Kuntoro wants provinces to get mining royalties

JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto said yesterday that the government should in future split royalties from mining, oil and gas operations with the producing provinces.

He said the current law on royalties from mining, gas and oil operations should be changed to allow the provincial administrations to get a portion of the money to speed up the development of their areas.

"It's high time for us to have a law which allows provinces to get part of the royalties from the development of their natural resources," Kuntoro said.

He noted such a law should also cover royalties from other natural resources like forests and plantations. As such, the drafting of the law should involve ministries dealing with mining, oil and gas, forestry and plantations.

Kuntoro however said the government had thus far not yet made any plans to start drafting such a law.

Protests have long been raised by people in several provinces to demand part of the earnings from oil, gas and mining operations in their regions.

The protests have intensified since the downfall of Soeharto, who in the past paid little attention to the complaints.

Some government critics are now warning about possible national disintegration if the central government does not heed the provinces' demands.

The legislature of oil and gas-rich Riau in central Sumatra recently demanded the central government introduce a law allowing the province to get a portion of revenues generated from the development of their oil and mineral resources.

Riau. through PT Caltex Pacific Indonesia, accounts for half of the country's oil production of 1.5 million barrels per day.

Tribal people in Irian Jaya have also long demanded a large portion of the government's earnings from the development of their gold and copper resources by PT Freeport Indonesia, a subsidiary of Freeport McMoRan Copper and Gold of the United States.

Under current production sharing contracts (PSC) with oil and gas contractors, the government receives between 65 percent and 90 percent of their output.

Under current contracts of work (COW) with mining contractors, the government receives taxes and royalties.

The earnings from oil and gas operations, as well as tax and royalties from mining companies are at present pooled into the state budget and then distributed to the provinces with little regard to their contribution to the state budget.

Furthermore, provincial administrations only receive half of the land and building tax while other taxes go wholly to the central government.

Kuntoro said there was a clause in mining contracts signed since 1995 obliging contractors to send 80 percent of royalties to local authorities and only 20 percent to the central government.

Eighty percent of the royalties for the local administrations should be sent to the districts where the mines are located, and the other 20 percent to the provincial administration.

But, Kuntoro said, the COW clause could not be implemented since it is in conflict with a governmental regulation which stipulates that the royalties should be first delivered to the central government before being redistributed to the provincial administrations. (jsk)