Industry Updates

HPP Law Law No. 7 of 2021 on the Harmonization of Tax Regulations

23 November 2021 – HPP Law introduces among others, a carbon tax in Indonesia.

The carbon tax will be imposed on individuals or entities purchasing goods that contain carbon or conducting activities that emit carbon. It will become effective on 1 April 2022. The coal-fired power plant sector will be the first sector to be charged, with a minimum tariff of IDR 30 per kilogram of carbon dioxide equivalent (CO2e).

PR 98/2021 Presidential Regulation No. 98 of 2021 on Implementation of Carbon Economic Value for Nationally Determined Contributions and Control of Greenhouse Gas Emissions in National Development

23 November 2021 –  PR 98/2021 introduces the mechanisms to implement the Carbon Economic Value.

To achieve the Nationally Determined Contribution (NDC), PR 98/2021 introduces the following mechanisms.

1. a. Carbon trading
   
   Carbon trading is carried out based on the National Registry System for Climate Change Control (Sistem Registri Nasional Pengendalian Perubahan Iklim - "SRN PPI") or based on the use of greenhouse gas Emission Reduction Certificates issued from the national emission reduction certification. The mechanisms of carbon trading may be in the form of emission trading or greenhouse gas emission offsets.
   
   
2. b. Performance-based payment
   

   Performance-based payments are made based on the results of verification of the achievement of the emission reduction results carried out by a business or activity.
   
   

3. c. Carbon levies
   
   Carbon levies may be in the form of tax, duty and custom or other levies based on the content and/or potential of the carbon emissions and/or the amount of emitted carbon and/or the performance of the Climate Change Mitigation Actions.

As the regulation was recently issued, it remains to be seen how the above mechanisms will be implemented.

MOPWH Circular Letter 21/2021: Minister of Public Works and Housing Circular Letter No. 21/SE/M/2021 on Procedures for Fulfilling Business Licensing Requirements, Construction Work Competency Certification Implementation, and Business Entity Certificates Applications as well as Construction Work Competency Certificates

21 December 2021 – MOPWH Circular Letter 21/2021 revokes MOPWH Circular Letter No. 10/SE/M/2021 on Procedures to Apply for LSBU, SKK and SBU. The following is the scope of MOPWH Circular Letter 21/2021:

a. Fulfilment of Business Entity Certification Agency (Lembaga Sertifikasi Badan Usaha/LSBU) business license requirements

b. Fulfilment of Professional Certification Institution (Lembaga Sertifikasi Profesi/LSP) business license requirements

c. Fulfilment of business license requirements for construction service business entities

d. Implementation of construction work competency certification

e. Provisions related to applications for Business Entity Certificates (Sertifikat Badan Usaha/SBU) and Work Competency Standards (Standar Kompetensi Kerja/SKK) Construction

In addition, the Construction Services Development Agency (Lembaga Pengembangan Jasa Konstruksi/LPJK) will stop the services for SBU and SKK applications once LSBU and LSP are operating.

MOPWH Reg 28/2021: Minister of Public Work and Housing Regulation No. 28 of 2021 on Rest and Services Areas on Toll Roads

3 November 2021 – MOPWH Reg 28/2021 revokes MOPWH Regulation No. 10/PRT/M/2018 on Rest and Services Areas on Toll Roads.

In general, MOPWH Reg 28/2021 adds a new layer of classification to the types of rest area. The previous regulation only recognized Type A, Type B and Type C Rest and Services Areas (Tempat Istirahat dan Pelayan/"TIP"). The new regulation differentiates between City and Inter-city TIP, and the classification becomes City TIP, Intercity TIP Type A, Intercity TIP Type B, and Intercity TIP Type C (the differences are in required size and facilities).

There are also some changes in requirements to obtain a business permit for development and change of TIP. Now, toll road operators must also provide an analysis of traffic, technical analysis and user needs analysis as well as company profile of the applicant. Also, where TIP Type C (the smallest type of TIP, which is temporary) previously did not require permits, the new regulation obliges parties to obtain a permit albeit with lower standards and requirements.

