EMR Minister: Smelter Construction Unlikely to be Completed by 2017

KATADATA - The progress of the mining and mineral downstreaming program has been slow. Minister of Energy and Mineral Resources (EMR) is pessimistic that the construction of mineral processing and refining facilities can be completed next year according to schedule.

Sudirman explained that under Government Regulation 1/2014 and the EMR Minister Regulation 1/2014 construction of smelters must be completed no later than 2017. Mineral and mining companies that are unable to meet the target are prohibited from exporting their mining products overseas.

Given the decline in commodity prices, achieving this target will be difficult. Mining companies have trouble raising the capital for smelter construction. This lack of funds is blamed for the slow progress of the smelter construction. As a result, only 6-7 out of 100 companies have constructed smelters that will be operational by 2017.

The EMR Ministry has held a full-day focus group discussion to find a solution. The issues discussed include a proposal to provide incentives to the mineral industry and a proposed revision of the 2009 law on mineral and coal mining (Mining Law).

The Ministry of EMR and parliamentary commission VII have an informal agreement to discuss revision of the Mining Law. Sudirman requested six months to prepare a government-proposed draft that will be discussed with the House. One of the proposed clauses is related to smelters. Going forward, new provisions on smelter and mining product exports may apply.

These revisions are expected to resolve controversy surrounding the 2009 Mining Law and its derivatives rules, particularly Government Regulation 1/2014. Under this law, smelter construction was to be completed by 2014, but this was put on hold awaiting derivative regulations. Finally, in early 2014, a government regulation was issued relaxing the provisions set out in the Mining Law. The target for completion of smelter construction was extended to 2017.

Director General of Mineral and Coal Bambang Gatot Ariyono confirmed that any new mining law should harmonise these two regulations. (Read: Freeport Gets Export Recommendation Despite Not Paying US$530 Million)

Bambang added that several other matters will be regulated in the new Mining Bill which has been included in this year’s national legislation program. These include limits of mining areas, the use of local goods and services, and share divestment. "We will thoroughly review (the Bill) to find the best (solution), by taking into account the investment aspect," he said.