Indonesia has enacted a new royalty framework for metal producers, linking levies to commodity prices in a bid to boost state revenue for key government initiatives. The updated rules were outlined in a regulation document issued on April 11 and take effect 15 days after registration.
Under the changes, the previous fixed 10% royalty on nickel ore has been replaced with a variable rate ranging from 14% to 19%, depending on government-determined price bands. Lower-grade ore refined into battery-grade nickel will be taxed at a significantly reduced 2% rate. The new structure also sets lower-than-expected rates for ferronickel and nickel matte compared to earlier public consultation proposals.
Royalty changes will also apply to other sectors, including tin and coal. While royalties for open-pit coal mines will vary by permit, underground coal mining will be subject to lighter levies.
The adjustment is aimed at supporting high-profile policy priorities of President Prabowo Subianto, including the launch of a state investment fund and nationwide free school meals. The shift follows last month’s public consultation and reflects broader fiscal strategies designed to increase non-tax revenue.
Indonesia’s mining sector, particularly its nickel smelters, has been under pressure from ongoing ore shortages, which have squeezed margins and led to production cuts. In March, the Indonesian Mining Association urged the government to reconsider the proposed royalty hikes, citing rising operational costs and cash flow constraints.
The market response has been mixed. While mining firms in the metals space brace for thinner margins, coal producers like PT Bumi Resources and PT Indika Energy saw a boost in share prices following the announcement.
