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Indonesia's new royalty scheme to cut miners' net incomes by up to 6.5%
The government is aiming to rake in more nontax revenue through its new coal royalty scheme, which an analyst expects will cut into miners' net income by a maximum 6.5 percent.
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A backhoe unloads coal from a barge and onto trucks on Jan. 17, 2020 at the Karya Citra Nusantara (KCN) Marunda Port in North Jakarta. (AFP/Adek Berry)
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ublicly listed coal miners saw their fundamentals improve this year amid skyrocketing global coal prices, but their net income was expected to decline after the government introduced higher coal royalty rates mid-month.
Ahmad Zuhdi Dwi Kusuma, an industry and area analyst at state-owned Bank Mandiri, predicted a maximum 6.5 percent decline in coal miners’ net income due to higher royalties, assuming a rate of 13.5 percent.
“We see that the new regulation aims to reap windfall [revenues] from the high commodity prices,” Zuhdi told The Jakarta Post on Thursday.
The mining industry is a major contributor to nontax state revenue for Indonesia, the world’s second largest coal exporter, with miners contributing Rp 70.05 trillion (US$4.92 billion) out of Rp 452 trillion in nontax state revenue booked last year.
The government has introduced a higher coal royalty rate in a bid to raise state revenue amid the global surge in commodity prices.
President Joko “Jokowi” Widodo on Aug. 15 signed Government Regulation No. 26/2022 on tariffs for types of nontax state revenue applicable to the Energy and Mineral Resources Ministry.
The new regulation imposes a progressive royalty rate of between 5 and 13.5 percent on coal, depending on the calorific value of the miners’ coal production and the Indonesian Coal Benchmark Price (HBA). All companies holding a mining business license (IUP) are subject to both tax and nontax obligations under the new regulation, which becomes effective on Sept. 14.
