Jakarta reimposes DMO coal sanctions

The Indonesian government has reintroduced sanctions for producers that fail to meet their domestic market sales obligation (DMO), with 34 companies currently banned from exporting coal because of unfulfilled supply agreements with state-controlled utility PLN.

DMO penalties were reinstated through a ministerial decree dated 4 August 2021, which reversed a previous decree that suspended the DMO sanction system for 2020. The suspension last year was meant to serve as a form of financial relief for coal producers suffering the effects of the pandemic in the business sector.

The latest decree reinstates regulated DMO quotas for Indonesian producers and stiffer penalties for companies that are unable to fulfill their quotas. Under the new DMO regulation, coal mining companies that fail to hit their quotas will be barred from exporting their coal products, locking them out of the lucrative foreign market.

Energy and mining ministry ESDM said it has submitted a report to trade and customs authorities requesting that errant producers failing to meet their DMO obligations have their export licenses frozen.

A total of 34 companies have been banned from exporting goods after PLN reported them to the ESDM for failing to fulfil domestic supply agreements. The freeze will be in effect until these firms fulfil their supply obligations.

The reimplementation of the DMO quota and its sanction system is aimed at ensuring domestic supply is sufficient to meet demand, the ESDM said. The ministry noted that the coal reference prices for 2021 are significantly higher than the domestic price cap, which has led to companies focusing on export sales to the detriment of local supply.

Coal mining companies that do not have supply contracts with domestic coal users or those whose coal products do not have a domestic market are exempted from the export freeze if they fail to reach their DMO quotas.

By Antonio delos Reyes