Indonesia’s Minister of Energy and Mineral Resources, Bahlil Lahadalia, announced that the government will reduce mining production quotas to maintain viable price levels for key national commodities such as coal and nickel. The decision forms part of a broader strategy to maximise tax revenues and ensure sustainable profitability for businesses in the sector.
Measures integrated into the annual production plan
The minister specified that the production cuts would be implemented under the Rencana Kerja dan Anggaran Biaya (RKAB), an annual work and budget plan document that each mining company must submit to the government for approval. According to him, these adjustments will enable the state to collect higher royalties and taxes, while allowing companies to benefit from increased margins when global prices are high.
Bahlil Lahadalia referred to a current decline in coal prices but did not provide specific figures on the scale of the planned reductions for this resource or for others, such as nickel. However, immediate effects were seen in the markets, with nickel prices on the Shanghai exchange rising over 3% due to reports of a potential drop in Indonesian supply.
A major player in global markets
Indonesia holds a strategic position in the global supply of several raw materials. It is the world’s top exporter of thermal coal and processed nickel products, which are essential for numerous industrial sectors internationally. The reduction in national output could therefore affect global market balances, particularly in Asia and Europe.
Indonesian authorities have also justified the decision as a means to better regulate the environmental impact of mining operations. Although this rationale was mentioned, it remains secondary to the economic objectives related to taxation and state revenue.
Public revenue at the centre of the strategy
The quota reduction policy, focused on more precise supply regulation, could serve as a tool to boost public revenue without introducing new taxes. It reflects an approach centred on the value optimisation of existing resources while maintaining control over local market fluctuations.
“When prices are good, businesses earn better profits and the state collects more taxes and royalties. This is what we are aiming for now,” the minister said during a televised interview.
