JAKARTA (Reuters) – Indonesian Mining Association on Tuesday urged the government to reconsider a plan to hike royalty rates for mining products as miners are already struggling with rising operational costs and tight cash flow.
Indonesia is considering raising royalties paid by mining companies from commodities like coal, nickel, copper, gold and tin, a proposal authorities said was intended to improve industry governance.
“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.
“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,” he said.
Miners are already facing a host of policy changes impacting their finances, such as the removal of subsidies on biodiesel for industrial use and a 6.5% hike in regional minimum wages, and the mandatory use of a government-determined coal benchmark price for transactions, Hendra said.
A recent policy mandating resource exporters to keep all proceeds onshore for a year would also tighten cash flow, Hendra said.
Some miners would be further hit by Indonesia’s adoption of the global minimum tax this year as they had previously been enjoying tax breaks on their smelter investment, he said.
Nickel miners are dealing with declining prices, he said, adding that coal miners also complained of the government’s price cap policy for domestic market, which has not been reviewed for several years.
Miners face significant increases in royalty payments if the government goes ahead with the proposal, Maybank Securities Indonesia said in a note to clients, saying companies like Vale Indonesia, Bumi Resources Minerals, Aneka Tambang and Merdeka Copper Gold could see their earnings decline.
However, some holders of a special coal mining permit such as Adaro Andalan Indonesia could benefit from the proposed revision due to an overall reduction in maximum rates charged.
Other miners that could be affected by the proposal include Freeport-McMoran’s Indonesian unit, Amman Mineral Internasional and tin miner Timah.
(Reporting by Bernadette Christina; Editing by Christian Schmollinger)
