New Regulation on the Method of Standard Price Determination for Minerals and Coal

Minister of Energy and Mineral Resources Regulation No. 17 of 2010 on Procedures to Determine the Standard Sale Price (Harga Patokan) of Minerals and Coal (‘Regulation’) has recently been issued as an implementing regulation of Article 9 (2) of Minister of Energy and Mineral Resources Regulation No. 34 of 2009. Each month the Director General of Mineral, Coal and Geothermal (‘Director General’) (on behalf of the Minister of Energy and Mineral Resources) determines the standard sale price for minerals and coal. This standard price is then used as the price for Mining Business License (‘IUP’) and Special Mining Business License (‘IUPK’) holders. By doing this, the government aims to improve the sale price and to optimize the use of mining resources in Indonesia.

The Regulation, in Articles 5, 9 and 11, sets out the method, with the exact formula to be set out in a further piece of regulation, of price determination for (1) minerals, which consist of metallic minerals (mineral logam), non-metallic minerals (mineral bukan logam) and stone, and (2) coal, which consists of thermal coal and coking (metallurgical) coal. For Minerals, each month the Director General determines the standard price for metallic minerals based on a formula by referring to market mechanisms and/or the common standard price in the international market. The determination of price can also involve the regional government, particularly for non-metallic minerals and stone, which is determined, respectively, by the governor (after coordinating with the Director General) and the regent/mayor (after coordinating with the governor). For coal, the Director General determines the standard price based on a formula which refers to the average price index of coal.

A price floor principle applies, as per Articles 8, 9 (4) and 14, to the sale of minerals and coal. Which is that, if the agreed price between the buyer and the seller is higher than the standard price, the agreed price prevails. On the other hand, if the agreed price is lower than the standard price, the standard price is used.

It should be noted that there are time limits, under Articles 26 (2) and (3) for a license holder, who has signed a contract prior to the enactment of the Regulation, to comply with the new provisions contained in the Regulation. However, the time limits mentioned above are not applicable if the buyer and the seller have renegotiated the price following the enactment of the Regulation.

The violation of certain provisions of the Regulation is subject to administrative sanctions, in the form of written notices, temporary suspension of sales or the revocation of the IUP or IUPK licenses.

The Regulation has been in force since 23 September 2010.