Operations at PT Semen Gresik’s cement plant in Gunem, Rembang Regency, Central Java have ground to a halt following a dispute with the village administration of Tegaldowo over access to a key mining route. 

The shutdown is already impacting local government revenue and raising concerns about the region's investment climate.

In a statement released last week, state cement producer PT Semen Gresik cited the blockade of an access road by Tegaldowo village authorities as a primary reason for suspending operations. The company claimed the action had effectively cut off raw material supply to the plant, forcing a halt in production.

The access restrictions have prevented the factory from obtaining the required supply of limestone.

"The Rembang factory was forced to temporarily suspend operations," PT Semen Gresik Corporate Secretary, Abdul Manan, said in a statement on Tuesday, June 10, 2025.

Amid speculation circulating on social media that Tegaldowo’s village administration had demanded Rp1.5 billion annually in compensation for the use of village-owned land, village head Kundari has firmly denied the allegation.

“There has never been any monetary request from the village,” Kundari said in a public statement on Tuesday, June 17, 2025. She emphasized that the agreement between PT Semen Gresik and the village, made in 2020, focused solely on the restoration of a village road that was lost due to industrial activity.

“There was a commitment to replace the lost road with land, but that promise has yet to be fulfilled,” she added.

According to Kundari, PT Semen Gresik previously offered to take full ownership of the road in question, but the proposal was rejected by the village. The lack of a mutually agreed solution has now led to an operational standstill with wider financial implications.

Local revenue

The suspension of the cement plant’s activities is expected to significantly affect Rembang’s regional budget. The local revenue office, BPPKAD Rembang, has warned of a sharp decline in income from mineral and rock excavation taxes (MBLB), one of the largest sources of local revenue.

“Prior to the shutdown, PT Semen Gresik contributed an average of Rp1.6 billion per month in MBLB taxes. With the plant offline, we are potentially losing Rp19.2 billion annually,” a BPPKAD official said. The last recorded tax payment from the company was in April 2025, for production carried out in March.

Even before operations were officially suspended, production levels had reportedly begun to decline, raising concerns about the long-term viability of the plant’s contribution to the local economy.

Mediation

Rembang Regent Harno acknowledged that multiple efforts had been made to mediate between the company and village officials, but so far, no resolution has been reached.

“I last met with PT Semen Gresik before June 1. They informed me that negotiations with the village were still at an impasse,” Harno said as quoted by Suara Merdeka on Monday, June 16, 2025, noting that the company decided to cease operations due to unsustainable losses.

Harno expressed concern over the broader implications of the dispute. “We’ve tried everything to secure our regional income and ensure that residents continue to benefit from the plant’s operations. But with both sides holding firm, our options are limited,” he said.

He further urged all stakeholders to consider the wider economic consequences, particularly as the regency grapples with a projected budget deficit. “We hope this situation doesn’t deter potential investors from coming to Rembang,” he added.