The Indonesian Nickel Miners Association (APNI) has strongly opposed the government's plan to increase mining royalty rates, citing concerns over the heavy financial burden on the industry.

APNI Secretary-General Meidy Katrin Lengkey said that nickel miners, smelter operators, and other stakeholders had submitted their input regarding the proposed regulation changes. According to Meidy, the planned royalty rate hike − ranging from 14 percent to 19 percent for nickel ore and 5 percent to 7 percent for processed nickel products (FeNi/NP) − is unrealistic and does not reflect the current state of the industry.

"Today, we are sending a formal letter to the Ministry of Energy and Mineral Resources (ESDM), as well as 11 other institutions, including the Ministry of Trade, the Ministry of Finance, and the Investment Ministry. The Directorate General of Mineral and Coal is already waiting for our letter, and I will send it tonight before any decisions are finalized," Meidy told a discussion on mining royalties on Monday, March 17, 2025.

Falling prices and rising Costs

APNI argues that the proposed progressive royalty rates do not account for the current decline in global nickel prices. Additionally, rising operational costs − including the increase in B40 biodiesel prices, a 6.5 percent rise in the minimum wage, a 12 percent value-added tax (VAT), and the mandatory 100 percent export earnings repatriation for 12 months − are further squeezing miners' profit margins.

The impact of the royalty increase would also extend to smelter operators, whose capital-intensive projects cost between US$1.5 billion and $2 billion per smelter, excluding reclamation, non-tax state revenues (PNBP), community development funds (PPM), and the 15 percent Global Minimum Tax.

Balanced policy

To mitigate the impact, APNI is urging the government to implement a fairer and more flexible royalty policy. Meidy suggested adjusting the royalty rate based on commodity prices, ensuring that higher royalties apply only when nickel prices exceed a certain threshold. The association also called for fiscal incentives for smelters, such as lower royalty rates for companies investing in downstream processing.

Additionally, Meidy proposed a review of the tax and levy structure to prevent overlapping obligations, including VAT, income tax (PPh), non-tax state revenue (PNBP), and the Goods and Services Tax (GST). She also pushed for a revision of the nickel ore benchmark price formula to account for iron and cobalt content.

APNI hopes the government will engage in open dialogue with industry players to develop a mutually beneficial solution. 

"We are committed to providing technical data and financial analysis to support the proposed policy adjustments," Meidy said.

APNI Chairman Nanan Soekarna echoed these concerns, warning that the royalty hike would also threaten the nickel processing industry. 

"Everyone has expressed their concerns. Miners have calculated the impact, and it's a heavy burden − especially with export earnings being withheld. We hope the government will take our input into consideration," he said.