Indonesia plans to increase mining royalties across its resource sector to strengthen state revenue. As the world’s largest exporter of thermal coal and a leading nickel producer, the country intends to channel proceeds from its mineral wealth to help finance President Prabowo Subianto’s new government programs.
Under the proposal, the current flat-rate royalty system would be replaced by price-linked progressive rates. For nickel ore, royalties could rise from the existing 10% to a range of roughly 14%–19%, and comparable increases are expected for processed nickel products. Coal royalties would see a smaller change: an increase of about one percentage point, bringing the top rate to approximately 13.5% when prices exceed $90 per ton. Copper would experience the largest proposed adjustment, with ore royalties possibly moving from around 5% up to a band of roughly 10%–17%. Other minerals, including tin, gold, silver, and platinum, are also slated for higher royalty rates.
The dual aim of the reform is to improve governance of the mining sector and to generate additional funding for the administration’s ambitious spending plans. By tying royalties to commodity prices, the government seeks a more responsive fiscal framework that captures greater value when global prices rise while still allowing for flexibility when markets soften.
Proponents argue that a progressive, price-based approach can encourage fairer revenue sharing, reduce incentives for tax avoidance, and create clearer incentives for sustainable resource management. Higher royalties for high-value commodities like copper and nickel would help channel a larger share of resource rents into public investment, while smaller, targeted increases for coal seek to balance fiscal gains with the realities of a global energy transition.
Critics caution that steeper royalties could deter investment or accelerate efforts by some firms to cut costs, potentially reducing long-term production. They also warn that without strong regulatory oversight and transparent allocation of proceeds, higher royalty rates alone may not translate into better outcomes for local communities or environmental protection.
Policymakers are discussing mechanisms to minimize negative impacts, such as phased implementations, exemptions for early-stage or high-cost projects, and reinvestment clauses to ensure a portion of higher revenues supports local development and environmental remediation. Clear rules and transparency in royalty collection and spending are seen as essential to maintain investor confidence while delivering public benefits.
The proposal is part of a broader effort by the Indonesian government to reform extractive sector policy, enhance fiscal resilience, and prioritize public projects. If adopted, the changes would mark a notable shift toward a revenue system that adjusts with global commodity prices and aims to capture a larger share of Indonesia’s resource wealth for national development.