The Simulacrum Coal Dilemma

KOMPAS/AGUS SUSANTO

The barge Pulau Jaya 336-1 loaded with coal docked at Marunda Port, Cilincing, North Jakarta, Sunday (12/19/2021). The government has issued a mandatory fulfillment of the domestic coal market (DMO) which reaches 25 percent to meet the electricity, fertilizer and cement sector industries.

The interests of the public should be taken into consideration as regards the ban on coal exports from 1 to 31 Jan. 2022.

The Energy and Mineral Resources Ministry’s minerals and coal director general, Ridwan Jamaludin, announced the government’s decision on Saturday (1/1/2022), saying that the decision had been made on the grounds of meeting the demands of coal-fired power plants (PLTUs) managed by state electricity firm PT PLN as well as independent power producers, or IPPs (Kompas, 3/1/2022). Earlier, the PLN president director sent a letter to the Energy and Mineral Resources Ministry on 31 Dec. 2021 about the coal crisis and the commodity’s extremely limited supply. The situation would disrupt the operation of PLTUs, which would then impact the national electricity grid (Kontan.id, 1/1/2022).

The decision to ban coal exports has drawn protests from coal mining companies. Looking back, the export ban is tied to the high global prices of coal as well as the government policy for coal miners to meet the domestic market obligation (DMO).

Also read:

> Coal Export Ban to Prevent Mass Blackouts

> Coal and the Global Energy Crisis

Through Energy and Mineral Resources Ministerial Decree No. 255 K/30/MEM/2020 on fulfilling domestic coal needs in 2021, the government does not impose sanctions, such as fines, for failure to meet the DMO for coal. The government’s selling price of coal for electricity generation is US$70 per ton, while the global reference price for coal in July 2021 was $115.35 per ton (Kompas, 13/7/2021).

According to a previous regulation, Energy and Mineral Resources Ministerial Decree No. 261 K/30/MEM/2019 on fulfilling domestic coal needs in 2020, companies that are unable to meet their DMO will have their production quota reduced the following year, according to their shortfall in coal volume based on their sales contracts.

Kompas

A series of coal transport trains in the PT Bukit Asam (PTBA) area, South Sumatra, Tuesday (16/11/2021).

The government stipulates that coal companies are required to set aside a minimum 25 percent of coal as per their approved production plan as their DMO. The ministry noted that of the 5.1 million metric tons of coal allocated to PLTUs, until 1 Jan. 2022, only 35,000 metric tons had been met, or less than 1 percent of the target. This situation could potentially result in large-scale power outages.

Also read:

> Wakeup Call for Coal Economy

> Indonesia and the Glasgow Pact

Article 33, Paragraph 3 of the 1945 Constitution states: “Land and sea and the natural resources contained therein are controlled by the state and used for the prosperity of the people.” It is thus the government’s responsibility to enact regulations that balance fulfilling domestic demand and earning foreign exchange. Careful calculations are needed to meet domestic coal needs and to ensure that every mining company fulfills their obligations.

Now is the time for the government to thoroughly evaluate its energy strategy and policies, including the implementation of existing regulations and taking into account the interests of all parties in a fair, transparent and open manner.

This article was translated by Kesya Adhalia.