Indonesia has banned coal exports in January because of concerns that low supplies at domestic power plants could cause widespread blackouts.
As Reuters reports, Indonesia has a so-called Domestic Market Obligation (DMO) policy where coal miners must supply 25% of annual production to state utility Perusahaan Listrik Negara (PLN) at a maximum price of $70 per tonne, well below current market prices.
What is more, as Ridwan Jamaludin, director-general of minerals and coal at the energy ministry explained, if the ban isn’t enforced, almost 20 power plants with the power of 10,850 megawatts will be out.
Namely, coal supplies to power plants each month were below the DMO, so by the end of the year there was a coal stockpile deficit. The ban will be evaluated after January 5.
However, the Indonesian Coal Mining Association (ICMA) called on the energy minister to revoke the export ban, saying that the policy was “taken hastily without being discussed with business players”.
The association is also concerned about potential disputes with buyers if coal producers declared force majeure for not being able to deliver coal exports.
Ships sailing to Indonesian waters will also experience conditions of uncertainty and this would affect Indonesia’s reputation and reliability as world’s coal supplier
ICMA chairman Pandu Sjahrir said,
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