MOT Reg 81/2021: Minister of Transportation Regulation No. 81 of 2021 on Airport Business Activities

3 November 2021 – MOT Reg 81/2021 revokes MOT Reg 33/2021 on Airport Business Activities.

In general, MOT Reg 81/2021 sets out further provisions on the implementation of airport affairs services and airport-related affairs services in Indonesia, including their cooperation and licensing schemes. For example, MOT Reg 81/2021 clarifies that state-owned enterprises/regional-owned enterprises can cooperate with business entities in operating airport through a joint venture (i.e., by establishing subsidiaries).

MOPWH Reg 23/2021: Minister of Public Works and Housing No. 23 of 2021 on Procedures for Determining Toll Road Development Initiated by Business Entities

1 October 2021 – This regulation provides thorough guidelines on the procedure for determining a toll road unsolicited project, including for the relevant land procurement process. An unsolicited project (proyek prakarsa) is a toll road operation prepared and proposed by a business entity to the MOPWH.

An unsolicited project that has obtained the approval of feasibility pre-study document based on Minister of National Construction Planning Regulation No. 4 of 2015 on Procedures for the Implementation of Cooperation Between Government and Business Entities in the Provision of Infrastructure (as amended) must continue the process of determining the toll road operation initiated by the business entity based on MOPWH Reg 23/2021.

MOEF Reg 23/2021: Minister of Environment and Forestry Regulation No. 23 of 2021 on the Implementation of Forest and Land Rehabilitation

21 December 2021 – MOEF Reg 23/2021 revokes MOEF Regulation No. P.105/MENLHK/SETJEN/KUM.1/12/2018 on the Implementation, Supporting Activities, Incentives, Guidance and Control of Forest and Land Rehabilitation Activities, as amended by P.2/MENLHK/SETJEN/KUM.1/1/2020. There is a significant change on incentives under the new regulation, which no longer provides incentives in the form of ease of service and/or awards.

MOEF Reg 23/2021 sets out a new provision on 10-year indicative plans for Forest and Land Rehabilitation (Rehabilitasi Hutan dan Lahan/"RHL"), i.e., the Forest and River Area Rehabilitation Plan (Rencana Umum Rehabilitasi Hutan dan Lahan Daerah Aliran Sungai/"RURHL-DAS"). Also, an annual rehabilitation plan for forest or land must be made in accordance with the RURHL-DAS.

Specific regulations on the funds for forest and land rehabilitation activities are set out in MOEF Reg 23/2021. The funds can be provided from the state revenue and expenditure budget, regional revenue and expenditure budget and/or other sources of funds in accordance with the laws and regulations.

Constitutional Court Decision on Law 3/2020 Amendment to Law No. 4 of 2009 on Mineral and Coal Mining

23 November 2021 – On 27 October 2021, Constitutional Court Decision No. 64/PUU-XVIII/2020 amended Law 3/2020 regarding the extension guarantees for Contracts of Work (Kontrak Karya - "COW") and Coal Contracts of Work (Perjanjian Karya Pengusahaan Pertambangan Batubara - "CCOW").

Due to this amendment, holders of COW and CCOW are no longer guaranteed to obtain IUPK as a continuation of operation of contracts/agreements. In addition, the state is expected to start enforcing the scale of priority as well. State Owned Enterprises (SOEs) and Regional Owned Enterprises (ROEs) are prioritized for obtaining Special Mining Business License Areas (Wilayah Izin Usaha Pertambangan Khusus - WIUPK).

MEMR Decree 169/2021: Minister of Energy and Mineral Resources Decree No. 169.K/HK.02/MEM.M/2021 on Cost of Generation (BPP) of PT PLN (Persero) Year 2020

3 November 2021 - MEMR Decree 169/2021 is applicable to determine the amount of BPP from 8 September 2021 until 31 March 2022 (by which time a new set of annual BPP numbers for the 2021 calendar year will be published).

