Government weighs revision to coal DMO price

By Calvin Purba

The Ministry of Energy and Mineral Resources (MEMR) is considering revising the Domestic Market Obligation (DMO) coal price, also known as the Domestic Price Obligation (DPO), as state utility PT PLN (Persero) faces growing challenges in securing supplies of medium-calorific coal.

Energy and Mineral Resources Minister Bahlil Lahadalia said the review was prompted by rising mining costs, particularly for medium-calorific coal with an energy content of around 5,200 GAR.

"For medium-calorific coal, the stripping ratio has reached between 8 and 12. Production costs have become quite high. Therefore, we must be prudent to ensure mining companies are not forced to sell coal at excessively low prices," Bahlil told reporters on Thursday.

He said the government is seeking a balance that protects both coal producers and PLN. Revising the DPO, which has remained unchanged for the past eight years, is among the options being evaluated.

"Yes, the DPO is one of the factors we are reviewing," he said.

During a hearing with the House of Representatives' Commission XII earlier this week, Bahlil said supplies of medium-calorific coal used by PLN's coal-fired power plants are becoming increasingly difficult to secure.

Pricing has emerged as a key issue for suppliers. Under the DMO scheme, coal sold to PLN is capped at $70 per tonne, significantly below prevailing international market prices. At the same time, stripping ratios at some mines have increased to between 10 and 12, pushing up production costs.

According to Bahlil, the higher costs have reduced the economic incentive for producers to allocate coal to the domestic market.

"Under these conditions, supplying coal to PLN has become increasingly challenging from an economic standpoint for mining companies. That is the issue we are facing," he said.

Editing by Reiner Simanjuntak