The Indonesian Government has announced an increase in the royalty rates for nickel, tin and other metal producers, reported Bloomberg, citing a regulation document and sources familiar with the matter.

The move is part of an effort to secure funding for President Prabowo Subianto’s high-priority policies, which include a new state investment fund and free school lunches.

The changes reflect those discussed in a public consultation last month, with royalties now varying with commodity prices.

The document indicates that the previous flat levy of 10% on nickel ore production will be replaced by a variable tax rate ranging from 14% to 19%, based on price levels set by the government.

However, lower-grade ore processed into battery-grade nickel will be subject to a reduced 2% royalty.

The royalty rates for higher-grade ferronickel and nickel matte will be lower than those proposed in the public consultation.

Conversely, the royalty changes for open-pit coal production will be dependent on existing permits, while underground coal mining will see comparatively lower levies.

The new royalty regime will become effective 15 days after the registration date of 11 April.

Indonesia’s large smelting industry has faced a shortage of ore for months, resulting in reduced margins and output cuts.

Last month, the Indonesian Mining Association called on the government to reassess its proposal to raise royalty rates, citing that miners are already grappling with escalating operational costs and constrained cash flows.

The news of the royalty revision has impacted Indonesian mining stocks, with coal companies such as PT Bumi Resources and PT Indika Energy experiencing a rally in share prices following the announcement.