Tuesday, July 14, 2009

Mining royalties to be raised

Mining companies might have to pay higher royalties as the State seeks higher income from the sector. 
Simon Felix Sembiring, special staff for energy and mineral resources minister, said government is the process to negotiate the raise of mineral royalties with all existing mining companies, including those under coal contract of work (CCOW) which currently pay 13.5% of output.
Sembiring admitted the currently deliberated Mining and Coal Law No. 4/2009 stipulates that government shall honor the existing contracts. But he said, government as partner in the contracts could ask for negotiation to raise the royalty. 
"In fact the contracts clearly stipulate that if government asks for higher royalty, contractors shall do financial calculation. As long as they will not incur losses, they have no reason to reject a raise," Sembiring is quoted by financial paper Bisnis Indonesia today.
Well, we have repeatedly suggested the raise in mineral royalty. Bumi Resources, which controls KPC and Arutmin, for example, booked combined net profit of almost US$2 billion in the past five years. Even a 20% royalty for coal will cut only few percentage of net profit of coal companies.
Government should have raised the royalty few years ago. But nothing is too late for the something good for the country. The next important issue, of course, not only how to raise revenue for the State, but how the State will spend properly the revenues from natural resources.

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