The average national BPP is decreased to USD 7.05 cent/kWh or IDR 1,027.70/kWh (a 10.3% decrease from the USD 7.86 cent/kWh specified in the previous 2018 BPP Decree).

GR 96/2021: Government Regulation No. 96 of 2021 on Implementation of Mining of Minerals and Coal Business Activities

3 November 2021 – GR 96/2021 revokes the long-standing Government Regulation No. 23 of 2010 as lastly amended by Government Regulation No. 8 of 2018. The following are some of the significant changes:

1. Greater detail in preparation and determination of National Mineral and Coal Management Plan
2. Several changes in various licensing (including changes to IUP, IPK, IUPK, IUJP and addition of IUPK continuation, Authorization Letter for Rock Mining, Transport and Sale Licenses)
3. Procedural and authority changes in amending Business Area Size
4. Relaxation of Divestment Requirements
5. Procedural Changes in Suspension of Licenses.
6. More specific obligations in prioritizing national interest
7. More specific authority in State production and sale control
8. New principles and standards in processing and smelting coal/minerals
9. New regulations in utilizing mining roads
10. More specific regulations on land utilization and sale of mineral/coal in specific circumstances

MEMR Decree 139/2021: Minister of Energy and Mineral Resources Decree No. 139.K/HK.02/MEM.B/2021 on Fulfillment of Domestic Coal Needs

4 October 2021 - This decree revokes MEMR Decree No.255.K/30/MEM/2020 of 2020 (as amended by MEMR Decree No.66.K/HK.02/MEM.B/2021 of 2021 on Fulfillment of Domestic Coal Needs for 2021). Domestic market obligations, coal production amount and coal price for supply of electricity for public interest remain the same as before, respectively, 25%, 650 million tons, and USD 70 per ton at standard specifications.

Non-compliance with domestic market obligations will result in:

a. an export ban until domestic market obligations are met

b. a fine of the difference in the selling price abroad minus the coal benchmark price for the supply of electricity for the public interest (domestic market obligation) multiplied by the volume of sales abroad in the amount of the obligation to fulfill domestic coal needs that are not fulfilled for the license and permit holder

c. compensation fund in the amount of sales shortfall in accordance with the percentage of sales for license/permit holders without sale contracts with domestic coal users or whose coal does not have a market in Indonesia

MOEF Reg 7/2021: Minister of Environment and Forestry of the Republic of Indonesia No. 7 of 2021 on Forestry Planning, Changes to the Designations and Functions of Forest Areas, and Uses of Forest Areas

1 October 2021 – This MOEF Reg 7/2021 revokes a number of MOEF regulations, among others:

• MOEF Regulation No. P.67/MENHUT-II/2006 on Forest Inventory Criteria and Standards
• MOEF Regulation No. P.6/MENHUT-II/2009 on the Formation of Forest Management Unit Areas
• MOEF Regulation No. P.34/MENHUT-II/2010 on Procedures for Changes to the Function of Forest Areas, which has been amended several times, most recently through the issuance of MOEF Regulation No. P.16/MENHUT-II/2015 ("MOEF Reg 34/2021")
• MOEF Regulation No. P.36/MENHUT-II/2010 on the Integrated Team for Research into Changes to the Use and Functions of Forest Areas

In general, MOEF Reg 7/2021 addresses the following three main areas:

• Forestry planning
• Changes to the designations of forest area (change from forest to non-forest area)
• Changes to the functions of forest areas (change of function of part or all of the forest area within one or several groups of forest to other function of forest area)
• Uses of forest areas (for development purposes other than forestry activities can only be implemented for activities that have critical strategic objectives)

Use of Forest Areas

The use of forest areas for development purposes other than forestry activities can only be implemented for activities that have critical strategic objectives. Under MOEF Reg. 7/2021, said use of forest areas can be implemented through the following mechanisms:

