Indonesia’s President Joko Widodo has signed a revised government regulation which stipulates that a fixed price will be applied for coal with similar specification that is supplied for domestic power plants.
Agung Pribadi, a spokesman for the Energy and Mineral Resources Ministry, confirms the revised rule has been issued. “Details of the formula and the price will be issue in a separate energy minister decree,” Pribadi told Coalmint.
Bambang Gatot Ariyono, director general of coal and minerals at the Energy and Minerals, quoted by the Jakarta Post as saying that with the new provision, the Energy and Mineral Minister Ignasius Jonan will be allowed to set coal selling price for domestic needs.
The revised regulation aims at helping Perusahaan Listrik Negara, the state electricity company, to narrow losses due to rising coal prices. The company suffered losses of 16 Trillion rupiah in 2017 as coal prices soared to more than USD 90/MT, exceeding USD 63/MT set in its budget, inflating the company’s primary energy costs, the Jakarta Post reported. PLN still has to subsidise low-income electricity household users.
Local media reported that the government may set domestic coal prices at USD 70/MT, lower than March coal benchmark price which is set at USD 101.86/MT.
While the new domestic price revision is unlikely to encourage Indonesian miners to export more coal to avoid the regulation, it could reduce revenue for miners, Singgih Widagdo, the head of public policy at the Indonesian Geologists Association, told Coalmint.
“It could happen that some miners can suffer losses if mining costs near USD 45/MT,” Widagdo said. Additionally, the country may risks losing potential reserve as miners trying to reduce mining costs by reducing stripping, Widagdo added.
With a mandatory domestic sale obligation set at 25%, Indonesian producers have to sell 121 MnT of coal to domestic buyers, including PLN this year. In 2017, Indonesia consumed 97 MnT of coal.
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