Indonesia Pushes Higher Mineral Royalty Tariffs to Plug Fiscal Gap

The Indonesian Ministry of Energy and Mineral Resources (ESDM) is proposing a sweeping upward revision to mineral royalty tariffs that were only recently enacted under Government Regulation (PP) 19/2025.

The proposed structure raises rates across copper, gold, silver, nickel ore, tin, chromium by-products, and cobalt, while expanding price brackets to capture upside from elevated commodity prices.

This effectively converts royalties into a windfall tax mechanism, layering progressive rates onto the highest price tiers and introducing new commodities such as iron derivatives.

While the stated objective is to align royalties with current price dynamics, the underlying motive is clearly fiscal.

• The Prabowo administration faces a widening budget deficit, rising energy subsidies, and an aggressive spending agenda, making commodity revenue one of the few politically feasible sources of incremental income.

However, the trade-off is that miners will absorb meaningful margin compression and are likely to redirect capex toward overseas assets, where the regulatory environment is materially more predictable.