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No Royalty for Coal Process

Law No. 11 of 2020 concerning Job Creation (“Omnibus Law”) contains many new regulations regarding industrial, including the Implementation of the Energy and Mineral Resources Sector, regulated in the Government Regulation No. 25 of 2021 (“GR 25/2021”), which mostly regulates mineral mining activities and electricity. One of the new adjustments in the regulation is stipulated in article 3, which states: “Production operation Mining Business Permit, Production Operation Special Mining Business Permit and Special Mining Business Permit as a continuation of Operation Contract/Agreement holders for coal commodity which carries out the domestic Coal Value-Added Activities can be given treatment in the form of the imposition of royalties of 0% (zero percent),” whereas the previous regulation imposed a royalty fee ranging from 2-13.5% of selling price, depending on volume.

Paragraph (4) of article 3 GR 25/2021 states that the value, requirements and method of imposition of this provision will be regulated further in the regulation from the Minister of Energy and Mineral Resources. The Ministry regulation is currently being drafted and is expected to be completed soon. This new provision is applicable only on the volume of coal used in value-added activities. As stated in paragraph (2) of article 3 GR 25/2021, this regulation is being imposed in order to achieve energy independence and to meet the need for industrial raw materials. It would seem that GR 25/2021 is aimed at attracting more investors and to lighten the cost burden on the coal mining industry as the current royalty fee is not seen as competitive. It should also be noted that this provision is only applicable for operations with a production mining business permit, which means that the government is aiming for factories that build smelters or other processing factories in order to achieve energy independence and fill the need for industrial raw materials. This provision is also still a part of government’s effort to set up a conductive investment climate in order to increase the country’s EODB rank, encouraging more mining companies to set up their operations in Indonesia which is, in turn, also expected to help solve the joblessness problem.

Future regulations are predicted to support the development of investment and business activities, thus permits, among other things, are also expected to be issued and more easily obtained. Schinder Law Firm has had years of experience helping companies successfully set up their businesses in Indonesia and acquire their licenses. Should you wish to do so, feel free to drop us an email at info@schinderlawfirm.com.

Schinder Consultant London Ltd.


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