Cost Recovery Bill Provides Fiscal Incentives: Minister Luhut

TEMPO.CO, Jakarta – Coordinating Minsiter for Maritime Affairs Luhut Binsar Pandjaitan said that the draft revision on cost recovery includes a number of fiscal incentives. Luhut added that the Energy and Mineral Resources Ministry can now propose such incentives, not only the Finance Ministry.

“I’ve already told [Finance Minister] Sri Mulyani,” Luhut said in Jakarta on Tuesday, October 18, 2016.

The draft bill has been sent to the Coordinating Minister for Economic Affairs to be signed before being submitted to the President through the State Secretary.

“We hope that [the draft bill] will be sent to the State Secretariat to be finalized soon,” he added.

Luhut revealed that the fiscal incentives included a tax relief during oil and gas explorations, as well as fiscal incentives during the exploitation period by taking the project feasibility into account. Luhut explained that the final draft bill would also provide non-fiscal incentives. As stated in the new bill, the Energy and Mineral Ministry will have an authority to provide fiscal incentives, such as investment credit or domestic market obligation (DMO) holiday for five years.

The bill draft also governs production and revenue sharing, from previously fixed sharing composition of 84-15 or 70-30 to dynamic sharing composition. Given the provision, the government can gain higher portion when the oil price is high or otherwise.