By: Abrar Saleng: Professor of Agrarian Law and Natural Resources, UNHAS
The policy of cutting mineral and coal production quotas in the 2026 RKAB, which is said to vary between 30% and 60% of the proposed IUP and IUPK holders, is one of the most crucial issues in national mining governance.
The aim of this policy, as understood by the public, is to maintain market balance and encourage increases in the prices of certain commodities, especially nickel and coal. Conceptually, supply control is known in commodity economic theory as an instrument for fixing prices when they occur oversupply.
However, in the Indonesian context, this policy requires a more comprehensive reading from both legal, economic and social impact aspects.
Regulatory Dimensions and State Authority
Normatively, production control through the Work Plan and Budget (RKAB) instrument has its basis in the mining licensing regime based on Law no. 3 of 2020 concerning Amendments to Law no. 4 of 2009 concerning Mineral and Coal Mining (UU Minerba).
The government, through the Minister of Energy and Mineral Resources, has the authority to approve or adjust the Annual RKAB as an instrument for controlling production and managing mining resources.
However, this authority remains limited by the general principles of good governance (AUPB), in particular the principles of legal certainty, proportionality, accuracy and protection of legitimate expectations (legitimate expectations).
When production quota cuts are carried out in a significant range of between 30% to 60% and are not preceded by a gradual transition, questions arise regarding the proportionality of the policy and the accuracy in considering the impact. Because public policies that are valid in terms of authority are not necessarily always appropriate in terms of governance.
Implications for Operations and Employment
Mining is a capital-intensive, labor-intensive and high-risk sector that is indirectly affected by the policy of cutting production quotas. Drastic reductions in production not only impact sales volumes, but also the entire value chain (value chain).
If production is reduced by half, the need for operational workers, transportation contractors, processing and refining services, and supporting sectors such as catering, local transportation and MSMEs around mining businesses will also be affected.
In practice, companies will make cost adjustments (cost adjustment). The first stage usually involves reducing overtime and short-term contracts. If production restrictions last for a long time, the option of laying off workers or even laying off workers (PHK) becomes difficult to avoid.
The impact is not only on the company, but on the socio-economic stability of the mining area. In many regions such as Sulawesi, North Maluku, Sumatra and Kalimantan, mining activities are the backbone of the local economy.
A decrease in production activity will have implications for a decrease in purchasing power, the potential for increased unemployment and a slowdown in the regional economy.
Legal Certainty and Investment Guarantee
Another aspect that is no less important is legal certainty in contractual relationships.
Many IUP and IUPK holders have signed sales contracts, financing agreements, as well as contracts with mining services business permit (IUJP) holders for implementation in 2026. A significant reduction in production quotas has the potential to pose a risk of default or contract renegotiation.
From an investment law perspective, policy changes that have a material impact on business projections can give rise to claims for losses or disputes, especially for foreign investors who are subject to the bilateral investment protection regime.
The state does have the right to regulate (right to regulate), but the policy must meet the principle of fairness (reasonableness) and on timings right.
Business actors view this policy as not measurable and not based on transparent studies, so the perception of Indonesian investment risk may increase.
Global Market Structure Problems
The policy objective of increasing commodity prices needs to be tested realistically. Indonesia is indeed the largest nickel producer in the world and one of the main coal exporters. However, Indonesia is not price maker single in the global market.
Nickel prices are determined by the dynamics of global industrial demand, especially the stainless steel and electric vehicle battery industries, as well as the economic conditions of China and countries that are members of the OECD. Coal prices are also strongly influenced by global energy demand and the energy transition.
Production control at the national level may not significantly influence global prices if external factors remain dominant. In this context, the policy of limiting production has a greater risk of suppressing domestic activity than producing significant price increases.
Reducing production directly affects Non-Tax State Revenue (PNBP), royalties and regional taxes.
When volume decreases, state revenues have the potential to decrease, unless price increases are able to compensate for the decrease in volume. This is a calculation that must be based on accurate data and projections.
If prices do not increase significantly, the state faces the risk of losing revenue while also bearing the socio-economic impacts in the region.
Between Good Intentions and Implementation
It cannot be denied that the aim of maintaining market balance and preventing excessive exploitation is an intention that should be appreciated, but good policy requires appropriate design, gradual, tiered, measurable, and based on transparent academic studies.
Approach shock therapy in strategic sectors such as mining there is a risk of triggering instability. The perception that the policy was taken suddenly or emotionally, although this may not be the case, in reality has triggered an emotional response from business actors, workers and communities around the mine.
A Constructive Middle Way
With drastic policy cuts, the government should consider a gradual adjustment scheme with clear global price indicators. Then carry out a tripartite dialogue between the government, business actors and worker representatives to maintain and anticipate unrest in the mining community.
Indonesia is a large producer of mining commodities, but is not yet a complete controller of global prices. In such a position, production policies must consider the resilience of national industry and its socio-economic ecosystem.
The balance between state sovereignty in managing mining resources and legal certainty for business actors is the main foundation of modern mining governance. The right policy is not only about goals, but also about time, methods and sensitivity to the impacts.
In the midst of global challenges and the need to maintain domestic stability, cool, measured and dialogical policies will be much more effective than sudden and drastic approaches.
Source: tambang.co.id
