Court bars direct award of mining permits, orders transparent selection process

The Constitutional Court has ruled that the government cannot directly award priority mining permits to selected entities, including religious organizations and universities, and must instead use a transparent, objective and accountable selection process.

In a ruling issued on Thursday, the court partially granted a judicial review of the 2025 revision to the Mineral and Coal Mining Law, declaring provisions allowing "priority" allocations of mining business licence areas (WIUP) to be conditionally unconstitutional unless they are implemented through clear parameters and an objective selection process.

The ruling stops short of abolishing the priority allocation scheme, but requires the government to replace direct appointments with a competitive assessment mechanism.

Justice Enny Nurbaningsih said the law failed to establish clear criteria for determining which applicants should receive priority licences, giving the government excessive discretion.

"Without clear parameters, subjectivity could become dominant, which could instead lead to greater environmental damage," Enny said while reading the court's decision.

Under the revised law, the government may allocate mining licence areas either through auctions or through a priority mechanism for cooperatives, small and medium-sized enterprises (SMEs), region-owned enterprises, businesses owned by religious organizations and, under certain conditions, universities.

The court ruled that such affirmative policies remain constitutional provided recipients are selected through measurable criteria and an assessment process that is objective, transparent and accountable, rather than by direct appointment.

The judges also said mining licences should be subject to periodic evaluation to determine whether they continue to meet their intended objectives, including empowering local communities and supporting regional economic development.

If permit holders violate licensing conditions or cause environmental damage, the licences should be reviewed or revoked, the court said.

The ruling also outlined five principles for Indonesia's mining licensing regime, including strict and measurable selection criteria, reasonable licence periods, clear extraction procedures, regular supervision and the revocation of licences for violations, including environmental damage.

The judicial review was filed by representatives of private companies, SMEs, lecturers and students, who argued that direct appointments could encourage favoritism and undermine constitutional principles governing the management of Indonesia's mineral resources.

The court also ruled that universities granted mining licences cannot directly operate coal mines.

The 2025 revision of the Mining Law expanded the categories of entities eligible for priority mining permits, building on a regulation issued by former President Joko Widodo that allowed religious organizations to receive state-owned mining concessions.

Indonesia's largest Islamic organization, Nahdlatul Ulama (NU), became the first religious group to receive a coal mining concession in 2024. Muhammadiyah, the country's second-largest Islamic organization, has also been slated to receive a coal mining concession, although the government said earlier this month that the allocation remained under review.

The Ministry and Mineral Resources did not immediately respond to requests for comment on how the ruling would affect existing or planned priority mining permits.

Editing by Reiner Simanjuntak