Indonesia begins approving revised mining quotas, and the criterion being applied is how much royalty a company pays

The Ministry of Energy and Mineral Resources began issuing approvals for revised 2026 work and budget plans on 20 August 2026. Tri Winarno, Director General of Minerals and Coal, confirmed that roughly a dozen nickel companies and a similar number of coal companies had received approval, and that the purpose was to let mines which had gone idle under quota constraints resume operations.

He did not say how much additional production those approvals carry. That omission is deliberate and has been explained. It is also the most interesting thing about the decision.

Approvals begin, volumes withheld

The RKAB, the annual work and budget plan every Indonesian mining permit holder must have approved, is the instrument through which the state sets how much ore or coal may be produced. For 2026 the government tightened it considerably. The revision window opened in July with a 31 July filing deadline, and approvals have now started to land three weeks after that.

Minister of Energy and Mineral Resources Bahlil Lahadalia set out the reasoning on 3 August. Relaxation would not be applied uniformly across permit holders. It would go first to companies with a record of paying substantial royalties.

I must prioritise those paying high royalties, because we must create policy that provides maximum benefit for the state and the people.

He tied this to Article 33 of the 1945 Constitution and its requirement that natural resources be managed for public benefit, and argued that non-renewable commodities should command a fair price rather than be sold into a market the producer has helped to flood.

On disclosure he was equally direct. Publishing the volumes, he said, could move prices again, and that would affect world pricing. The government is treating its own quota decisions as market-sensitive information.

The pattern beneath the approvals is narrow rather than general. Additional nickel quota is going only to supply smelters that are short of feed. Additional coal quota is going to meet the operational needs of the state electricity company PLN. This is not a broad reopening. It is a set of targeted adjustments aimed at specific bottlenecks.

The numbers the cap is being measured against

The scale of the 2026 tightening is what gives the approvals their weight. Indonesia produced 817.48 million tonnes of coal in 2025. The 2026 plan caps the sector near 600 million tonnes. Singgih Widagdo, Chairman of the Indonesian Mining and Energy Forum, has argued that 700 to 720 million tonnes would be the more reasonable level, describing that range as what his own calculation supports.

The consequences of the gap are quantified. Coal available for export would fall from 514 million tonnes in 2025 to around 370 million tonnes at the current cap, a reduction of 144 million tonnes. Rizal Kasli, Chair of the Advisory Board at PERHAPI, the Indonesian Association of Mining Professionals, has warned that non-tax state revenue would decline, particularly from coal, if the cap held at 600 million tonnes. The 2026 non-tax revenue target for minerals and coal is Rp133.93 trillion, and the projected shortfall against an unrevised plan has been put at 23.54 percent.

Nickel shows the same compression with less clarity in the figures. As of April, Tri Winarno said RKAB approvals were nearly complete and that nickel stood at around 190 to 200 million tonnes, with the adjustment made to match smelter production capacity. The wider 2026 planning range has been described as 250 to 260 million tonnes in some accounts and 260 to 270 million tonnes in others. The 2025 comparison is reported as 379 million tonnes in one source and 320 million tonnes in another. Sirkularium records the discrepancy rather than choosing, because the size of the reduction depends entirely on which 2025 baseline is used, and that is not a detail a reader should have to guess at.

Tri Winarno has separately denied reports that nickel quotas would be lifted to 360 million tonnes, saying the ministry never made such a statement.

Royalty as an allocation criterion

Sirkularium reads the royalty test as the substantive development here, and as a defensible one. A production quota is a claim on a finite public asset. Allocating it by fiscal contribution rather than by uniform percentage is a decision to value that claim by what it returns to the state, and it is a more rigorous basis than first come first served or across the board proportionality.

It is also, in effect, an efficiency rule. Royalty paid per tonne varies by commodity, by grade, by product form, and by how much processing the company does domestically. A company that pays more royalty on the same physical volume is, by the state's own accounting, producing more public value from the same depletion. Directing scarce quota toward those operations is a coherent position, and it points in the same direction as the downstreaming policy the government has set out elsewhere.

The criterion becomes stronger the more of a company's contribution it captures. Royalty is one line. Corporate tax, dividends to state holding companies, local revenue sharing, and employment are others, and each is already measured somewhere in the system.

What is measured, and what is not

There is one column the allocation rule does not yet reach, and it is the one Sirkularium works on.

A quota is permission to disturb a defined area of land and water for a year. Two companies granted identical additional tonnage can impose very different costs on the catchment, the forest, and the coastline around them, depending on ore body, method, overburden ratio, water use, and tailings handling. At present nothing in the RKAB allocation reflects that difference in monetary terms.

Indonesia already holds every instrument required to change this. AMDAL establishes the environmental baseline at permitting. PROPER and environmental approval conditions monitor performance. Reclamation guarantee funds hold money against future obligations. Permen LH No. 7 Tahun 2014 sets out how ecological damage, environmental economic loss, and recovery cost are priced, and courts have applied it to produce concrete figures. Remote sensing and GIS make land cover change, disturbance footprint, and reclamation extent measurable on a repeatable schedule at low marginal cost.

What is absent is the habit of running these as a periodic account that sits beside the royalty record, in the same units, on the same cycle.

Sirkularium's view

The measured approach the ministry has taken deserves recognition. Holding production against market conditions rather than maximising volume is the harder discipline, and the royalty priority gives the policy an explicit and defensible logic. For government and public institutions, three observations follow.

First, on disclosure. The reason given for withholding volumes, that publication could move world prices, is a real consideration and applies with genuine force while allocations are live. It applies with much less force afterwards. Publishing the allocation methodology, and the aggregate volumes once a quarter has closed, would preserve the market rationale while letting regional governments and the public see how the rule was applied. A criterion that cannot be checked is weaker than one that can.

Second, the royalty test would be improved by being explicit about what it counts. If the intention is to reward companies that return more value per tonne of depletion, then stating the measure, whether royalty alone or total state contribution per tonne, and publishing it as a ratio, would turn a ministerial judgment into an auditable standard.

Third, and most substantively, quota allocation is the natural place to introduce an environmental condition figure. A company seeking additional tonnage already submits a work plan. Requiring an independently verified valuation of the land, water, and ecosystem position of its concession, built from GIS and ground data under the national methodology, would add one measured column to a decision that already weighs several. It would also give the reclamation guarantee system something to test adequacy against each year rather than only at closure.

For operators, the near-term reading is practical. Quota is now allocated on demonstrated contribution, which means the evidence a company can produce about itself has direct commercial consequence. Those already holding a rigorous, independently verified valuation series covering their environmental position are better placed than those who would need to assemble one.

What to watch next is whether aggregate approved volumes are published once the allocation round closes, whether the royalty criterion is formalised in writing rather than described in press remarks, and whether the coal cap moves toward the 700 to 720 million tonne range that industry has proposed.