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by
Seneca ESG
- January 11, 2022
The Indonesian government has taken back 2,078 mining licenses from miners that failed to fulfill its supply obligations to domestic customers, as reported by Nikkei Asia on January 7. Under Indonesia’s Domestic Market Obligation (DMO) policy, coal miners must supply 25% of their annual output to the domestic market at a price capped at USD70 per ton, less than half of the current market price. Reportedly, most of the mining licenses revoked this time belong to coal miners, which have been shirking their domestic supply obligations and making greater profits from exporting coal.
The move came after Indonesia’s Ministry of Energy and Mineral Resources abruptly announced an export ban on coal for the whole month of January in response to the low fuel inventory reported by the utility department. As the world’s largest thermal coal exporter, Indonesia entered an energy shortage as around 490 out of 631 coal mining enterprises have not yet fulfilled their DMO duties. A report from Citibank [C:US] suggested these coal miners contribute 35% to 40% of Indonesia’s total production. Therefore. the Indonesian government would strictly evaluate miners’ DMO compliance monthly rather than annually in the past, citing State Enterprise Minister Erick Thohir. Moreover, the government demands state-owned coal miner Bukit Asam to boost its production and supply to the state utility Perusahaan Listrik Negara (PLN), and it also prompts the PLN to sign long-term procurement contracts to secure supply.
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