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Finance Ministry sets penalty for coal DMO noncompliance
The policy is intended to prevent a repeat of a domestic coal shortage that led to a coal export ban in January.
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T
he Finance Ministry has set the penalty mechanism for coal mining companies that do not meet the domestic market obligation (DMO), in safeguarding the country's power supply.
Ministerial regulation No. 17/2022 provides a formula to calculate fines based on benchmark coal prices (HBA). The regulation takes effect starting March 2.
The Finance Ministry said on Saturday that the policy was meant to ensure compliance with the DMO, under which all coal mining companies are obliged to supply at least 25 percent of a mine's approved production plan at a maximum sales price of US$70 per ton, less than half the global benchmark price.
“The regulation is in accordance with the President’s direction to fulfill domestic coal demand,” the Finance Ministry’s state assets director general, Isa Rachmatarwata, said in the statement.
The regulation states that the Energy and Mineral Resources Ministry will collect the fines, then deposit it into state coffers.
Plans to improve DMO governance were made after the government began on Jan. 1 a month-long ban on coal shipments to address a shortage in domestic coal supplies that could have led to widespread blackouts. The ban drove coal prices in China and Australia higher in January as Indonesia is one of the world's top exporters of coal.
Now that the coal ban has been lifted, the Office of the Coordinating Maritime Affairs and Investment Minister, Trade Ministry, Energy Ministry and state-owned electricity monopoly PLN still need to determine how to ensure long-term DMO compliance.
Read also: Govt to use carrot, stick in coal DMO policy
The regulation also says that in the event that mining license (IUP) or special mining permit (IUPK) holders do not fulfill the DMO in accordance with the contract with the domestic industry, the IUP or IUPK holder will be subject to a fine.
IUP or IUPK holders that have a DMO but do not have contracts with domestic industries and sell all of their products abroad because, for instance, their coal does not meet industry specifications, will be subject to pay compensation.
Read also: Govt mulls plan to form new entity to collect coal levies
