Indonesian coal producers have raised concerns on a proposed royalty hike by the country's ministry of energy and mineral resources (ESDM).
The proposal is ill-timed given an extended sluggishness in coal prices and the impact of recent government regulations, the Indonesian Mining Association (IMA) said.
The industry is still navigating the regulatory changes announced in February and a higher royalty will impact revenues, IMA said. Exporters of national resources, including coal but excluding oil and gas, are required to place 100pc of the foreign currency proceeds into a special deposit account of a national bank for at least 12 months, starting on 1 March. This marks a significant increase compared with the initial regulation, which required exporters to place only 30pc of the foreign currency proceeds onshore for three months.
Jakarta also approved a decision in February to link coal exports to HBA, a government set reference price, starting from 1 March.
Coal prices have been steadily declining since 2024, which has significantly pressured margins, prompting many producers to keep output flat in 2025 and focus on ways to increase efficiency and reduce costs.
A higher royalty could lead to lower coal production, IMA said. Coal producers prepare their Work Plan and Budget (RKAB) based on current coal royalty rates, it said. A change in royalty might necessitate a review of these plans since the validity period for the RKAB is three years.
The ESDM first announced its plans to increase royalty rates in the first half of March. Coal royalties could be increased by 1 percentage point for producers holding business permits (IUP) for GAR 5,200 kcal/kg or lower coal products when the HBA is at or above $90/t.
This would result in GAR 4,200 kcal/kg or lower coal having a new royalty rate of 9pc from the current 8pc. Coal with a higher calorific value (CV) than GAR 4,200 kcal/kg up to GAR 5,200 kcal/kg would have a new royalty rate of 11.5pc, up from 10.5pc. Royalties from coal with a higher CV than GAR 5,200 kcal/kg would remain unchanged at 13.5pc under the proposed revision.
Coal Contract of Work (PKP2B) holders will retain their 13.5pc total tariff rate across all coal grades, as the 1 percentage point increase in royalty rates will be offset by a 1 percentage point decrease in mining receipt shares, the ESDM said. The increase was proposed to raise non-tax state revenue collections from the mining industry.
