Coal DMO Revoked, RI Holds Red Carpet for Tycoons

Jakarta, CNBC Indonesia – The government in this case the Ministry of Energy and Mineral Resources (ESDM) plans to change the domestic coal sales price scheme or Domestic Market Obligation (DMO).

Energy Economics observer at Gadjah Mada University (UGM) Fahmy Radhi said that if the DMO was removed, it would mean that PLN would buy coal at the market price, which is much higher than the current DMO price, which is set at a maximum of US$ 70 per ton.

Fahmy said that if the DMO was revoked, it would have an impact on the cost of electricity production or the Basic Cost of Supply (BPP) of electricity up to two times, assuming the price of coal in the market was double the DMO price benchmark. Moreover, currently Indonesia’s energy mix is ​​still dominated by coal.

“Purchase of coal at a price of US $ 153 per metric ton Of course, it can increase the cost of electricity supply by up to two times where the DMO price is US$70 per month metric ton,” he told CNBC Indonesia, Wednesday (11/17/2021).

If PLN is forced to buy coal at high prices and does not increase electricity tariffs, it means that PLN is selling electricity far below the economic price. In this condition, he added, the government must provide compensation from the state budget in large amounts.

“It could even be more than double the (APBN). However, if tariff adjustment If it is enforced, electricity tariffs are raised according to the economic price, the burden on the people, who have just fallen due to the Covid-19 pandemic, will be even heavier,” he stressed.

He suggested that so as not to burden the state budget and burden the public as PLN consumers, the DMO scheme should not be abolished.

“Unless the government prioritizes the interests of coal entrepreneurs rather than the interests of the people,” he quipped.

The same thing was conveyed by Komaidi Notonegoro, Executive Director of the ReforMiner Institute. He said this change would definitely have an impact on increasing electricity BPP.

“This is considering that currently around 65-70% of our electricity production is from coal,” he said.

However, according to him, the authority regarding DMO is in the hands of the government. The government should also be very aware of the risks.

“However, the government has full authority in this matter. I think the government is also very aware of the risks,” he continued.

Previously, the Director General of Mineral and Coal of the Ministry of Energy and Mineral Resources, Ridwan Djamaluddin, explained that the government opened a lower limit price option (floor price) from the current upper limit price (ceiling price).

The DMO price for Steam Power Plants (PLTU) is currently set at a maximum price of US$ 70 per ton, while for fertilizer and cement factories it is set at US$ 90 per ton.

According to him, there are five problems that prompted this DMO change, one of which is that not all coal specifications produced by mining companies have a domestic market.

Ridwan said the Ministry of Energy and Mineral Resources has three proposals to solve this problem. First, the construction of coal mixing facilities (coal blending facility) which is managed by a business entity (BUMN/private) to process various specifications of coal to match the specifications of coal needed in the country.

“Second, the scheme for imposing compensation funds for mining business entities that cannot fulfill their DMO obligations, which will then be used to increase subsidies for PLN or for development. coal blending facility,” he continued.

Then the latter is an alternative to setting the price of coal in the country, consisting of setting the price of the upper limit (ceiling price) as is currently being done for general electricity, cement and fertilizer industries.

However, according to him, there are obstacles in implementing this ceiling price scheme, because coal producers will tend to avoid contracting with domestic coal consumers when domestic coal prices are much lower. They will prefer to pay the fine.

“When prices rise, coal producers have the potential to avoid contracting with domestic coal users by setting an upper limit price,” he said.

Next, the upper limit pricing option (ceiling price) and the lower limit price (floor price).

“The lower limit price aims to protect coal producers so that they can continue to produce at their economic level when coal prices are low,” he said.

Then, setting up a domestic sales contract scheme through a fixed price contract scheme (fixed price) at the agreed price Business to Business (B to B).

“This scheme will provide certainty for coal producers and domestic coal consumers regarding guaranteed prices and supply volumes,” he said.

One of the members of Commission VII of the Indonesian House of Representatives, Muhammad Nasir, also urged the DMO for coal to be revoked. According to him, in this condition, PLN should be willing to compete to get coal supply. He is of the view that the more vigorous exports will have a good impact on foreign exchange.

Nasir also suggested that the export tax could be increased because coal is currently needed abroad. He questioned why PLN still relies on coal DMO which costs US$ 70 per ton, while the DMO price for coal for fertilizer and cement is US$ 90 per ton.

“Actually, we see that this BUMN is already dizzy here, begging for help but not daring to compete. Fertilizer has gone up by US$ 90, Mr. (PLN) is not going up, the Director General is already dizzy. BUMN,” he said in a Hearing Meeting (RDP) with PLN and the Directorate General of Mineral and Coal, Monday (11/15/2021).

According to him, if this condition is left unchecked, the company will prefer to export because the profits obtained are greater. He believes that PLN can die if it doesn’t want to compete.

“Now in the market of all competition, please DMO nonsense, should they pay the fine don’t want to increase it? cement fertilizer increased, Mr. (PLN) did not increase,” he said.

[Gambas:Video CNBC]

(wia)

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