On 18 September 2026, the Minister of Energy and Mineral Resources issued Decree No. 365.K/MB.01/MEM.B/2026 on Technical Guidelines for Approval of the Use of Subsidiaries and/or Affiliates in Mineral and Coal Mining Services (“Kepmen 365/2026”). The decree took effect on the date it was signed.

Kepmen 365/2026 does two things. It requires holders of mining business permits (“IUP”) and special mining business permits (“IUPK”) to prioritise mining services companies from the area around their mines. It also prohibits them from engaging subsidiaries or affiliates as mining services providers without Ministerial approval, and that approval is now available only in narrow circumstances.

The Ministry has presented the decree as a measure against group dominance of mining services work and as a way to open opportunities for regional contractors. For mining groups that run operations through related-party contractors, the change is structural rather than administrative, and contracting models, cost structures and procurement practices may need to be revisited.

Local Mining Services Companies First

Under the first provision of Kepmen 365/2026, an IUP or IUPK holder that uses mining services must engage companies holding a mining services business permit (“IUJP”). In doing so, it must prioritise mining services companies located in the regency or city surrounding its mining permit area.

The decree frames this as a priority rather than an absolute requirement, and it does not define how that priority is to be demonstrated. In practice, permit holders should expect tender processes, vendor lists and contractor selection records to be reviewed against this standard, particularly where a non-local or affiliated contractor is chosen over a qualified local one.

The Affiliate Prohibition

IUP and IUPK holders are prohibited from involving subsidiaries or affiliates in mineral and coal mining services without the Minister's approval. The decree identifies two relationships that fall within the prohibition.

1. Direct shareholding by the IUP or IUPK holder in the IUJP holder.
2. At least one common ultimate beneficial owner shared by the IUP or IUPK holder and the IUJP holder.

The second test is the broader of the two. It reaches sister companies and other group entities that have no shareholding link with the permit holder, as long as the same individual sits at the top of both ownership chains. Groups should therefore assess contractor relationships by reference to their beneficial ownership filings, and not only by reference to their shareholder registers.

A Narrow Exception and the Approval Process

Approval to use a subsidiary or affiliate may only be granted to an IUP or IUPK holder that is carrying out a government assignment in one of three areas.

1. Implementation of a national strategic project.
2. Construction of mineral processing or refining facilities, or coal development or utilisation activities.
3. Supplying minerals or coal to meet domestic needs.

A permit holder outside these categories has no approval route under the decree. The exception also turns on the assignment itself, so an integrated group or a domestic supplier does not qualify automatically.

Eligible holders apply to the Minister, who must decide within 14 working days of receiving a complete and correct application. Holders of IUPs issued by a governor under the governor's authority may apply to the governor instead. Any approval is limited to the field and sub-field of the affiliate's IUJP stated in the application, and it remains valid only until that IUJP expires. The Minister or governor may also correct an approval or rejection issued through an administrative or evaluation error.

The decree does not provide for deemed approval if no decision is issued within 14 working days, and it does not state that filing an application allows the affiliate to keep working in the meantime.

Who Else Is Covered

Kepmen 365/2026 applies mutatis mutandis to holders of IUPKs issued as a continuation of contract or agreement operations, Contract of Work holders, and Coal Contract of Work (“PKP2B”) holders. The largest legacy concessions are therefore within scope.

The decree revokes Director General of Minerals, Coal and Geothermal Regulation No. 376.K/30/DJB/2010 on the procedures and requirements for approving the participation of subsidiaries and affiliates in mining services. Approval requests for affiliate participation are now assessed under the government assignment test described above.

Points Still to Be Clarified

The decree took effect immediately and contains no transitional provision. It does not say how existing affiliate contracts, or approvals granted under the 2010 instrument, are to be treated. The text supports neither automatic grandfathering nor automatic termination, so ongoing arrangements carry real uncertainty until the Ministry issues guidance or begins deciding applications.

The ownership tests also leave gaps. Reverse shareholding, where the contractor holds shares in the permit holder, is not expressly named, and neither is a common parent that does not produce a common beneficial owner. These structures should not be assumed to fall outside the prohibition without a review of the full ownership chain.

Finally, the Directorate General of Minerals and Coal has publicly stated that the decree does not ban affiliates outright but introduces an approval mechanism. How strictly the government assignment condition is applied in practice will become clearer once the first decisions are issued.

Key Considerations

Kepmen 365/2026 turns affiliate contracting from a routine approval into an exception reserved for government-assigned activities. Mining groups, and the contractors that serve them, should consider the following steps now.

1. Map every mining services contractor against both ownership tests, using beneficial ownership records as well as share registers.
2. For each affected relationship, assess whether the IUP or IUPK holder is carrying out a qualifying government assignment, and prepare a complete application where it is.
3. Where no approval route exists, plan a transition to an independent contractor early, with attention to termination rights, handover of equipment and personnel, and continuity of production under the approved work plan and budget.
4. Review procurement procedures so that the priority given to local mining services companies is documented and defensible.
5. Monitor Ministry guidance on existing contracts and approvals issued under the 2010 instrument, as that guidance will decide how much near-term disruption the decree causes.