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Govt to save Rp 5.2t from coal DMO
The requirement upon coal producers to allocate part of their coal production to the domestic market under the domestic market obligation (DMO) policy is expected to save the government Rp 5
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The requirement upon coal producers to allocate part of their coal production to the domestic market under the domestic market obligation (DMO) policy is expected to save the government Rp 5.29 trillion (US$472 million) in electricity subsidies this year.
This is equivalent in value to the construction of 17,000 modest one-story primary schools outside Greater Jakarta, covering the whole nation excluding Balikpapan in Kalimantan and Nanggroe Aceh Darussalam (due to their higher costs).
Director General of Electricity and Energy Utilization J. Purwono said on Thursday the DMO would cut the electricity subsidy this year to Rp 36.51 trillion (US$.3.23 billion) from Rp 41.8 trillion.
“We will receive the Rp 5.29 trillion in the form of coal to be used for power plants,” he said, adding this arrangement had been approved in a recent meeting with members of the House of Representative’s budget commission.
Coal producers will be required to allocate up to 30 percent of their production to the government’s new domestic market obligation policy.
Indonesia may produce 250 million tons of coal in 2009. But should export demand decreases significantly due to the global crisis, output may be reduced to 230 million tons or roughly the same amount as for last year, according to the Energy and Mineral Resources Ministry.
Domestic demand for coal is to increase to 66 million tons this year from 57 million tons in 2008 since the state power company PLN is set to switch more power plants from oil to coal, which is cheaper.
Purwono said coal purchased by the government under the DMO scheme was priced at Rp 750 per kilogram or Rp 750,000 a ton.
While the DMO calculation has been set out in the state budget, its implementation remains uncertain as the government has yet to issue an official regulation to facilitate implementation of the DMO policy.
An advisor to the Energy and Mineral Resource Minister, Simon Sembiring assured the industry the DMO implementation will start this year but not the fixed 30 percent allocation as stated by Purwono.
He said the allocation would be determined based on the needs of different regions of the country.
He was upbeat the regulation to implement the DMO would now be issued within six months .
The domestic requirement for coal is expected to jump in the next few years , mostly from PLN.
PLN demand will almost double this year to 43.8 million tons from 24.5 million tons in 2008, as the company’s new coal-fired power plants will start operating.
Due to lack of a clear cut policy, most coal companies operating in Indonesia export their products, leaving the country receiving only royalties and tax proceeds, as well as environmental destruction.
The government says it will soon impose stiff sanctions on coal producers for failing to comply with the new DMO policy. This will include reduction of allowable production quotas, so encouraging compliance.
