RI plans for progressive , increase in gold royalty rate
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The government plans to introduce a progressive gold royalty scheme to reap higher revenues when prices are bullish, a move that might force miners to amend their contracts.
At present, Government Regulation (GR/PP) No. 9/2012 stiplates that all gold miners must pay a Hat royalty of 3.75 percent of their sales price. However, the rate would progressively increase once the market price surpasses US$1,300 per troy ounceunder
the new scheme.
The royalty would increase by 0.25 percent for each $100 price hike. For example, gold miners would pay a 4 percent royalty when the price fluctuates between $1,300 and $1,400 and 4.25 percent when the price is between $1,400 and $1,500.
“The reason behind this plan was to ensure that the government always benefited from the global price hike. That’s all,” Bambang Susigit, the Energy and Minieral Resources Ministry’s minerals business supervision director, said recently.
“We wanted the benefits gained by gold miners to also be distributed to the government in order to boost non-tax revenues [PNBP].”
PNBP from the minerals and coal sector reached Rp 35 trillion ($2.59 billion) as of Nov. 17, surpassing the full-year target of Rp 32.7 trillion. The government plans to launch the new royalty scheme through the revision of Government Regulation No. 9/2012, the draft of which is currently being reviewed by the Office of the Coordinating Economic Minister.
However, Bambang said the government needed input from all relevant stakeholders before issuing the revised regulation, while also waiting for the settlement of a dispute concerning gold and copper miner PT Freeport Indonesia (PTFI).
Since early this year, negotiations between the government and PTFI over the latter’s future operations in the country have seemingly gone nowhere. To encourage the company to Convert its Contract of Work (CoW) into a special mining license (IUPK), the Finance Ministry is currently drafting a new regulation that would guarantee investment stability for all miners.
Under the new regulation, miners that have converted their COW will be required to follow prevailing laws, including ones related to royalties. PTFI agreed in 2014 to amend its royalty agreements with the government in its CoW As a result, its royalties for copper and gold increased to 4 percent and 3.75 percent, respectively from initial rates of 3.5 percent and 1 percent.
Bambang added that other CoW holders would also need to amend their royalty agreements in line with the new scheme. Overall, the government hopes to amend 68 coal contracts (PKP2B) and 34 mineral COW before the end of the year to meet the mandate of the 2009 Mining Law.
However, only 50 PKP2B and 20 CoW have been revised this year.
“lt is not fair if there is no adjustment for the royalty when the price is below $1,300 [per troy ounce]. It might be better if the government considered revising the price Hoor to relieve a miner’s burden when the price reaches its lowest point,” Indonesian Mining Institute (IMI) chairman lrwandyArif said.
Jakarta Post, Page-13, Tuesday, Nov 29, 2017
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