Indonesian government has decided to keep the current price cap on domestic thermal coal supplies and is also against revoking the domestic market obligation (DMO).
The government had earlier proposed to withdraw its current policy regarding DMO and existing price cap on coal sale to domestic sector, and a decision was expected to be taken in a high level meeting held on 31 Jul’18.
However, post meeting, under the guidance of president Joko Widodo the government has made it clear that it would continue to support the domestic coal needs by keeping the existing coal policies unchanged.
As per Media sources, an official from Indonesian Energy and Mineral Resources has commented that “Coal DMO, under president’s guidance, has been decided to be the same as existing. There is no change and there is no new government regulation.”
He added, “The price mechanism is similar (with the existing one), no revocation. The president decided to let it run as existing.”
Under the existing DMO regulation, coal companies in Indonesia have been asked to allocate at least 25% of their annual coal production for the domestic market. Indonesia had applied the DMO in Mar’18 to ensure that domestic needs are met after more coal cargoes were diverted to the seaborne market because of higher price realization.
Besides, given the high seaborne prices this year, the government introduced the price cap on domestic procurement to ease PLN’s financial burden as the utility is not allowed to increase the electricity tariff until 2019 when the presidential election takes place.
Coal accounts for almost 50% of PLN’s total power generation.
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