The NSW government is set to bolster its budget by $2.7 billion through an increase in coal royalties.

However, the move has drawn concern from the mining sector due to what it labels a “significant additional tax burden” amid challenging market conditions.

Starting from July 1, 2024, NSW will raise coal royalties by 2.6 per cent for open-cut, underground, and deep underground mines, resulting in rates of 10.8 per cent, 9.8 per cent, and 8.8 per cent, respectively.

The government expects this adjustment to inject over $2.7 billion into state funds over the next four years.

The decision follows consultations with industry stakeholders, aiming to strike a balance between maintaining a robust mining sector and serving public interests.

Finance and Natural Resources Minister Courtney Houssos emphasised the significance of coal to the state's economy and electricity supply, saying the state had “struck the right balance”. 

However, the NSW Minerals Council has expressed apprehension about the increased royalty rates, particularly as the coal industry grapples with escalating operational costs and falling coal prices.

Stephen Galilee, CEO of the NSW Minerals Council, noted that these rate hikes could effectively amount to a 30 per cent increase in proportional terms, posing a considerable challenge for the sector.

Despite these concerns, the industry expressed relief that NSW did not adopt Queensland's sliding scale royalty system.

The changes also mark the first coal royalty increase in NSW since 2009 and are intended to offset a $1.3 billion royalties revenue write-down in the forthcoming budget.

Coal remains a critical export commodity for NSW, supporting thousands of jobs and playing a significant role in the state's energy landscape. 

The government aims to balance the industry's needs with the state's fiscal requirements while allowing time for adaptation before the changes take effect in 2024.