Indonesia plans to set ceiling-floor price for coal

Jakarta (Indonesia Window) – The Indonesian Ministry of Energy and Mineral Resources is discussing setting the ceiling price and floor price for coal in order to anticipate the disparity in this commodity prices in the domestic market.

“We are trying to see opportunities for better regulations and provide justice for business (mining) actors,” Director General of Mineral and Coal at the Ministry of Energy and Mineral Resources, Ridwan Djamaluddin, said during a hearing with the house of representatives here on Monday (Nov. 15).

The fixing of upper limit prices has been implemented for general electricity, cement industry, and fertilizers.

The implementation of this policy on coal will reduce the potential for coal producers not to contract with domestic coal consumers when global coal commodity prices rise.

“When prices go up, (producers) prefer a fine if the domestic coal price is much lower than the international market price,” Ridwan said.

“The lower limit price aims to protect coal producers so that they can continue to produce at their economic level when coal prices are low,” he added.

In addition, the ministry will also regulate a domestic sales contract scheme through a fixed price contract on a Business to Business (B to B) basis.

“This scheme will provide certainty for domestic coal producers and consumers regarding prices and supply volumes,” Ridwan said.

The government has regulated the obligation to fulfill domestic coal for all mining business entities, stipulating that if a mining company does not fulfill the coal DMO of 25 percent of its production plan or domestic sales contract, it will be subject to a coal export ban, fines, and compensation funds.

Reporting by Indonesia Window