1. Approval for the use of a forest area through a Minister Decree, which is delegated to the relevant governor in relation to any of the following activities:
   • Development of non-commercial public facilities (up to a maximum area of 5 Ha)
   • Community mining
2. Cooperation agreement through a Letter of Director-General of Forestry Planning and Environmental Management on behalf of the Minister, which can be issued for the development of certain activities outside forest areas (di luar kegiatan kehutanan tertentu) that may support direct/non-direct forest management (e.g. cultural tourism, post-mining activities, telecommunications towers)

Approvals for the implementation of survey activities through a Letter of the Director-General on behalf of the Minister, which can be issued for developments that lie outside the scope of forestry activities (specifically survey-related activities

MOEF Reg 7/2021: Minister of Environment and Forestry of the Republic of Indonesia Regulation No. 7 of 2021 on Forestry Planning, Changes to the Designations and Functions of Forest Areas, and Uses of Forest Areas

1 October 2021 - MOEF Reg 7/2021 revokes a number of MOEF regulations, including:

• MOEF Regulation No. P.34/MENHUT-II/2010 on Procedures for Changes to the Function of Forest Areas, (as lastly amended by MOEF Regulation No. P.16/MENLHK-II/2015)
• MOEF Regulation No. P.44/MENHUT-II/2012 on Forest Area Affirmation (as lastly amended by MOEF Regulation No. P.62/MENHUT-II/2013
• MOEF Regulation No. P.27/MENLHK/SETJEN/KUM.1/7/2018 on Guideline of Borrow Use of Forest Area (as lastly amended by MOEF Regulation No. P.7/MENLHK/SETJEN/KUM.1/2/2019
• MOEF Regulation No. P.97/MENLHK/SETJEN/KUM.1/11/2018 on Exchange of Forest Area

In general, MOEF Reg 7/2021 addresses the following main areas:

• Forestry planning
• Changes to the designations of forest areas (change from forest to non-forest areas)
• Changes to the functions of forest areas (change of function of part or all of a forest area within one or several groups of forest area to other functions of forest areas)
• Uses of forest areas (for development purposes other than forestry activities without changing the forest designation or function)

Use of Forest Areas

The use of forest areas for development purposes other than forestry activities can only be implemented for activities that have critical strategic objectives. Under MOEF Reg 7/2021, that use of forest areas can be implemented through the following mechanisms:

1. Approval for the use of a forest area through a Ministerial Decree, which is delegated to the relevant governor, in relation to any of the following activities:
   • Development of non-commercial public facilities (up to a maximum area of 5 Ha)
   • Community mining
2. Cooperation agreement through a Letter of Director General of Forestry Planning and Environmental Management (Director General) on behalf of the MOEF, which can be issued for developments that lie outside the scope of forestry activities that may support direct/non-direct forest management (e.g., cultural tourism, post-mining activities, telecommunications towers)
3. Approvals for the implementation of survey activities through a Letter of the Director General on behalf of the MOEF, which can be issued for developments that lie outside the scope of forestry activities (specifically survey-related activities).

In addition, MOEF Reg 7/2021 covers transitional provisions from the previous regime of borrow-to-use forestry permits (Izin Pinjam Pakai Kawasan Hutan/IPPKH) to the forest area utilization approvals (Persetujuan Penggunaan Kawasan Hutan/PPKH) regime.

Government Tightening Its Grip on Water Resources

October 2019 - Four years after the 2004 Water Resources Law was annulled by the Constitutional Court, the new water law was finally issued on 16 October, i.e., Law No. 17 of 2019 on Water Resources (New Water Law). There is only one type of license under the New Water Law, i.e., Water Resources Use License (Izin Penggunaan Sumber Daya Air). This license can be granted for use of water resources:

(i) for business purposes, for the use of water, water resources and/or water power (daya air) as a medium and/or material (i.e., Water Use Business License), and

(ii) for non-business purposes, such as for daily use, people's farming, and other non-business activities (i.e., Water Use Non-business License).

