Jakarta (Indonesia Window) – The Indonesian government is proposing the construction of a coal blending facility to fulfill the Domestic Market Obligation (DMO) of coal for domestic industries and mining companies.

"We are currently conducting discussions to further increase the 25 percent DMO policy," said Director General of Mineral and Coal at the Ministry of Energy and Mineral Resources, Ridwan Djamaluddin, during a hearing with the house of representatives here on Monday (Nov. 15).

The DMO requires business entities to allocate some of their coal productions to the state through an authorized agency for domestic needs.

However, according to Ridwan, the coal DMO policy is not easy for companies to do because not all specifications of coal produced by mining companies have domestic markets and can be absorbed by them.

"We encourage PLN (the state-owned electricity company) in particular or other users to build coal mixing facilities managed by state/private companies to process various specifications of coal to suit domestic needs," he explained.

The Ministry of Energy and Mineral Resources has also proposed a scheme for imposing compensation funds for mining business entities that do not fulfill their DMO obligations.

"This compensation fund can also be used to support coal productions, either as additional subsidies or to support the construction of a coal blending facility," Ridwan said.

He explained that domestic coal consumption has so far been lower than the national coal production. In addition, not all mining business entities have sales contracts with domestic coal users.

Ridwan pointed out that the realization of national coal production until October 2021 reached 512 million tons or 82 percent of the target set in 2021 of 625 million tons. Meanwhile, the realization of the new DMO is only 110 million tons.

Reporting by Indonesia Window