50 percent of coal production must be sold in domestic market: Minister

The government will oblige coal producers to sell 50 percent of their output in domestic market to ensure a sufficient supply for the growing number of coal-fired power plants in the country, Kontan daily reported Friday.

State Minister for State Enterprises Sofyan Djalil said in Jakarta, Wednesday that he would send a proposal to the Ministry of Energy and Mineral Resources office to limit coal export by 50 percent so that the other 50 percent of the country's coal production could be sold in the domestic market.

While waiting for the issuance of the coal export restriction, state-owned electricity company PLN would be required to set up a comprehensive strategy to ensure that every coal-fired power plant would receive sufficient coal supply.

Sofyan said that without the so-called domestic market obligation (DMO), coal producers would prefer to sell their production overseas, causing uncertainty in the operation of the new coal-fired power plants.

He, however, did not mention if the government would also regulate the coal prices, as most of the country's coal producers export their production to take advantage of higher prices overseas.

In Dec 2007, Indonesian Coal Mining Association (ICMA) recommends a "fair" implementation of the DMO that requires coal mining companies set aside some of their output to the local market.

ICMA?s Chairman Jeffrey Mulyono said that a fair implementation of DMO should be based on the ratio of domestic need to total national production every year.

In June 2007, ICMA called on the government to require coal producers to set aside between 30 percent and 40 percent of their production to fulfill domestic needs.

PLN is currently building a dozen of coal-fired power plants as part of the government's crash program to provide additional power supply of about 10,000 megawatt within three years beginning in 2007. (*)