Indonesia is a country that rich in natural resources. The 1945 Constitution provides a mandate for the Government to manage natural resources within the jurisdiction of the State for the greatest prosperity of the people. In mining sectors, Indonesian Government requires mining companies to conduct activities to add value to coal that will provide more benefit for low-quality coal and reduce carbon emissions from the use of processed coal. To support this activity, the Government imposed a zero percent royalty policy.
This research is legal research that uses a statutory approach, conceptual approach, and comparative approach with China and Australia to analyze the principle and regulations related to royalty and profit-sharing policies in the coal mining sector. The purpose of this study is to analyze changes in royalty policy in Indonesia and to analyze the most beneficial profit-sharing system to be used in Indonesia. This policy has the possibility to give impacts that will give both benefits and disadvantages that must be anticipated by the Government. The profit-sharing system that will give the maximum benefit for Indonesia is the royalty system which also reflects the principle of State control of natural resources as mandated by the 1945 Constitution.
Appropriate Profit-Sharing System for Coal Mining in Indonesia
Although the zero‘percent coal royalty was intended to spur downstream value‘addition and lower emissions, the policy creates serious fiscal and legal risks: it eliminates a pragmatic, enforceable source of state revenue, conflicts with provisions in Minerba 2020 and the Job Creation Law, lacks a clear procedural basis or alternative revenue scheme, and has not demonstrated clear success in increasing value‘adding projects”while potentially delaying the shift to renewable energy by privileging more profitable fossil‘fuel investment. To balance investment incentives, environmental goals, and state revenue, the government should reinstate transparent profit‘sharing mechanisms (e.g., progressive or price‘linked royalties adapted to Indonesian coal quality), and use rational‘choice and economic analysis of law to design fiscally responsible, investment‘friendly regulations that align legal certainty with public interest.
Additionally, the government should adopt a phased, transparent framework that reintroduces calibrated royalties or hybrid profit‘sharing linked to price and coal quality with clear sunset clauses tied to renewable‘energy milestones; establish firm legal authority and reporting obligations to avoid ambiguity; and create a dedicated just‘transition fund (for infrastructure, remediation, and worker retraining) financed by these revenues, together with an independent monitoring body and structured stakeholder consultation to preserve public revenue while maintaining investor certainty and accelerating the shift to low‘carbon alternatives.
Author: Widhayani Dian Pawestri
Widhayani Dian Pawestri, Katherine Abidea Salim, Kukuh Leksono Suminaring Aditya
Imposition of Zero Percent Royalty for Mining Companies Increasing the Added-Value of Coal in Indonesia, Volume 13, Issue 3, December 2025, Jurnal IUS Kajian Hukum dan Keadilan, 27 Desember 2025, DOI : 10.29303/ius.v13i3.1827
https://jurnalius.ac.id/ojs/index.php/jurnalIUS/article/view/1827