The Water Use Business License is prioritized for state/region/village-owned entities (S/R/V-OEs). It can be granted to a private business entity if, among other things, it has been first offered to S/R/V-OEs. However, particularly for businesses producing drinking water for the public, the license is granted to S/R/V-OEs. There is no exception to this provision. Further provisions regarding Water Resources Use Licenses will be regulated in a government regulation.

MEMR Reg 23/2021: Minister of Energy and Mineral Resources Regulation No. 23 of 2021 on the Management of Oil and Gas Working Area for Cooperation Contract that Will Expire

4 October 2021 – MEMR Reg 23/2021 revokes MEMR Reg No. 23 of 2018 on the Management of Oil and Gas Working Areas whose Cooperation Contract will Expire.

Management of working areas for cooperation contracts that will expire may be conducted by way of:

a. extending the cooperation contract

b. management by PT Pertamina (Persero)

c. joint management between the Contractor and PT Pertamina (Persero)

d. determining working area bidding

This regulation provides that PT Pertamina (Persero) may apply for the MEMR's approval to manage the working area and PT Pertamina (Persero) must, among other things, attach the proposal of the signing bonus amount to the proposal. MEMR Reg 23/2021 states that the formula for the bonus amount for the signing of the cooperation contract will be determined by the MEMR, and that the signing bonus must be no less than USD 1,000,000. There is no maximum signing bonus as previously stated in MEMR Reg 23/2018 with a maximum limit of USD 250,000,000. The winner of working area bidding must provide a performance bond with a value of 10% of the amount of the fixed work commitment budget for the first five years. If 10% of that amount is less than USD1,500,000, the contractor must provide a performance bond with a minimum of USD 1,500,000.

Comparison between MEMR Regulation No. 27/2006 and MEMR Regulation No. 7/2019

23 September 2019 – In a bid to encourage a greater amount of oil and gas exploration and exploitation activity, the Minister of Energy and Mineral Resources (MEMR) recently issued MEMR Regulation No. 7 of 2019 on the Management and Utilization of Oil and Gas Data (MEMR Regulation 7/2019). MEMR Regulation 7/2019 updates procedures relating to the management and utilization of various facts, information, hints and indications, which are generated through activities such as general surveys, as well as the exploration and exploitation of oil and gas resources (Data).

Previously, those procedures were addressed under the now obsolete MEMR Regulation No. 27 of 2006 on the Management and Utilization of Data Secured through General Surveys and the Exploration and Exploitation of Oil and Gas (Previous Regulation). In general, MEMR Regulation 7/2019 addresses the following specific matters:

1. data classification, acquisition and confidentiality
2. data transfers
3. data management
4. data utilization and membership
5. transfers of media and deletions of data

MEMR Regulation 7/2019 has been in force since 2 August 2019 and simultaneously repeals and replaces the Previous Regulation. To see a high-level comparison table between the two regulations, please click here.

MEMR Reg 12/2021: Minister of Energy and Mineral Resources Regulation No. 12 of 2021 on Classification, Qualification, Accreditation, and Certification of Electricity Support Service Business

4 October 2021 – MEMR Reg 12/2021 revokes MEMR Reg No. 38 of 2018 on Guidelines of Accreditation and Certification of Electricity. 

In general, MEMR 12/2021 addresses new classification of electricity support business, i.e., other electricity support service business directly related to the electricity supply, minimum in the form of:

a. inspection and assessment of the level of domestic components in the electricity sector

b. inspection and assessment of the implementation of the electricity safety management system

c. electricity environmental management

d. control of electricity greenhouse gas emissions

e. inspection and assessment of compensation for land, buildings, and/or plants located under the free space of the electric power transmission network

MEMR Reg 11/2021: Minister of Energy and Mineral Resources Regulation No. 11 of 2021 on Implementation of Electricity Business

