Govt explains why planned royalty hike targets minerals, excludes coal

By Cepi Setiadi

The Ministry of Energy and Mineral Resources (ESDM) has defended its plan to raise royalty rates for mineral commodities while excluding coal, saying higher levies on coal miners could hurt corporate profitability under current market conditions.

Tri Winarno, Director General of Minerals and Coal at the ESDM Ministry, said the proposed royalty adjustment is aimed primarily at capturing additional state revenue from rising mineral commodity prices.

“The royalty increase is essentially intended to capture the rise in mineral commodity prices,” Tri said during a hearing with House of Representatives Commission XII on Tuesday.

He said the government had conducted an economic assessment before determining which commodities would be subject to the new royalty structure.

According to the evaluation, the coal industry is currently less able to absorb additional fiscal burdens than mineral producers.

Read also: Govt postpones mining royalty hikes, export duties after industry pushback

“After our calculations, if coal were subjected to higher royalties, companies would begin to suffer losses. Therefore, coal will not be included,” he said.

The government has instead focused the planned royalty increase on mineral commodities benefiting from relatively strong global prices, particularly nickel.

Tri said the proposed scheme would apply a progressive royalty mechanism, allowing the state to secure higher revenue when commodity prices and company earnings increase.

Under the proposed nickel royalty adjustment, the government plans to tighten the price brackets used to determine royalty rates. Previously, a 14% royalty rate applied when nickel prices were below US$18,000 per ton. Under the revised proposal, the threshold would be lowered to below US$16,000 per ton while maintaining the same rate.

Editing by Reiner Simanjuntak