A potentially widening budget deficit amid soaring global oil prices has prompted Finance Minister Purbaya Yudhi Sadewa to explore alternative revenue sources, including export duties on nickel and coal, commodities that are currently benefiting from relatively strong price trends. The push for rapid revenue mobilization, however, appears to be running ahead of sectoral readiness.

President Prabowo Subianto has approved a coal export duty, with tariffs reportedly still under discussion depending on price levels, initially slated for implementation on April 1. However, its rollout remains subject to ongoing cross-ministerial deliberations, particularly regarding its impact on mining sector profitability.

As highlighted by Energy and Mineral Resources Minister Bahlil Lahadalia, the structure of Indonesia’s coal exports complicates policy design. Around 60-70 percent of exports consist of low-calorific, lower-value coal, meaning that a uniform export duty risks disproportionately burdening producers operating on thin margins. This has prompted the minister to adopt a more cautious stance, delaying implementation until a more calibrated approach is formulated.

Yet this caution contrasts with parallel intervention on the supply side. The government has tightened production through the Work Plan and Budget (RKAB) mechanism, capping approved output at around 580 million tonnes. This figure is well below the previous year’s realization of 790 million tonnes, aimed at preventing oversupply and supporting global prices.

The escalation of geopolitical conflict in the Middle East has helped sustain elevated energy and mineral commodity prices. Coal prices have remained consistently above US$135 per tonne, while nickel prices have also stayed relatively stable. This sustained price momentum has prompted the government to take strategic measures to safeguard the state budget. Export duty revenues in the 2026 state budget are projected to surge to Rp 42.56 trillion (US$2.5 billion), marking an increase of more than 850 percent. This sharp rise underscores the urgency behind recent policy initiatives.

This creates a fragmented policy mix. While fiscal authorities push for revenue mobilization through export duties, sectoral regulators simultaneously restrict output to stabilize prices. Rather than a fully coherent strategy, the current approach reflects an unresolved tension between short-term fiscal pressures and longer-term industrial and market considerations. This tension becomes even more apparent when compared with the government’s more assertive stance in the nickel sector.

The government is currently formulating an export duty on nickel-based products, particularly nickel pig iron (NPI), although the exact tariff structure and rates remain under deliberation. At the same time, supply-side controls have been introduced, with the nickel ore RKAB capped at around 150 million tonnes to safeguard domestic availability.

Notably, the proposed export duty targets early-stage downstream products such as NPI, effectively compressing profit margins for semi-finished exports. This design is not incidental. By reducing the attractiveness of intermediate exports, the policy seeks to push firms further down the value chain, channeling investment into higher-value processing such as electric vehicle battery production.

Taken together, these policy developments suggest that Indonesia is pursuing a dual-track strategy that blends fiscal extraction with industrial transformation. Export duties are not merely revenue instruments but are increasingly being deployed as tools to reshape production incentives and reconfigure value chains.

However, this approach is not without risks. The simultaneous use of export taxes and production controls may create overlapping distortions, potentially weakening competitiveness and discouraging investment, particularly if policy signals remain inconsistent across sectors.

Moreover, pushing firms too aggressively down the value chain without ensuring adequate infrastructure, technological readiness and market absorption could lead to inefficiencies rather than genuine upgrading. In this context, the effectiveness of the policy will depend not only on its design, but also on the coherence and credibility of its implementation.

Ultimately, Indonesia’s evolving export duty regime reflects a broader ambition to transition from a commodity-dependent exporter to a more value-added industrial economy. Yet ambition alone is insufficient. Without clear coordination, predictable policy frameworks and a careful balancing of fiscal and industrial priorities, the strategy risks becoming reactive rather than transformative.

The challenge, therefore, lies in ensuring that these policies do not merely respond to short-term fiscal pressures, but instead lay the foundation for sustainable and competitive economic restructuring in the years ahead