The Indonesian Mining Association (IMA) has urged the government to reconsider its plan to increase royalty rates for mining products as miners face rising operational costs and tight cash flows, reported Reuters.
Earlier this week, the Indonesian Government announced plans to increase royalties paid by mining companies to improve industry governance.
The focus is on commodities such as coal, nickel, copper, gold and tin, with potential implications for production and investment plans.
Indonesian Mining Association executive director Hendra Sinadia said that miners are already dealing with several policy changes impacting their finances.
These include the removal of subsidies on biodiesel for industrial use, a 6.5% hike in regional minimum wages and the mandatory use of a government-determined coal benchmark price for transactions.
“A royalty hike will increase the burden for the business community, and it can affect production and investment plans. 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,” Sinadia added.
A recent policy requiring resource exporters to keep all proceeds onshore for a year is also expected to tighten cash flow, Hendra said.
Additionally, the report stated that some miners could be affected by Indonesia’s adoption of the global minimum tax this year, which could impact those previously benefitting from tax breaks on smelter investments.
Furthermore, nickel miners are facing declining prices, and coal miners have expressed concerns over the government’s price cap policy for the domestic market, which has not been reviewed for several years.
Maybank Securities Indonesia noted that companies such as Vale Indonesia, Bumi Resources Minerals, Aneka Tambang and Merdeka Copper Gold could see earnings decline if the proposal proceeds.
However, some holders of a special coal mining permit, such as Adaro Andalan Indonesia, might benefit from the proposed revision due to an overall reduction in maximum rates charged.
Other miners potentially affected by the proposal include Freeport-McMoRan’s Indonesian unit, Amman Mineral Internasional, and tin miner Timah.
