Business Owners Suggest Postponing Mineral And Coal Royalty Increase: For The Sake Of Downstream Development

Mineral and coal industry players are urging the government to delay the implementation of increased mining royalties. The Indonesia Mining Association (IMA) has requested a review of this royalty hike, as it could negatively affect investment climate and the competitiveness of the mining sector amid the push for downstream processing. "For mineral mining companies, the rise in royalty rates will be burdensome due to high operational costs, especially with the increase in biodiesel prices, which can have a significant impact. Additionally, there is a 12 percent VAT increase and a requirement for 100 percent retention of export data for 12 months, which raises debt and interest," said IMA Chairman Rachmat Makkasau in a written statement on Friday (March 14, 2025).

Moreover, mining industry players are currently making substantial investments in smelter construction as part of the downstream initiative. This investment requires significant funds and is expected to create thousands of jobs. Since smelters are still in the early stages and will only start producing in two to three years, business operators hope to avoid the burden of increased royalties that could strain cash flow. In agreement with IMA, the Indonesian Nickel Industry Forum (FINI) has also proposed delaying the nickel royalty increase. This request is driven by the current challenges faced by the nickel industry, as international market prices have fallen to their lowest since 2020. As a government partner, FINI is committed to supporting the success of nickel downstream processing. They highlighted several significant challenges, including falling prices and difficulties arising from the trade war between China and the U.S.

Therefore, FINI believes that postponing the royalty increase would provide valuable support to maintain the viability of the domestic nickel industry amid global challenges.

To maintain the investment climate and the competitiveness of Indonesia's nickel downstream products amid uncertain global conditions, we suggest that an increase in royalties should not be implemented at this time, said FINI Chairman Alexander Barus.

Tag: IMA Indonesia Mining Association Rachmat Makkasau