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Indonesia raises coal royalty rates to boost revenue
The new rates are meant to maximize state revenue at a time when coal prices were at record highs.
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A worker stands on the back of a truck loaded with coal at the Karya Citra Nusantara (KCN) Marunda port in Jakarta on Jan. 17. (AFP/Adek Berry)
T
he government has introduced a higher coal royalty rate for mining companies to raise state revenue amid a global surge in commodity prices.
President Joko “Jokowi” Widodo signed April 11 Government Regulation No. 15/2022 on coal tariffs that imposes, among other things, a progressive coal royalty rate ranging from 14 to 28 percent, depending on Indonesia’s benchmark coal price (HBA).
Previously, coal producers were subject to a nontax obligation called the coal production result fund (DHPB), which imposed coal royalties at a fixed rate of 13.5 percent, regardless of coal prices.
Lana Saria, director of coal business development at the Energy and Mineral Resources Ministry, said the coal royalty scheme would be implemented in five levels considering fluctuations in global coal prices.
“When prices are high we want [to ensure] the government reaps an increase in state revenues. But when coal is at a very low price, the government does not want to burden companies with their financial obligations and still have a conducive business situation," she said in a media briefing on Monday.
Read also: Finance Ministry sets penalty for coal DMO non-compliance
Indonesian Coal Mining Association (APBI) executive director Hendra Sinadia told The Jakarta Post that the regulation would make it more challenging for coal mining companies to perform operational activities efficiently. Existing coal mines were quite old, and as reserves were buried deeper, operating costs were getting higher.
