Govt Explains Reasoning Behind Indonesia's Coal Export Ban

TEMPO.CO, Jakarta - Finance Minister Sri Mulyani Indrawati in a press conference on Monday talked about Indonesia’s domestic market obligation (DMO) on coal and how the recent coal export ban could have been unnecessary if the domestic coal industry adhered to the DMO. 

“But in actuality [the DMO] was not met because the opportunity in exporting coal is so high with significantly higher value,” said the Minister on January 3. 

The government imposed the coal export ban on January 1 and will only be lifted on January 31 and argues this is necessary as the domestic coal supply for electricity power plants are at a critical level. 

This way, the domestic coal industry is asked to supply coal to state-owned electricity firm PLN and independent power producers. The safe amount of supply for PLN to power electricity for millions of its customers is coal supply for 20 operational days, but out of the government’s 5.1 million metric tons assignment, only 35 thousand or less than 1 percent were realized by the coal industry.  

This condition poses a risk of cutting electricity for 10 million of its customers. 

Moreover, Sri Mulyani said the export ban is intended to preserve domestic supply and insisted that it is a difficult but crucial decision to take. 

“If Indonesia had a blackout would we still export?,” she said. 

Finance Ministry Deputy Suahasil Nazara said the coal export ban is indeed a short term solution to ensure electricity supply remains safe, but clarified that the Ministry is currently concocting a plan for the long term that mixes two agendas: coal exports as commodity that contributes to Indonesia’s foreign exchange but in the same time is able to fulfill the domestic needs. 

The Ministry's head of fiscal policies Febrio Kacaribu did not go into details on how the ban would affect the country’s income but noted that even if there will be effects, it would be temporary. 

“We are comfortable enough with the risks that we face in the future,” said Febrio.

Following Sri Mulyani’s press conference, it was President Joko “Jokowi” Widodo’s turn to hold a press conference addressing the coal export ban.

"There is already a DMO mechanism that requires mining companies to meet the needs of PLN's power plants. This is absolute and not to be violated for any reason," the President warned. 

Read: Jokowi to Revoke Permits of Coal Firms Neglecting DMO

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