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Indonesia issues rules to shore up domestic coal supplies

Tuesday, January 25th, 2022

Indonesia has issued a new regulation aimed at ensuring coal miners sell part of their output to the domestic market, or face operational suspensions and risk mining permits being revoked, according to the regulation document reviewed by Reuters.

Indonesia, the world’s biggest thermal coal exporter, on Jan. 1 imposed a month-long ban on coal exports after officials said miners had failed to fulfil their so-called Domestic Market Obligation (DMO) to sell a quarter of their output locally, with a price cap of $70 per tonne for power generators.

The ban was imposed to secure domestic supply after the state power company reported a critically low supply of the fuel at power generators.

According to the regulation signed by the energy minister, coal miners must report the fulfilment of their monthly DMO requirement to the energy ministry within 10 days of the end of each month. The regulation took effect on Jan. 19.

Companies that did not meet their DMO will be fined, while those producing coal with specifications unsuitable for domestic needs would have to make a “compensation payment”.

Miners faced a “temporary suspension of all production operations for a maximum period of 60 calendar days” if they failed to pay fines within a month, according to the regulation.

Furthermore, companies failing to make fine payments after 60 days would have their mining permits revoked, it said.

Meanwhile, miners will not be allowed to export if they have not yet met their DMO. Exports suspensions will also be slapped on coal traders who fail to fulfil contracts with domestic buyers.

Mining companies and traders that were the subject of coal export bans prior to the issuance of the new rules are also required to pay a penalty for coal distribution shortages for the January-July 2021 period, according to the regulation.

As of Jan. 20, Indonesia has lifted a coal export ban for 139 companies.

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