Business actors need to retructure their debts in response to the increase in mineral and coal (minerba) royalty rates as regulated in revised regulations on tariffs for Non-tax State Revenue and tax treatment in the coal mining business sector, says the Indonesian Mineral and Coal Energy Suppliers Association (Aspebindo).

"The increase in royalties has the potential to erode cash flow, so companies need to restructure their debts, especially those with high interest rates, through refinancing to extend the debt tenor and reduce interest burdens," Aspebindo Deputy Chairman, Fathul Nugroho, said on Thursday, March 27, 2025.

On the other hand, operational efficiency is also key. Fathul said companies need to increase the recovery rate so that all mineral reserves can be extracted by minimizing waste.

"Mining companies need to shift their paradigm from volume-based to value-based, namely focusing on mining high-grade minerals first. Low-grade minerals will only burden margins when royalties increase," he suggested.

He also encouraged companies to renegotiate long-term contracts with buyers.

"Companies can submit price revisions to long-term contracts with price formulas such as HPP plus margin plus variable royalties, so that the increase in royalties is also borne by buyers," he said.

The revised regulations include Government Regulation (PP) No. 26/2022 on Types and Tariffs for Non-Tax State Revenue (PNBP) applicable to the Ministry of Energy and Mineral Resources (ESDM), as well as PP No. 15/2022 on Tax Treatment and/or PNBP in the Coal Mining Business Sector.

Fathul, however, acknowledged that the increase in royalty rates is the government's right as the owner of mining rights. He hopes that the amount of the increase will still pay attention to the sustainability and economics of the business.

He predicted that this increase would trigger various challenges, especially for coal and mineral mining companies.

However, he ensured that the company would continue to produce according to the 2025 Work Plan and Budget (RKAB) approved by the Ministry of Energy and Mineral Resources, which is 917.16 million tons (mt) for coal and 220 mt of nickel ore.

He also predicted that there would be a slowdown in production for around the first two months after the royalty increase, because the company needed to make operational and commercial adjustments, including increasing selling prices which would reduce demand.