In April 2025, the Indonesian government officially increased royalty rates for several key mineral and coal commodities. A mining royalty is a payment that mining companies must make to the government for the right to extract minerals. It is usually calculated as a percentage of the value of the mineral sold. Royalty rates vary depending on the mineral and whether it is processed or unprocessed. The increased royalty rates is part of a broader strategy to enhance state revenue from the mining sector industry long regarded as a pillar of the national economy. However, the policy has sparked debate among industry players who warn of rising production costs, potential investment delays, and reduced global competitiveness.
The revised regulation introduces a progressive royalty scheme, meaning that rates vary depending on global market prices. Below are the detailed changes: [1]
| Commodity | Old Rate | New Rate (2025) |
| Nickel Ore | 10% | 14%–19% (based on price range) |
| Nickel Matte | 2% | 4.5%–6.5% |
| Ferro-nickel | 2% | 5%–7% |
| Nickel Pig Iron (NPI) | 5% | Up to 7% |
| Gold | 3.75%–10% | 7%–16% (price-based bracket) |
| Silver | 3.25% | 5% |
| Copper Ore | 5% | 10%–17% |
| Copper Concentrate | 4% | 7%–10% |
| Copper Cathode | 2% | 4%–7% |
| Coal (IUP/PKP2B) | ~13.5% avg | +1% if price ≥ $90/ton (HBA benchmark price) |
| Coal (IUPK) | 14%–28% | New, detailed progressive scale introduced |
According to Energy and Mineral Resources, the policy ensures that the state receives a fairer portion of natural resource wealth, especially when global commodity prices are high.
“It’s time for the state to claim a more appropriate share,”
said Bahlil during a press briefing in April 2025. He emphasized that the regulation aims to balance profitability and fairness, particularly since many corporations have historically enjoyed large profits while state earnings remained relatively modest.
Indonesia wants to capture more value from its natural resources boom. In recent years, global prices for nickel, gold, and copper have surged due to rising demand for electric vehicles (EVs), clean energy technology, and industrial growth. A knowledgeable Mining Consultant can play a key role in helping companies adjust to such fiscal shifts by developing strategic mine plans that optimize profitability under the new royalty scheme.
Associations and Experts Warn Royalty Hike Threatens Product Competitiveness, Downstream Investment
However, The Indonesian Mining Association (IMA) and other industry stakeholders have raised concerns, stating that the royalty hike could strain operational costs especially amid falling global prices, higher inflation, and increased logistical expenses.
“A royalty hike will increase the burden for the business community and it can affect production and investment plans,”
the group’s Executive Director Hendra Sinadia said.[2]
“We request that the government reconsider the plan to increase the tariffs, especially given state revenues from the mining sector have exceeded targets in recent years,”
The concerns are particularly acute for downstream producers who have already invested heavily in smelting and refining facilities. These investments were made in response to previous government policies promoting domestic processing. Now, the same companies feel that the royalty increases are counterproductive. In this complex regulatory environment, companies often rely on the expertise of a Mining Consultant to conduct economic assessments and navigate policy uncertainty.
The Indonesian Society of Mining Professionals (PERHAPI) also raised concerns about the lack of consultation with the mining industry, particularly mineral producers, during the formulation of the revised royalty scheme. According to PERHAPI Chairman Sudirman Widhy Hartono [3],
the nickel sector will be disproportionately impacted by the changes.
He emphasized that the proposed progressive nickel ore royalty ranging from 14% to 19% would become the highest in the world, surpassing the global average of 2% to 7%. This, he warned, could erode profit margins and make Indonesia’s nickel industry less competitive.
PERHAPI also highlighted that the higher rates on processed nickel products, such as nickel matte, ferronickel, and NPI, would strain vertically integrated companies that have already invested in downstream facilities.
For instance, the increased royalty is expected to cut profits by 9% to 15% for nickel matte producers and by around 11% for integrated ferronickel companies.
In PERHAPI’s view, such fiscal pressure contradicts the government’s broader goal of supporting mineral downstreaming and industrialization.
Furthermore, the association noted that the timing of the policy is problematic. The nickel price has declined significantly over the past two years, while companies also face additional burdens from new biofuel mandates (B40) and foreign exchange repatriation rules (DHE), which affect liquidity. PERHAPI urged the government to instead focus on improving governance and market control in the mining sector to ensure sustainable royalty contributions without undermining industry viability.
Indonesia’s Mining Crossroads: Balancing Resource Nationalism, Investor Confidence, and Global Competitiveness
The uncertainty caused by frequent changes in fiscal policy can undermine investor confidence. Mining is a long-term business that requires large upfront capital and clear regulatory frameworks. If investors view Indonesia as unpredictable, they may shift their focus to other countries like Australia, Canada, or the Philippines, which are also rich in minerals but offer more stability.
From a global perspective, Indonesia’s actions are part of a wider trend. Countries such as Chile and Peru have been reviewing their mining tax regimes to capture more value from booming commodity prices. This is known as resource nationalism, a strategy where governments aim to take greater control over their mineral wealth and increase their share of profits. However, there is a delicate balance to maintain: too high a tax burden may drive investors away, while too low a share may leave citizens without fair benefits from resource extraction.
Looking at the broader picture, Indonesia’s new royalty system has potential to support national development if the extra funds are used effectively. This could include investments in infrastructure, education, healthcare, or the energy transition. But poor management of these funds or unclear implementation could backfire and create more harm than good.
In conclusion, while the 2025 royalty reform may help increase Indonesia’s state revenue and reflect a fairer distribution of resource wealth, it also presents real challenges for investment and competitiveness. To succeed, the government must ensure regulatory stability, support downstream industries, and communicate clearly with stakeholders. If handled well, this policy could strengthen Indonesia’s position as a major player in global mining. If not, it risks undermining the very growth it hopes to achieve.
In line with the government’s vision to advance mineral downstreaming and maximize domestic value-added, Tura Consulting Indonesia—a mining consultant in Indonesia—has published an in-depth analysis addressing critical challenges in achieving successful downstream industrialization. Our article, Towards Mining Downstreaming & Industrialization in Indonesia, offers actionable insights for navigating policy uncertainty, mitigating cost pressures, and aligning investments with Indonesia’s global competitiveness goals.
Elevate your understanding: Explore how stakeholders can overcome regulatory headwinds, optimize downstream project viability, and contribute to sustainable industrialization. With expert perspectives on balancing fiscal reforms and investor confidence, this piece serves as a strategic roadmap for Indonesia’s mining future.
How can Indonesia strike the right balance between resource nationalism and long-term industry growth? Dive deeper into the debate here.
References
[1] CNBC Indonesia. (2025, March 27). Aturan baru tarif royalti pertambangan sudah final. https://www.cnbcindonesia.com/news/20250327120506-4-622232/aturan-baru-tarif-royalti-pertambangan-sudah-final
[2] Reuters. (2025, March 11). Indonesian miners group urges government to reconsider royalty hike plan. https://www.reuters.com/markets/commodities/indonesian-miners-group-urges-government-reconsider-royalty-hike-plan-2025-03-11/
[3] Perhimpunan Ahli Pertambangan Indonesia (PERHAPI). (2025, March 20). PERHAPI Beri Catatan terhadap Rencana Kenaikan Royalti. https://perhapi.or.id/perhapi-beri-catatan-terhadap-rencana-kenaikan-royalti/