Indonesia introduces significant changes to mineral and coal mining regulations
9 June 2025
On 19 March 2025, Indonesia enacted Law No. 2 of 2025 on the Fourth Amendment to Law No. 4 of 2009 on Mineral and Coal Mining (“New Law”), which came into effect immediately. Law No. 4 of 2009 had previously been amended by Law No. 3 of 2020, Law No. 11 of 2020, and Law No. 6 of 2023 (“Previous Law”).
This article provides a general overview of the key provisions as amended by the New Law.
Prioritisation of domestic market
The New Law affirms, for the first time, the prioritisation of domestic utilisation of minerals and/or coal in the national interest, and stipulates obligations in this regard for holders of mining business permits (Izin Usaha Pertambangan (“IUPs”)) and special mining business permits (Izin Usaha Pertambangan Khusus (“IUPKs”)).
An IUP authorises the conduct of general mining operations while an IUPK authorises mining activities within a designated area (Wilayah Izin Usaha Pertambangan Khusus (“WIUPK”)) and is only granted for a single type of metal, mineral (including its associated minerals), or coal. The IUPK reflects the central government's effort to consider regional interests for the purpose of regional empowerment.
Holders of IUPs and IUPKs are now required to meet domestic needs or domestic market obligations before exporting minerals or coal. This requirement applies during the “production operation” phase, which encompasses construction, mining, processing and/or refining or smelting, development and/or utilisation, hauling and sale, and the installation of facilities to manage environmental impacts, as determined through feasibility studies.
In addition, IUP and IUPK holders must prioritise meeting the requirements of state-owned enterprises (Badan Usaha Milik Negara (“BUMN”)) engaged in activities such as electricity and energy generation, fertiliser production for public use, and operations within national strategic industries.
Types of entities
The New Law sets out the entities entitled to an IUP, including those so entitled prior to the New Law’s enactment, and also introduces new entities. In addition to cooperatives and sole proprietorships, the New Law lists entities that include BUMN, region-owned companies, private entities, small and medium entities, and religion-affiliated entities.
BUMN, region-owned companies, and private entities have long been involved in the mining business. The New Law introduces small and medium entities as well as religion-affiliated entities as new types of participants in the mining sector to support regional economic development.
The New Law defines small entities as businesses with capital exceeding IDR1,000,000,000 but not more than IDR5,000,000,000, and medium entities as those with capital exceeding IDR5,000,000,000 but not more than IDR10,000,000,000. For this purpose, business capital excludes the value of land and buildings used as the place of business.
Extended production period for certain minerals
The New Law introduces a provision governing the duration of production operation activities for the mining of non-metallic minerals, with specified characteristics, that are integrated with domestic industrial processing facilities. The initial production operation period may be granted for up to 20 years, with a guaranteed extension of 10 years for each subsequent renewal.
To fall within this provision, the minerals must be either (i) of high value and difficult to obtain (such as diamonds and precious stones); or (ii) essential to the supply chains of strategic industries (such as limestone, clay, and quartz sand used in the cement industry).
New priority policies
The New Law includes several provisions granting priorities to certain entities.
Mineral and coal WIUP
The New Law introduces a priority procedure under which entities, cooperatives, sole proprietorships, small and medium entities, and religion-affiliated entities may obtain a mining permit area (Wilayah Izin Usaha Pertambangan (“WIUP”)) for metallic minerals and coal. This priority allocation mechanism is new to the bidding procedure, which otherwise remain unchanged from the previous framework. The bidding process continues to take into account factors such as the size of the WIUP and the applicant’s administrative, technical, environmental, and financial capabilities.
The priority procedure is conducted through the electronically integrated business licensing platform known as the Online Single Submission system and considers various factors, including the:
- size of the WIUP for metallic minerals or coal;
- empowerment of cooperatives and small and medium entities;
- strengthening of the economic role of religious community organisations; and
- promotion of regional economic development.
Higher education institutions
The central government designates WIUPs for metallic minerals and coal, and WIUPKs, with priority given to BUMN, region-owned companies, or private entities that support the interests of higher education institutions. This new provision aims to strengthen the independence and leading position of higher education institutions.
Mining permit areas prioritised for higher education support are designated based on the size of the WIUP or WIUPK, the accreditation status of the university, and the improvements in educational access and community services.
Recipients of priority WIUPs and WIUPKs shall allocate part of their profits to higher education institutions in accordance with the cooperation agreement concluded between the parties.
Downstreaming
The New Law also facilitates the priority granting of metallic mineral and coal WIUPs to BUMN and private entities for downstreaming purposes. Key considerations include the size of the WIUP, the increase in the domestic workforce, the amount of investment, and/or the increase in value added, and the fulfilment of domestic and/or global supply chains.
“Downstreaming” is a process of adding value to mined raw materials to achieve greater economic benefits and to create a sustainable and independent industrial ecosystem that can compete at the national, regional, and international levels.
IUPK eligibility and allocation
The New Law expands IUPK eligibility to include cooperatives, small and medium entities, and religion-affiliated entities, in addition to BUMN, region-owned companies, and private entities under the Previous Law.
Entities other than private entities obtain an IUPK on a priority basis, while private entities go through a bidding process for a WIUPK to obtain an IUPK.
Both procedures consider the size of the WIUPK, as well as the entities’ capabilities in administration, technical and environmental management, and finance.
|
Entities |
Areas / Permits |
Selection Mechanism |
|
|
Entities, cooperatives, sole proprietorships, small and medium entities, or religion-affiliated entities |
WIUP |
Priority |
Bidding |
|
BUMN, region-owned companies, or private entities that serve the interests of higher education institutions |
WIUP for metallic minerals, coal, and WIUPK |
Priority |
- |
|
BUMN and private entities for downstreaming purposes |
WIUP for metallic minerals and coal |
Priority |
- |
|
BUMN, region-owned companies, cooperatives, small and medium entities, and religion-affiliated entities |
IUPK |
Priority |
- |
|
Private entities |
IUPK |
- |
Bidding |
Government guarantees
The New Law regulates the provision of guarantees by the central and regional governments for various types of WIUPs, including those for metallic minerals and coal, as well as WIUPKs.
The central and regional governments guarantee that there will be no changes in the use of spaces and zones within WIUPs for metallic minerals and coal and WIUPKs that have already been designated, unless such use conflicts with laws and regulations. If changes do occur, the areas remain valid, and mining business activities may continue. However, the central and regional governments may change the spatial uses within WIUPs for metallic minerals and coal to promote added value and downstreaming.
The central and regional governments also guarantee the issuance of other permits required for mining business activities within WIUPs for metallic minerals and coal, and WIUPKs that have already been designated, provided the necessary requirements are met.
Transitional policies
IUPs issued before 19 March 2025 with WIUPs have partial or complete geographic overlap, based on the central government’s evaluation, will be revoked with the WIUPs returned to the state.
If IUPs and IUPKs issued before 19 March 2025 fail to fulfil their obligations or to operate in accordance with laws and regulations, all or part of their areas may be reorganised and utilised based on the evaluation of the Minister of Energy and Mineral Resources.