1 October 2021 –MEMR Reg 11/2021 revokes a number of MEMR regulations, including:

• MEMR Regulation No. 28 of 2012 on Procedures for Applying for Electricity Supply Business Area for Public Interest
• MEMR Regulation No. 35 of 2013 on Procedures for Electricity Business Licensing
• MEMR Regulation No. 36 of 2013 on Procedures for Applying for Electric Power Grid Utilization Permit for the Purposes of Telecommunication, Multimedia, and Informatics
• MEMR Regulation No. 10 of 2019 on Procedures for the Preparation of an Electricity Supply Business Plan

In general, MEMR Reg 11/2021 addresses the following main areas:

• newest classification and licensing obligations for electricity business
• implementation of electricity businesses
• utilization of electricity grids for telecommunications, multimedia and/or information needs

MEMR Releases New Regulations on Captive Power Plants and Use of Roof Solar Power Plants

1 October 2021 - Reg 12 revokes MEMR Regulation No. 29 of 2012 on the Capacity of Power Plants for Private Purposes Based on Operational License (Reg 29).

Under Reg 29, owners of a captive power plant with a capacity of more than 200 kVA were required to obtain an Operational License issued by the Director General of Electricity (DGE) on behalf of the MEMR, relevant Governor or Regent (as applicable), and a Registered Certificate (Surat Keterangan Terdaftar or SKT) was required for a capacity of 25 kVA up to 200 kVA.

Reg 12 now provides the following:

1. Captive power plants with a total capacity of >500 kVA. The owner of this type of power plant must obtain both an Operational License and an Operational Worthiness Certificate (Sertifikat Laik Operasi or SLO).
2. Captive power plants with a total capacity of ≤500 kVA. The owner of this type of power plant does not have to obtain an Operational License or an SLO. However, the owner must submit a one-time report prior to the commencement of the electricity supply to the MEMR through the DGE or the relevant Governor in accordance with their authority. Further, the owner must ensure that the power plant has a manufacturer test result (hasil uji pabrikan), product certificates (sertifikat produk) or a product safety standard document (dokumen standar keselamatan) equivalent to SLO.
3. SKT is no longer required. Operational Licenses and SKTs issued before Reg 12 came into effect remain valid until they expire as long as the designation and the capacity of the power plant do not change.

MEMR Regulation No. 13 of 2019 (Reg 13) on Amendment to MEMR Regulation No. 49 of 2018 (Reg 49) on the Use of Rooftop Solar Power Plants by Customers of PLN

4 November 2019 - The amendments contemplated by Reg 13 were intended to bring the requirements to obtain an Operational License and an SLO for rooftop solar power plants in line with Reg 12.

Previously, under Reg 49, owners of rooftop solar power plants with a capacity greater than 200 kVA were required to obtain both an Operational License and an SLO.

Reg 13 now amends and relaxes certain provisions under Reg 49 regarding requirements to obtain an Operational License and an SLO, to comply with Reg 12, which is the current prevailing law. As a result, only rooftop power plants with a capacity greater than 500 kVA require both an Operational License and an SLO.

PLN customers that are in the process of applying for an Operational License and an SLO for rooftop solar power plants with a capacity ≤ 500 kVA will be affected by this relaxation.

MEMR Regulation No. 16 of 2019 (Reg 16) on the Second Amendment of Regulation No. 49 of 2018 (Reg 49) on the Use of Rooftop Solar Power Plants by Customers of PLN

4 November 2019 - Reg 16 also relaxes the requirements under Reg 49. Through this amendment, the MEMR has decided to facilitate industrial customers who want to have their own rooftop solar projects to supplement their electricity supply.

Reg 16 lowered the monthly capacity charge amount to only five hours, or one-eighth of the amount under the previous regulation. The amendment also eliminates the mandatory emergency energy charge.

Before today, PLN industrial customers who had rooftop solar projects were subject to a monthly 40 hours' capacity charge, which is the same as the amount payable by PLN customers that have load based captive power plants.