JAKARTA – The government has recently enacted an increase in royalty rates for minerals and coal (minerba) through Government Regulation (PP) No. 18/2025 and PP No. 19/2025. Civil society groups have positively received this move. However, they emphasize that the potential increase in state revenue must be directed toward accelerating a just and sustainable energy transition in Indonesia.

Under the new policy, the government has implemented progressive royalty rates for minerals such as nickel, moving from a flat rate of 10% to a range of 14%-19%, adjusted based on the Reference Mineral Price (HMA). For coal, adjustments have been made based on the type of permit, with royalties for Mining Business Permits (IUP) increasing, while royalties for Coal Contract of Work (PKP2B) or Special Mining Business Permits (IUPK) have decreased.

Al Ayubi, Policy Strategist at CERAH, stressed that the royalty rate increase must be strategically utilized to support the energy transition. “The royalty hike should not merely be seen as additional state revenue but must serve as a momentum to improve the governance of the extractive industry in accelerating the energy transition. The funds obtained must be clearly allocated to support the development of the green energy sector, through subsidies for renewable energy or incentives for green investments,” Ayubi said in a statement in Jakarta on Friday (9/5).

Based on the National Medium-Term Development Plan (RPJMN) 2020-2024, the government has allocated only around IDR 34.2 trillion per year for renewable energy, far below the actual need of IDR 148.3 trillion per year. This situation makes it difficult to achieve the national energy mix target and the emission reduction targets outlined in the Nationally Determined Contributions (NDC).

Moreover, the Institute for Essential Services Reform (IESR) noted that from 2019 to 2021, private investment in fossil energy still dominated at 73.4%, while renewable energy only accounted for 26.6%. “This funding gap is a major obstacle to Indonesia’s energy transition. Therefore, additional funds from the royalty increase must be immediately allocated to bridge the renewable energy funding gap,” Ayubi emphasized.

Tata Mustasya, Executive Director of Sustain, added that increasing coal production levies is a strategic solution for the Prabowo administration to accelerate the energy transition while addressing the climate crisis. According to him, there are three main objectives of this increase. First, it will significantly boost state revenue to accelerate the energy transition. Second, to disincentivize coal production, thereby shifting investments toward clean and renewable energy. Lastly, to uphold the principle of justice by imposing proportional levies on the coal mining sector, which has long enjoyed substantial profits.

Tata added that coal royalty rates and other production levies should be gradually increased to achieve these three objectives.

“With the actual coal price scenario from 2022-2024, the government could potentially gain additional state revenue ranging from USD 5.63 billion (IDR 84.55 trillion) to USD 23.58 billion (IDR 353.7 trillion) per year. This funding is more than sufficient to cover the needs of the Just Energy Transition Partnership (JETP), which amounts to USD 96.1 billion until 2030, but has so far been constrained by a lack of concrete funding,” Tata explained.

Aryanto Nugroho, National Coordinator of Publish What You Pay (PWYP) Indonesia, cautioned the government against adopting a short-term approach that solely focuses on increasing state revenue. The royalty policy should serve as a strategic instrument to gradually reduce reliance on coal, including reducing coal production and phasing out the operation of coal-fired power plants (PLTU) in PT PLN’s (Persero) electricity grid, as well as captive PLTUs built for specific purposes, such as those in mineral downstream processing areas.

This is particularly relevant given that the RPJMN 2025-2029 still targets coal production at 700 million tons per year, far exceeding the safe limit of 400 million tons outlined in the National Energy Plan (RUEN). Additionally, the mineral and coal industry has enjoyed significant incentives since enacting the Mineral and Coal Mining Law No. 3 of 2020.

“Therefore, the royalty increase must be a tool to comprehensively improve governance and ensure that affected communities truly feel its benefits. Most importantly, the government should not allocate additional revenue from the royalty increase to coal downstream projects, such as Dimethyl Ether (DME), which have proven uneconomical and environmentally unfriendly,” Aryanto stressed.

Source: Dunia Energi