Commodities Indonesia: Moratorium on New Coal Mining Concessions
Indonesia's Ministry of Energy and Mineral Resources will soon issue a moratorium on new coal mining concessions. This moratorium will be implemented after the issuance of a planned presidential instruction regarding a five-year moratorium on new palm oil plantation concessions. Heriyanto, Head of the Legal Department Directorate General of Minerals and Coal at the Energy Ministry, emphasized that the moratorium in Indonesia's mining industry only involves coal, not the mining of minerals.
Similar to the planned moratorium in the palm oil sector, a moratorium in Indonesia's coal mining sector aims at safeguarding the environment. Earlier Indonesian President Joko "Jokowi" Widodo repeatedly stated that Indonesia needs to enhance and ensure protection of the environment so that future generations of Indonesia can enjoy the beauty and benefits of the rich environment.
Moratoriums in the palm oil and coal mining sectors will also show the world that the Indonesian government is willing to take efforts that aim at the preservation of the environment. After the severe forest fires and toxic haze (spreading to other parts of Southeast Asia) that occurred between June and October 2015, international criticism on Indonesia's environmental policies (and the lack of protection) rose significantly. Although some say it is easy to implement a moratorium on new coal mining concessions now coal prices are touching multi-year lows, others say it is still a valuable moratorium because amid low coal prices companies - those that are in the coal mining market for the long run - now have the momentum to purchase new concessions for a relatively cheap price. The moratorium, however, blocks their ambitions.
Those mining companies that already obtained concessions (prior to the moratorium) will still be able to expand their coal business as long as their expansion plans are in line with existing permits and regulations. Once the moratorium on new coal mining concessions is put in place, the nation's coal mining companies are still able to expand their businesses through acquisitions or mergers.
Read more: Overview of the Coal Mining Industry of Indonesia
Budi Santoso, Director at the Centre for Indonesian Resources Strategic Studies (Ciruss), said the government's plan to impose a moratorium on new coal mining concessions should be regarded a positive move. This moratorium can provide the momentum to order and organize the coal mining sector in terms of mining permits. Since the Reformation period when the process of decentralization was started, the regional governments of Indonesia in coal-rich areas (particularly on Kalimantan and Sumatra) have been issuing thousands and thousands of Mining Business Permits (Izin Usaha Pertambangan, or IUPs) - possibly because local officials can make some extra money through the issuance of the license - without keeping a proper administration. Hence, there occur numerous cases of overlapping concession areas, while many of the mining companies lack the mandatory clean and clear certificate (CnC). This CnC certificate - that was introduced two years ago - shows that the miner has no outstanding royalty obligations and other tax debts, fulfilled its exploration and environmental commitments, has no property delineation issues and obtained the necessary forestry permits.
Read more: Overlapping Land Conflicts & Troubled Mining Business Licenses in Indonesia
Bambang Gatot, Director General for Coal and Minerals at the Energy Ministry, said there were 10,388 IUP-holders in Indonesia in the first half of 2016, while 4,023 of them lack the CnC status.