Pricing Groundwater: Economic Instruments in PERMEN ESDM 5/2024
Executive Summary
On January 1, 2024, Indonesia's Ministry of Energy and Mineral Resources enacted PERMEN ESDM 5/2024 on Guidelines for Determining Groundwater Acquisition Value. The regulation establishes the methodology for calculating groundwater prices for taxation purposes under Law No. 1 of 2022 on Financial Relations between Central and Regional Governments.
Background
PERMEN ESDM 5/2024 implements Article 68 of Law No. 1 of 2022, which requires the Minister of Energy and Mineral Resources to establish guidelines for determining groundwater acquisition value as the basis for provincial groundwater taxes. The regulation provides technical standards for calculating groundwater prices across Indonesia's provinces.
Key Provisions
Groundwater Acquisition Value (NPA)
Pasal 1 Ayat 5: Definisi Nilai Perolehan Air Tanah
"Nilai Perolehan Air Tanah yang selanjutnya disingkat NPA adalah harga Air Tanah yang akan dikenai pajak Air Tanah, besarnya sama dengan Harga Air Baku dikalikan Bobot Air Tanah."
Groundwater Acquisition Value (NPA) is the price of groundwater subject to taxation. NPA is calculated as Raw Water Price (Harga Air Baku/HAB) multiplied by Groundwater Weight (Bobot Air Tanah/BAT).
Raw Water Price Components
Pasal 1 Ayat 6-7: Komponen Harga Air Baku
"Harga Air Baku yang selanjutnya disingkat HAB adalah biaya yang ditetapkan berdasarkan biaya pemeliharaan dan pengendalian sumber daya Air Tanah."
Raw Water Price (HAB) is calculated based on groundwater maintenance and control costs. Maintenance costs (BPH) include expenses for constructing and maintaining groundwater recharge wells. Control costs (BPL) cover monitoring groundwater conditions. Both cost categories are calculated using local prices divided by extraction volume over the production lifetime.
Groundwater Weight Factors
Pasal 2 Ayat 2: Faktor-Faktor Bobot Air Tanah
"BAT sebagaimana dimaksud pada ayat (1) dinyatakan dalam koefisien yang didasarkan atas faktor-faktor berikut: a. jenis Sumber Air berupa Air Tanah; b. lokasi Sumber Air berupa Air Tanah; c. tujuan pengambilan dan/atau pemanfaatan Air Tanah; d. volume Air Tanah yang diambil dan/atau dimanfaatkan; e. kualitas Air Tanah; dan f. tingkat kerusakan lingkungan yang diakibatkan oleh pengambilan dan/atau pemanfaatan Air Tanah."
Groundwater Weight (BAT) incorporates six factors: groundwater source type, source location, extraction purpose, extraction volume, water quality, and environmental damage level from extraction.
Pasal 2 Ayat 3-5: Komponen Sumber Daya Alam dan Peruntukan
"Faktor-faktor sebagaimana dimaksud pada ayat (2) dikelompokkan ke dalam komponen berikut: a. sumber daya alam; dan b. peruntukan dan pengelolaan."
The six factors are grouped into two components: natural resource (sumber daya alam) and utilization and management (peruntukan dan pengelolaan). The natural resource component includes groundwater type, location, and quality. The utilization component includes extraction purpose, volume, and environmental damage.
User Group Classification
Pasal 4 Ayat 1: Kelompok Pengguna Air Tanah
"Komponen peruntukan dan pengelolaan sebagaimana dimaksud dalam Pasal 2 ayat (3) huruf b dan ayat (5) dibedakan dalam 5 (lima) kelompok pengguna Air Tanah..."
The regulation categorizes groundwater users into five groups:
- Group 1: Water extraction where water is the final product (e.g., bottled water)
- Group 2: Water extraction for non-water products, including production support in high-risk business activities
- Group 3: Water extraction for non-water products, including production support in medium-risk business activities
- Group 4: Water extraction for non-water products, including production support in low-risk business activities
- Group 5: Water extraction for social, educational, health, or government activities; and water for direct geothermal use or by state/local/village-owned water utilities
Progressive Pricing by Volume
Pasal 5 Ayat 1-3: Nilai Progresif Berdasarkan Volume
"Komponen peruntukan dan pengelolaan sebagaimana dimaksud dalam Pasal 2 ayat (3) huruf b dan ayat (5) memiliki nilai berdasarkan kelompok Volume Pengambilan dan peruntukan yang dihitung secara progresif..."
The utilization component is calculated progressively based on extraction volume groups. Higher extraction volumes receive higher pricing values. Provincial governments may adjust volume intervals based on local groundwater availability.
Calculation Methodology
Pasal 3 Ayat 1-2: Kriteria dan Bobot Eksponensial
"Komponen sumber daya alam sebagaimana dimaksud dalam Pasal 2 ayat (3) huruf a dan ayat (4) dibedakan menjadi 4 (empat) kriteria yang memiliki peringkat dan bobot. Bobot sebagaimana dimaksud pada ayat (1) dihitung secara eksponensial dari nilai peringkatnya..."
The natural resource component uses four ranked criteria with exponentially calculated weights. Specific formulas and coefficients are provided in the regulation's technical appendix.
Implementation
PERMEN ESDM 5/2024 is implemented by the Ministry of Energy and Mineral Resources, the Geological Agency (Badan Geologi), and provincial governments. The Ministry provides technical guidance on valuation methodology. The Geological Agency supplies hydrological data on aquifer conditions, recharge rates, and water quality. Provincial governments apply the national methodology to local conditions and administer groundwater taxation.
Entities extracting groundwater through wells (dug wells, driven wells, drilled wells) for commercial, industrial, or large-scale institutional purposes are subject to NPA-based taxation. Users must report extraction volumes, install meters where required, and submit to periodic audits.
Conclusion
PERMEN ESDM 5/2024 establishes Indonesia's groundwater economic valuation methodology for taxation purposes. The regulation defines Groundwater Acquisition Value (NPA) as the product of Raw Water Price and Groundwater Weight. It categorizes users into five groups and applies progressive pricing based on extraction volume. Provincial governments implement the methodology to calculate groundwater tax rates.
Official Source
This article discusses PERMEN ESDM No. 5 Tahun 2024 on Guidelines for Determining Groundwater Acquisition Value.
The official regulation text can be accessed at:
Primary Source:
PERMEN ESDM No. 5 Tahun 2024 - BPK Regulation Portal
Alternative Sources:
- JDIH Sekretariat Kabinet
- JDIH Kementerian ESDM
Official Gazette: Berita Negara Republik Indonesia Tahun 2024
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