Key points for clients
- Indonesia has enacted a new law on Water Resources.
- The new law clearly establishes that the State has control over all water resources.
- The law establishes priorities for the utilization of water resources, with public needs, such as for drinking water, enjoying the highest priority.
- Business use by private entities has been given the lowest priority.
- Businesses wishing to utilize a State water resource will need first to obtain a water license.
- Among the requirements for a license will be the payment of a Water Conservation Fee.
- As usual in Indonesia it may be some time before detailed implementing regulations emerge governing business use of water resources, the license process and the calculation of the Conservation fees.
Introduction
On September 17th, 2019, the Indonesia House of Representative (Dewan Perwakilan Rakyat - "DPR") passed a bill on water resources (the "Water Law") which was previously regulated under the Law No. 11 of 1974 on water ("Law 11/1974"). The Water Law was promulgated on 16 October 2019 and is now in force, repealing the Law 11/1974.
Control and use of water resources
Before the new Water Law was enacted, the Constitutional Court ("MK'') had re-enacted the old water law, Law 11/1974, in 2015 in order to replace Law No. 7 of 2004 on ("Law 7/2004"). The MK had previously annulled Law 7/2004 because it allowed an individual or a legal entity to control a water resource, which it viewed as contrary to Indonesia's 1945 Constitution which stipulates that the State has control over water resources. As a result of this ruling and annulment, Law 11/1974 came back into force. However, since Law 11/1974 was a product which was issued around 45 years ago, the House of Representatives and the Indonesian Government viewed that such law is no longer relevant to regulate the water resources management vis-a-vis the current development and necessity of the communities. Hence it is decided that a new water law is necessary to be enacted.
Unlike under Law 7/2004, the Water Law clearly states that water resources shall be controlled by the State and their utilization shall be prioritized for the welfare of the Indonesian people. Other groups or legal entities must not own or control a water resource. As the sole controller of all water resources, the Water Law requires the State to ensure the right of Indonesian people to utilize at least 60 (sixty) litres of water per day in order to fulfil their basic needs.
The Water Law prioritizes the utilisation of water resources to fulfil the daily water consumption of the people, people's agriculture and for public drinking water systems. The use of water resources for (i) any non-business public purpose and (ii) any business purpose is only permitted if the priority utilization purposes mentioned above have been met and there is sufficient water remaining to be allocated for these purposes.
Licensing
The Water Law establishes 2 types of licence for the utilisation of water resources: 1. a non-business water utilisation licence (izin penggunaan sumber daya air untuk kebutuhan bukan usaha) and 2. a business purpose water utilisation licence (izin penggunaan sumber daya air untuk kebutuhan usaha).
1. Non-business water utilisation license
This type of license is differentiated into 3 (three) licences as follows:
| No. |
License |
Requirement |
| 1. |
Daily Needs Water Resources Licence (Izin Penggunaan Sumber Daya Air Pemenuhan Sehari-Hari) |
This licence is required if (i) the utilisation is conducted by altering the natural condition of the water resources and (ii) the utilisation is aimed at the needs of groups which require a large amount of water. |
| 2. |
People Agriculture Water Resources Licence (Izin Penggunaan Sumber Daya Air Untuk Pemenuhan Kebutuhan Pertanian Rakyat) |
This licence is required if (i) the utilisation is conducted by altering the natural condition of the water resources and (ii) the utilisation purpose is for people undertaking agriculture outside of the existing irrigation system. |
| 3. |
Other non-business purposes licence. |
This licence is required if the utilisation activities differ from the two utilisation activities as set forth above (e.g. watering city parks, for use by houses of worship, etc) |
2. Business purpose water utilisation licence (izin penggunaan sumber daya air untuk kebutuhan usaha)
This licence may be granted to: (i) a State owned enterprise (badan usaha milik negara – "BUMN"), (ii) a regionally owned enterprise (badan usaha milik daerah - "BUMD"), (iii) a locally owned enterprise (badan usaha milik desa), (iv) a cooperative, (v) a business entity, and (vi) an individual.
The granting of the licence shall be subject to the following priority levels:
a. daily utilisations of a group which requires a large amount of water;
b. daily utilisations which require the alteration of the natural condition of the water resource;
c. for agricultural activities of a community which are not supported by the existing irrigation system;
d. for the daily utilisation of water resources through the drinking water system;
e. utilisation of water resources for non-business activities with public purposes;
f. utilisation of water resources by BUMN, BUMD or local-owned enterprises for their business purposes; and
g. utilisation of water resources by a business entity or an individual for their business purposes.
The Government may only grant this licence to a business entity if the entity complies with various requirements including that: (i) it operates based on a related water resources management scheme (pola pengelolaan sumber daya air) and a water resources management plan (rencana pengelolaan sumber daya air) which have been set out by the central/regional/local Government (as applicable), (ii) it complies with all technical administrative requirements, (iii) it has obtained approval from the relevant regional stakeholder (pemangku kepentingan) within the area of the water resources; and (iv) it pays a Water Resources Conservation fee which is a component of the water resources management service fee (biaya jasa pengelolaan sumber daya air - BPJSDA) and fulfils any other payment obligation as set out under prevailing laws and regulations. Full new implementing regulations may take some time to emerge.
Sanction
The Water Law provides criminal sanctions for violations of specific provisions under the Water Law in the form of (i) imprisonment from 3 (three) months up to 9 (nine) years and (ii) penalties in the range of IDR 300 million up to IDR 15 billion. Such criminal sanctions may also be imposed on the person in charge or the management of an entity who commits the violation.
Authors: Ratih Nawangsari, Partner; Frederic Draps, Partner; and Rika Salim, Senior Associate.
