Jokowi cancels plan to revoke coal DMO

  • President Joko “Jokowi” Widodo on 31 Jul has cancelled the government’s plan to revoke the domestic market obligation (DMO) for coal producers as a means to help state-owned electricity company PLN maintain current electricity rates.
  • Energy and Mineral Resources Minister Ignasius Jonan said revoking the government policy on the coal DMO would require a lot of effort, as it was stipulated in law, while the price cap was stated in a government regulation (PP). He said that the President decided to leave the DMO rule as it is. There is no new regulation and that the same price mechanism will be kept. DMO is a mandate of Law No. 4/2009 and the $70 price cap is regulated by a PP.
  • Prevailing regulations require coal producing companies to allocate 25% of their production to fuel power plants for supplying electricity to PLN at a price cap of USD70 per ton of coal.
  • PLN president director Sofyan Basir said that the company needed around 92 million tons of coal per year, around 20% of national coal output. The market price of coal is now USD120 per ton while the price in the state budget is set at USD68 to USD70 per ton. If the DMO is revoked, the resulting subsidy would be enormous, perhaps up to IDR30tr.
  • Last week, Coordinating Maritime Affairs Minister Luhut Binsar Pandjaitan said the government would revoke the DMO policy for coal in response to the increasing coal price.

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