Indonesian coal mining interests have lobbied the government to consult widely before agreeing to state power monopoly PLN’s demands for lower prices for domestically mined coal. However, PLN wants the government to impose a domestic market obligation (DMO) rate of US$65 per tonne for coal for its TPPs.
The Indonesian Association of Geologists, whose members include mining companies, said setting two coal prices, one domestic and one for export, should not be hurried.
The government should consult all parties involved in coal investment, production and delivery as part of long-term national energy plans, said Association chairman Singgih Widagdo.
Coal fuels about 25% of Indonesia’s 60,500 MW of generating capacity and rising international prices have raised PLN’s debts because its retail power prices are fixed at low levels by the government.
The government is also planning to increase coal’s share of the generating fuel mix.
Thermal coal is a major Indonesian export and revenue earner. The government sets the Indonesian Coal Benchmark Price taking into account international prices in order to help fix royalties payable to the state by mining firms.
Indonesia is the world’s fifth biggest coal producer, mining 419 million tonnes in 2016, the business analysis website Indonesia Investments said. More than 330 million tonnes, about 80%, was exported.
The Indonesian Coal Mining Association, which represents 70% of PLN’s coal providers, has proposed a domestic benchmark of US$85 per tonne to be set for one or two years, much lower than PLN’s US$60.
As well as the benchmark price, the government controls the mining sector by requiring coal miners to reserve a specific amount of their production for the DMO.
The government also adjusts its export tax to discourage coal exports, which fetch higher prices
The government aims for more domestic consumption of coal as it wants coal to supply around 30% of the country’s energy mix by 2025.
Source: Richard Lockhard / AsiaElec – Asia Power
