The government may require coal producers to set aside at least 20 percent of their production to the domestic market next year and impose sanction -- in the form of output reduction -- if they fail to comply.
Bambang Gatot Ariyono, director for coal and mineral development at the energy and mineral resources ministry, said Thursday the regulation would take effect next year and form part of the companies' domestic market obligation (DMO) scheme.
"Their production target for the following year will be reduced as much as their unfulfilled obligation in the current year," Bambang said, explaining the proposed sanction.
Coal producers are required to seek government approval for their production target annually.
The government is still formulating the percentage of required DMO for coal producers, but Bambang said the DMO would be likely more than 20 percent of the annual production of each company.
In response, coal producers are still waiting to see how the implementation of DMO will work out.
"We are waiting for the government decision. Once the DMO regulation in place, we will definitely fulfill the obligation," Jenny Quantero, a director at Indonesia's eighth biggest coal producer PT Bayan Resources, told The Jakarta Post.
Bayan expects to increase its coal production to 9 million tons this year from 4.7 million tons last.
Bob Kamandanu, president director of PT Berau Coal, Indonesia's fifth largest coal producer, said he was confident that Berau would not be affected by sanctions.
"We have no problem with a DMO of 20 percent, because even without the DMO we have supplied 35 percent of our coal to the domestic market," Bob told the Post, adding that the situation might be different for other coal producers.
Berau is forecast to produce 14 million tons coal this year.
As the DMO would soon be mandatory for coal producers, Bob warned domestic buyers to work out long term projections for their coal consumption.
Bob also suggests the government should create a floating price system for coal. The government has stipulated that the ceiling price for the domestic market should be the lowest export price.
As the coal price fluctuates, Bob said the lowest price should be based on the price when a contract was signed, instead of a flat long-term price.
Bambang said the government was working on formulating a coal price index for Indonesia.
There would be a ceiling price for coal sold on the domestic market and a floor price for exported coal, he added. The government will also impose fines on coal producers that violate this price regulation.
Source: The Jakarta Post
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