Coal licences: IUP, IUPK and the old PKP2B contracts

Most Indonesian coal is mined under one of three titles: an old contract of work, the special licence that replaces it when it expires, or an ordinary mining business licence. All three give the right to mine for a fixed term. None gives ownership of the land on top.

For a buyer, the type of title decides how long the mine can run, what share of revenue goes to the state and which old problems come with it. The general rules for mining licences are in mining licences in Indonesia, and what follows is specific to coal.

Coal contracts of work (PKP2B)

Coal contracts of work (Perjanjian Karya Pengusahaan Pertambangan Batubara, PKP2B) were long-term agreements between the state and private coal companies, signed from the 1980s onwards. Each contract set its own area, term and fiscal terms, and those terms held for the life of the contract. Several of the largest mines in East and South Kalimantan started under one.

No new PKP2B is signed today. In November 2025 the energy ministry counted 59 still in force. Each one runs until the end date in its contract, and then the holder needs a licence to keep mining.

From PKP2B to IUPK

Law 3 of 2020, which amended the Mining Law (Law 4 of 2009), set the route. A contract that hasn’t been extended before can continue as a special mining business licence (Izin Usaha Pertambangan Khusus, IUPK) as a continuation of the contract’s operations. It can be extended twice, for up to 10 years each time. The holder has to apply no earlier than five years and no later than one year before the contract ends, and the minister can refuse if an evaluation finds the contract was poorly run.

The law first said these extensions were guaranteed. In October 2021 the Constitutional Court, in Decision 64/PUU-XVIII/2020, held that the guarantee was unconstitutional unless read as “may be granted”. Extension is now the government’s decision, made against conditions that include higher state revenue and an approved plan for developing the area.

The conversion has a price. The holder keeps only the area covered by its approved development plan and hands the rest back. It also has to carry out coal development or utilisation inside Indonesia. And the state take rises. As well as royalty, IUPK holders pay a charge on coal sales that rises with the reference price (HBA), set by Government Regulation 15 of 2022 as amended by Government Regulation 18 of 2025. They also pay the state 10% of net profit on top of income tax. How that compares with an IUP is set out in coal royalties and taxes.

The seven first-generation contracts ended between 1 November 2020 and 26 April 2025, and all seven now operate as IUPKs. The last of them got an IUPK running to 26 April 2035 and gave up about 30,896 hectares, keeping about 78,004.

The returned land doesn’t sit idle. Government Regulation 25 of 2024 let the government offer former PKP2B areas, with priority, to companies owned by religious organisations. Law 2 of 2025 and Government Regulation 39 of 2025 widened the priority routes to cooperatives and small businesses. On 16 July 2026 the Constitutional Court ruled that priority allocation needs clear criteria and an objective, transparent assessment, so the rules for these routes are still settling.

IUPs from the regional era

The ordinary mining business licence (Izin Usaha Pertambangan, IUP) has a different history. Under Law 4 of 2009, district heads and governors issued IUPs for areas inside their territory, and they issued thousands. Boundaries overlapped, documents went missing and many holders never paid their dues. The energy ministry began reconciling the records in 2011 and publishing which licences were clean and clear (CnC). In mid-2011, only 3,778 of the 9,662 licences it had registered had that status.

Licensing then moved up. Law 23 of 2014 on regional government gave it to the provinces, and Law 3 of 2020 gave mineral and coal licensing to the central government. Coal IUPs are now issued by the Ministry of Energy and Mineral Resources. The clean-up continued too. In January 2022 the government revoked 2,078 mineral and coal licences whose holders had never filed work plans.

A coal IUP has two stages. Exploration lasts up to seven years. Production runs for up to 20 years with two extensions of 10 years each, or 30 years for a mine integrated with coal development or utilisation. In November 2025 there were 871 coal IUPs, 854 of them at the production stage.

What each title means for a buyer

	PKP2B	IUPK (continued contract)	IUP
Basis	Contract with the state	Licence under Law 3 of 2020	Licence under the Mining Law
Issued by	Not issued: signed as a contract	Ministry of Energy and Mineral Resources	The ministry since 2020; district heads and governors before
Term	Set in the contract	Two extensions of up to 10 years	Up to seven years of exploration, then 20 years of production plus two 10-year extensions
State take	Mostly fixed by the contract	Royalty and a sales charge rising with the HBA, plus 10% of net profit	Royalty under Government Regulation 19 of 2025
Check first	The end date, and whether the IUPK application went in on time	The area and development plan the ministry approved	A clean record back to the first issue

The holder of an IUP or IUPK can’t transfer it or change its shareholders without the minister’s approval. For a PKP2B, read the contract’s own terms on changes of control. Either way, make payment depend on the approval.

Before you rely on a coal title

Ask for the original contract or licence and every amendment, extension and conversion decree since. Check each one against the ministry’s records: holder, stage, expiry date and coordinates.

For a PKP2B close to its end date, find out whether the IUPK application went in during the window and what area the development plan keeps. For an IUPK, read the conversion decree and the fiscal terms attached to it. For an IUP, trace the licence back to its first issue, including any regional decree, any CnC listing and any revocation or reinstatement.

Then compare the coordinates with neighbouring licences, plantation titles and the forest map. An overlap that started under a district head can still block production today, and forest status needs its own approval (see forest area status).