President Asks SOES and Private Companies to Prioritize Domestic Market

Kompas

This picture taken on October 29, 2020 shows the Celukan Bawang 2 power plant in Singaraja on Indonesia's resort island of Bali. - China’s plan to fund dozens of foreign coal plants from Zimbabwe to Indonesia is set to produce more emissions than those of major developed nations, threatening global efforts to fight climate change, environmentalists have warned.

JAKARTA, KOMPAS — President Joko “Jokowi” Widodo has urged state-owned enterprises (SOEs), their subsidiaries and private companies engaged in mining, plantation and the development of other natural resources, to give priority to domestic demand over exports. Companies that do not comply with the President’s appeal may face export bans or the revocation of business permits.

"Regarding the coal supply, I have asked the Energy and Mineral Resources Ministry, the SOEs Ministry and PLN to immediately find the best solution for the national interest. The priority is to fulfill domestic demand for PLN and other domestic industries," said President Jokowi when giving a statement on the supply of coal, liquefied natural gas (LNG) and cooking oil at Merdeka Palace in Jakarta on Monday (3/1/2022).

Also read:

> Coal Export Ban to Prevent Mass Blackouts

> Coal and the- Global Energy Crisis

The President reiterated that all coal mining companies should comply with their domestic market obligations (DMOs), which have been in place for years to ensure the coal needs of state-owned electricity company PLN and independent power producers (IPPs) are met.

"It is a must, and it should not be violated for any reason. Companies that cannot carry out their obligations to meet domestic needs may face sanctions, if necessary. They will not only be unable to get their export permits but could also lose their business licenses,” the President said.

In addition, the President ordered the Energy and Mineral Resources Ministry and the SOEs Ministry to find a permanent solution to the problem.

Regarding liquefied Natural Gas (LNG), President Jokowi asked LNG producers, both Pertamina and private companies, to also give priority to domestic demand. In addition, the President ordered the Energy and Mineral Resources Ministry and the SOEs Ministry to find a permanent solution to the problem.

The President's statement was made following the government's decision to impose a ban on the export of thermal coal in January because local coal miners had apparently not complied with their DMOs.

Meanwhile, the head of the Industrial Research Department of state-owned Bank Mandiri, Dendi Ramdani, said that it was mandatory for coal producers to fulfill domestic coal needs for power plants. He said the DMO was imposed because electricity was important for the national economy.

CHINATOPIX VIA AP, FILE

In this Sept. 27, 2021 file photo, steam billows out of the cooling towers at a coal-fired power station in Nanjing in east China's Jiangsu province. The world's facing an energy crunch. Europe is feeling it worst as natural gas prices skyrocket to five times normal, forcing some factories to hold back production. Reserves depleted last winter haven't been made up, and chief supplier Russia has held back on supplying extra. Meanwhile, the new Nord Stream 2 gas pipeline won't start operating in time to help if the weather is cold, and there's talk Europe could wind up rationing electricity. China is feeling it too, seeing power outages in some towns.

“So far, there has been a tendency for coal producers to sell coal domestically only when the price is low or below the DMO benchmark price. On the other hand, when coal prices are high, they tend to prioritize exports,” he said.

Dendi said the DMO policy was not effective because it was not based on a regular schedule, so many coal miners fulfilled their DMOs at any time, particularly when the coal price on the global market was low. To ensure that the coal miners met the obligation, the government needed to implement a domestic coal supply quota based on a regular schedule, he said.

Also read:

> Land Acquisition Crucial for SEZs

> SEZs Expected to Boost Exports, Employment

The executive director of the Indonesian Coal Mining Association (APBI), Hendra Sinadia, said the association’s members had held a number of meetings with the government since the export ban policy was issued on 31 Dec., 2021. In the meetings, the association and the government tried to find the solution to overcome the shortage of coal that PLN and IPPs had complained about.

South Korea

The ban on coal exports from Indonesia also had an impact on South Korea, which imports about 20 percent of its coal needs from Indonesia.

South Korea said it hoped the policy would only be short term. The country’s government has established a task force to carefully manage the current situation as a precautionary measure against the disruption of coal shipments from Indonesia. (CAS/HEN/MED/BEN)

(This article was translated by Hendarsyah Tarmizi).