Indonesian Coal Industry Protests January Export Ban, Pledges to Ease Domestic Shortfall

Ronna Nirmala and Arie Firdaus
2022.01.03
Jakarta
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Indonesian Coal Industry Protests January Export Ban, Pledges to Ease Domestic Shortfall Coal barges queue up to be pulled along the Mahakam River in Samarinda, East Kalimantan province, Indonesia, Aug. 31, 2019.
[Reuters]

Coal mine operators in Indonesia on Monday protested the government’s January export ban, saying it would bring up prices for the fuel and dent importers’ confidence in one of the world’s largest suppliers of thermal coal.

The government took a necessary step last week to halt coal exports because local producers had failed to supply the required 25 percent of their output for domestic use, analysts said. They added that the state should pay the market price for the coal it buys, instead of U.S. $20 below the global rate.

The Indonesian Coal Company Association urged the government to lift the ban, saying companies would quickly meet the required quota for supplying coal to PT Perusahaan Listrik Negara (the State Electricity Company), which operates coal-fired power plants.

“The policy was taken hastily and without being discussed with companies. We conveyed our objections and asked the Minister of Energy and Mineral Resources to withdraw the decision immediately,” said Pandu Sjahrir, chairman of the association (APBI).

Indonesia exported 29 million tons of coal in January 2021, slightly down from 32 million tons in January 2020. Almost 32 percent of Indonesia’s total coal production of 405 million tons went to China in 2020. Other top buyers included India, the Philippines, Japan, Malaysia and South Korea – none of them have commented on their potential imports being affected.

Last week, the Ministry of Energy and Mineral Resources stopped coal companies’ exports for January, saying they had failed in their obligation to supply at least a quarter of their output for domestic needs. PT Perusahaan Listrik Negara, the state utility, secures its coal supply 20 days before using it to generate power.

The ministry added that the shortfall could affect nearly 20 power plants, which generate electricity for 10 million consumers.

“When the domestic supply has been fulfilled, exports can be resumed. We would re-evaluate the policy after Jan. 5,” Ridwan Djamaluddin, the ministry’s director general of Mineral and Coal, said in a statement Saturday.

APBI said that temporarily stopping exports would make coal prices shoot up and result in up to U.S. $3 billion in lost revenue for January.

Ripple effects from the ban would also cause losses for the shipping industry, whose vessels are already headed to Indonesia to load coal. “This will [also] result in Indonesia’s reputation and reliability as a global coal supplier,” Pandu said.

Hendra Sinadia, the executive director of APBI, told local media that the government and businessmen were having intense discussions about the policy, and said the coal mining firms would seek a quick solution to supply the state utility’s coal needs.

The temporary ban was unfair, said the chairman of the Indonesian Chamber of Commerce and Industry, noting that not all coal mining companies had failed in fulfilling their domestic obligations.

“We hope that the government implements a fair and consistent reward and punishment system, not a sweeping ban for all coal companies,” Arsjad Rasjid said in a statement.

Finance minister: ‘No free options’

Meanwhile on Monday, Finance Minister Sri Mulyani Indrawati said that the temporary ban prioritized the needs of the people and encouraged coal companies to comply with what are known as Domestic Market Obligations (DMO).

“There must be sacrifices because there are no free options. The government picked [the option that has a] minimum impact on the people,” Sri Mulyani told reporters.

“We see that there are issues of coal prices, DMO decisions, and domestic electricity. We are forced to choose in a rapidly changing situation.”

According to the Ministry of Energy and Mineral Resources, it had reminded companies several times to fulfill their commitments in supplying the State Electricity Company. However, as of Jan. 1 this year, the companies only met less than 1 percent, or around 35 metric tons, of the target of 5.1 million metric tons required for domestic needs.

“If strategic steps are not taken immediately, power outages will occur widely,” Ridwan, the senior official at the energy ministry, said.

Mamit Setiawan, executive director of Energy Watch, a think-tank which focuses on the energy sector in Jakarta, said the ban on coal exports was appropriate because power outages would eventually disrupt the economy.

“Electricity is a basic need for the residents … maintaining domestic economic sustainability is important because, after almost two years of the pandemic, the economy has started to revive again. If it slows down due to coal supplies, it will be regrettable,” he told BenarNews.

This policy should serve as a warning for the companies to be committed to national interests, he added.

“This is a firm step for the government and an opportunity to prove that the state is present in meeting the energy needs of the community,” he said.

Meanwhile, the Institute for Essential Services Reform, a local NGO that advocates for using natural resources to support human development, said the government needed to review the policy on Domestic Market Obligations. In his view, the policy sets coal sale prices too low compared to the global market.

“Why are coal miners reluctant? Because the market price disparity with DMO is far, they are not wrong to seek profit,” Fabby Tumiwa, the institute’s executive director, said in a written statement to BenarNews.

The Ministry of Energy and Mineral Resources has set the DMO price for coal at $70 per ton since 2018, while coal miners say the price should follow market dynamics, where coal currently sells at around $90 per ton.

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