The Ministry of Energy and Mineral Resources is considering raising royalties paid by mineral and coal mining companies as part of efforts to increase government revenue. The proposed changes aim to fund President Prabowo Subianto’s populist programs, including a free lunch initiative for schoolchildren.
The policy change will be outlined in the revision of two government regulations: Government Regulation No. 26 of 2022 on the Types and Rates of Non-Tax Revenue (PNBP) at the Ministry of Energy and Mineral Resources, and Government Regulation No. 15 of 2022 on Taxation and/or PNBP in Coal Mining Businesses, according to Tri Winano, Director General of Minerals and Coal at the Ministry, during a public consultation on Saturday.
Indonesia is one of the world’s major exporters of thermal coal, nickel, tin, and copper.
During the public consultation, officials proposed raising royalty rates for miners and producers of metal products based on price levels, including the introduction of progressive rates for metals like nickel and copper.
The government suggested raising royalties for nickel ore to between 14% and 19%, depending on the benchmark price levels, up from the current flat rate of 10%, according to the Ministry's consultation document. The document also proposed progressive rates for nickel matte and ferronickel.
For coal, the government would increase royalty rates by one percentage point, depending on the Coal Price Reference (HBA), coal calories, and the type of coal mining license. The proposal also suggested increasing the royalty rate for copper ore to between 10% and 17%, up from the current flat rate of 5%. Increases for copper concentrate and copper cathode are also being considered.
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Other proposals included higher royalties for tin, gold, silver, and platinum.
Below are the details of the proposed changes to coal royalty rates in the revision of Government Regulation No. 26 of 2022:
1. Proposed changes to coal royalties based on contract type for Mining Business Licenses (IUP):
o Calorific value ≤ 4,200 kcal:
• HBA < US$70/ton: royalty remains 5%
• HBA US$70 ≤ HBA < US$90: remains 6%
• HBA ≥ US$90: royalty increases from 8% to 9%
o Calorific value > 4,200 kcal – 5,200 kcal:
• HBA < US$70/ton: royalty remains 7%
• HBA US$70 ≤ HBA < US$90: remains 8.5%
• HBA ≥ US$90: royalty increases from 10.5% to 11.5%
o Calorific value ≥ 5,200 kcal:
• HBA < US$70/ton: remains 9.5%
• HBA US$70 ≤ HBA < US$90: remains 11.5%
• HBA ≥ US$90: royalty remains at 13.5%
2. Proposed changes to coal royalties based on contract type for Coal Mining Concession Agreements (PKP2B):
o Calorific value ≤ 4,200 kcal:
• HBA < US$70/ton: royalty remains 5% with a 8.5% Mining Revenue (PHT)
• HBA US$70 ≤ HBA < US$90: remains 6% with a 7.5% PHT
• HBA ≥ US$90: royalty increases from 8% to 9%, with PHT decreasing from 5.5% to 4.5%
o Calorific value > 4,200 kcal – 5,200 kcal:
• HBA < US$70/ton: royalty remains 7% with a 6.5% PHT
• HBA US$70 ≤ HBA < US$90: remains 8.5% with a 5% PHT
• HBA ≥ US$90: royalty increases from 10.5% to 11.5%, with PHT decreasing from 3% to 2%
o Calorific value ≥ 5,200 kcal:
• HBA < US$70/ton: royalty remains 9.5% with a 4% PHT
• HBA US$70 ≤ HBA < US$90: remains 11.5% with a 2% PHT
• HBA ≥ US$90: royalty remains at 13.5%, with PHT remaining at 0%
3. Proposed changes to coal royalties for existing Special Mining Business Licenses (IUPK) – 28%:
o Calorific value ≤ 4,200 kcal:
• HBA < US$70/ton: royalty remains 5%
• HBA US$70 ≤ HBA < US$90: royalty remains 6%
• HBA ≥ US$90: royalty increases from 8% to 9%
o Calorific value > 4,200 kcal – 5,200 kcal:
• HBA < US$70/ton: royalty remains 7%
• HBA US$70 ≤ HBA < US$90: remains 8.5%
• HBA ≥ US$90: royalty increases from 10.5% to 11.5%
o Calorific value ≥ 5,200 kcal:
• HBA < US$70/ton: royalty remains 9.5%
• HBA US$70 ≤ HBA < US$90: remains 11.5%
• HBA ≥ US$90: royalty remains at 13.5%
Editing by Reiner Simanjuntak
