Mining Permit Holders Must Utilise Local Services, Director General of Mineral and Coal Explains Reasons
The Ministry of Energy and Mineral Resources (ESDM) has emphasised that holders of Mining Business Licences (IUP) are prohibited from arbitrarily conducting all mining activities using their own subsidiaries or affiliates. The objective is to encourage the empowerment of local entrepreneurs and contractors and to prevent monopolistic practices within mining services in various regions.
This mandate is stipulated in Ministerial Decree Number 3/365.K/MB.01/MEM.B/2026 regarding the Technical Guidelines for the Implementation of Approval for the Use of Subsidiaries and/or Affiliates in the Mineral and Coal Mining Services Business.
The Director General of Mineral and Coal at the Ministry of ESDM, Tri Winarno, stated that the prohibition on independent involvement of affiliates aims to create space for collaboration with contractors located around mining areas. Through this regulation, large mining companies are encouraged to partner with local entrepreneurs to deliver a positive economic impact to the local regions.
“It is not permitted; for instance, if it is an affiliate, it is not allowed. This means they cannot perform everything by themselves,” Tri stated when met at the Kalibata Heroes Cemetery on Tuesday (29/09/2026).
Tri emphasised that this policy is highly positive in driving the development of regional mining service entrepreneurs. Nevertheless, the government has established a scheme for flexibility or exceptions within the Ministerial Decree to accommodate certain operations.
“In the regulation, the use of affiliates is indeed not permitted. However, the Ministerial Decree allows for affiliates under certain criteria. These criteria include meeting domestic needs, National Strategic Projects (PSN), and downstreaming processes,” he added.
He explained that the reason for these exceptions in the Decree is based on field realities, where not all regions possess local service providers that meet the technical requirements of the companies. Therefore, an exception space is provided to ensure that national mining operations do not halt due to the absence of suitable local partners.
“The background of this Decree is that in certain areas, there are no providers that meet the criteria to be a partner for the company; therefore, it is made possible. We must ensure operations are not locked out,” he concluded.
Key points of ESDM Ministerial Decree Number 365.K/MB.01/MEM.B/2026 include:
FIRST: Holders of Mining Business Licences (IUP) or Special Mining Business Licences (IUPK) using mining services must prioritise mining service companies located in the regency/city surrounding the mining area.
SECOND: Holders of IUP or IUPK are prohibited from involving subsidiaries and/or affiliates in the mineral and coal mining services business without the Minister’s approval.
THIRD: The prohibition on involving affiliates includes: (a) direct share ownership by the IUP/IUPK holder in the mining service provider; or (b) shared ultimate beneficial ownership between the IUP/IUPK holder and the mining service provider.
FOURTH: Exceptions for using subsidiaries or affiliates may only be granted to holders currently undertaking government assignments, including: (a) implementation of National Strategic Projects; (b) construction of mineral processing/refining facilities or coal development/utilisation; and/or (c) fulfilment of domestic mineral or coal needs.
FIFTH: Applications for approval to use subsidiaries or affiliates must be submitted to the Minister.
SIXTH: Approval for such applications shall be granted within 14 working days from the receipt of a complete and correct application.
SEVENTH: Approval is granted according to the specific field and sub-field of the affiliate’s mining service licence and remains valid until the expiry of said licence.
EIGHTH: For IUPs issued by Governors, applications for the use of subsidiaries or affiliates may be submitted to the respective Governor.
NINTH: In the event of administrative or evaluative errors in the approval or rejection process, corrections may be made by the Minister or Governor according to their authority.
TENTH: These provisions apply mutatis mutandis to holders of IUPK as a continuation of contract operations, Contract of Work (KK) holders, and Coal Mining Business Agreement (PKP2B) holders.