Understanding the Impact of Government Regulation No. 25/2024 on Mineral and Coal Mining
Authors
Government Regulation No. 25 of 2024 (“GR 25/2024”) represents a pivotal update to Indonesia's regulatory framework governing mineral and coal mining business activities. This regulation amends the existing Government Regulation No. 96 of 2021, reflecting the government's commitment to refining and enhancing the operational landscape for the mining sector.
In 2021, the government enacted Government Regulation No. 96 of 2021 on the Implementation of Mineral and Coal Mining Business Activities (“GR 96/2021”). GR 96/2021 governed various aspects of mineral and coal mining operations. However, with the introduction of GR 25/2024, the government aims to streamline regulatory processes, enhance efficiency, and bolster legal certainty for holders of Special Mining Business Permits (Izin Usaha Pertambangan Khusus - “IUPK”) for production operations.
This client update will highlight the key provisions of GR 25/2024 and illustrate how this regulation aims to support and enhance the entire Indonesian mining industry.
The Elimination of ‘Annual’ Term in the Work Plan and Budget
GR 25/2024 introduces a notable revision to the previous regulation by simplifying the term 'Annual Work Plan and Budget' (Rencana Kerja dan Anggaran Biaya Tahunan) to 'Work Plan and Budget' (Rencana Kerja dan Anggaran Biaya - “RKAB”). This change aligns with recent adjustments outlined in the Minister of Energy and Mineral Resources Regulation No. 10 of 2023. Under this new regulation, the RKAB is now structured as follows: (a) a one-year RKAB for the exploration stage, and (b) a three-year RKAB for the production operation stage.
Extension of Mining Business License
GR 25/2024 also introduces changes to the extension rules for Mining Business Licenses (“IUP”) and/or Special Mining Business Permits (“IUPK”) for State-Owned Enterprise (“BUMN”) Subsidiaries. These subsidiaries can now extend their licenses for production operations for up to 10 years, a privilege previously limited to BUMNs.
Moreover, the regulation shifts the focus of priority areas for Special Mining Business Licenses (“WIUPK”) toward private mining companies. This marks a departure from the previous priority given to BUMNs and regional-owned enterprises (“BUMD”). Details on the criteria and process for this new priority system will be outlined in a future Presidential Regulation.
Additionally, GR 25/2024 requires that license holders must maintain at least 30% direct or indirect ownership in the entities responsible for processing activities to qualify for 10-year license extension.
Priority Special Mining Business License Areas for Religious Community Organisations
A new provision in GR 25/2024 grants religious community organisations to receive priority offers for WIUPK areas. These Organisations, which engage in economic activities to empower and enhance the welfare of their members, are now prioritised alongside BUMNs and BUMDs. This aims to promote community welfare by providing equal opportunities to manage natural resources.
The priority offers are valid for five years until May 30, 2029. To qualify, religious organisations must be the controlling shareholders of the business entities. Furthermore, these entities are only allowed to transfer their IUPK or ownership shares with approval from the Ministry of Energy and Mineral Resources. In addition, these entities are prohibited from cooperating with previous Coal Mining Work Agreements (Perjanjian Karya Pengusahaan Pertambangan Batubara - PKP2B) holders and their affiliates.
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
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