Ministry awards 68 coal-mining contracts of work

JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana awarded yesterday 68 third generation contracts of work (COWs) to develop coal deposits across the country.

Sudjana said during the ceremony to sign the COWs that the event demonstrated the government's consistency in promoting investment in the mining sector without sacrificing national interest.

The 68 contract areas are located in the provinces of Aceh (two COWs), West Sumatra (two), Riau (one), Jambi (two), South Sumatra (12), West Kalimantan (three), Central Kalimantan (six), South Kalimantan (11), East Kalimantan (27), and Irian Jaya (two).

All the contractors were local businesspeople, including President Soeharto's half brother Probosutedjo; Rizal Risjad, the son of businessman Ibrahim Risjad and Edwin Suryajaya, the son of the former owner of Astra, William Suryajaya.

The government had issued 11 first generation coal COWs on the basis of Presidential Decree No. 49/1981 and 18 second generation coal COWs based on Presidential Decree No. 21/1993.

The ministry's public relations office said that the third generation COWs were based on Presidential Decree No. 75/1996 which stipulates several new rulings.

The 1996 decree states that coal contractors have to give the Ministry of Finance 13.5 percent of its output in the form of cash on the basis of free on board or at sale point prices.

The previous decrees obliged coal contractors to give 13.5 percent of its output in kind to the state-owned coal company Tambang Batubara Bukit Asam on behalf of the government.

The 1996 ruling also stipulates that after the signing of the contract, contractors have to conduct a general survey and exploration which can take four to seven years with between US$5 million and $40 million investment.

After the exploration stage, contractors have to relinquish 75 percent of their contract area to the government and can only mine the remaining 25 percent.

The third generation contract area covers an average of 100,000 hectares.

During the preproduction stage, contractors are required to pay several taxes, including land and building tax and a permanent fee, which can reach more than Rp 500 million a year.

Twenty percent of the tax will be retained by the central government, and the remaining 80 percent will go to the local administration.

Sudjana said yesterday investors still had a big interest in coal mining due to the high demand for coal in the Asia Pacific region.

Sudjana said mining operations would benefit many people as it would create economic development centers across the country, create many jobs, help spur economic development in remote areas, and add to the provinces' income.

Sudjana warned the contractors against selling their contracts to other parties.

Indonesia produced 50.34 million tons of coal last year and exported about 37 million tons. (jsk)