Coal mining co mpanies are in a state of confusion over the domestic market obligation (DMO) policy, which states that they have to allocate 25 percent of their coal to generate power for state electricity firm PLN.
The miners have to sell their coal to the PLN at a coal reference price (HBA) of US$70 per ton fixed until 2019. The actual HBA is at $89.53 per ton this month, down 5.5 percent from $94.75 per ton in April. The coal reference price is set by the Energy and Mineral Resources Ministry.
Indonesian Coal Mining Association (APBI) chairman Pandu Sjahrir said miners that produced high calorie coal, which is not compatible for power generation, were the most confused.
“We can’t deny that there will be a [negative] impact on our revenue [from the DMO’s 25 percent]. Another problem is that the miners can’t sell their product to the PLN and to date there is no solution,” said Pandu on Wednesday.
As stipulated in the Energy and Mineral Resources Ministry Regulation on DMO for coal, which was issued in January, all miners are part of the 25 percent DMO policy and are subject to sanctions, ranging from a production volume cut to a reduction in their export quota, if they fail to adhere to it.
According to the APBI, the PLN’s power plants would use coal with average calorie of 4,700 with the price being between $38 and $42. Meanwhile, $70 per ton for coal with a calorie of 6,300 is considered high category.
Pandu suggested that the government would not apply the 25 percent DMO policy on all miners, only those that could fulfill it.
Alternatively, the government needs to cap the price to avoid a price surge if a miner is allowed to transfer its quota to another mining company. “We have proposed the plan [quota transfer] to the government as it is the fairest decision for us,” Pandu said.
Currently, the APBI consists of 186 miners, of which more than half are low-calorie coal producer firms.
APBI executive director Hendra Sinadia said the government had asked the association to facilitate the discussion of a quota transfer scheme among its members. Hendra, however, added that it would not be easy and it still needed the government’s touch to make the plan workable.
“It is not easy to decide on the standard price for each quota, so it is better that the government decides it in the end,” he said on Thursday.
The PLN calculated that the annual coal demand for nationwide power generation would gradually increase from 82.2 million tons last year to 92 million tons this year and 145 million tons in 2026.
With the government’s mandate to maintain current electricity prices until next year and with coal accounting for more than half of the PLN’s electricity supply cost, the policy is expected to ease the company’s burdens.
With the new coal price formula, the utility company estimated that it would be able to save around
Rp 18 trillion if it used 85 million tons of coal this year and save about Rp 20 trillion if it utilized 89 million tons of coal.
The Energy and Mineral Resources Ministry’s mineral and coal director general, Bambang Gatot Ariyono, said as of April the realization of the DMO for coal had reached 32.6 million tons or 34 percent of the target of 92 million tons.
“If all miners fulfill their DMO obligations then we will have 121 million tons of coal for power plants [31 million tons of surplus] that will exceed our target,” he said during a hearing with House Commission VII overseeing energy on Thursday.
Jakarta-based research group ReforMiner Institute’s executive director, Komaidi Notonegoro, said the DMO policy for coal was on the right track, adding that it still lacked detailed regulation. “The government needs to simplify the regulation in order to make it work for the miners as well as for the PLN.
Stefanno Reinard Sulaiman
The Jakarta Post
Jakarta | Fri, May 25 2018 | 02:31 am