Coal producer must share gain and pain with PLN: Observer

In early this month the Ministry of ESDM met with coal producers and PLN, as a state company, in charge of power procurement and the government as the regulator to determine coal price under Domestic Market Obligation (DMO). However, the decision to set the prices is put off until mid of this month.

There would be change in the DMO scheme related to calculation of HBA sold to PLN, which use the coal to fuel its power plants. The prices of coal for other purposes and exports are to be dictated by the market. The government, therefore, could be more flexible in making a decision that power price could stable.

The private sector also take part in power procurement as Independent Power Producer (IPP). IPPs are given a share in the development of power plants with a total capacity of 35,000 megawatts. The IPPs share of the target is 25,000 MW.

Coal producers proposed a coal price of US$85 per ton under the DMO scheme, but PLN asked for the use of the scheme of floor price at US$55 per ton and ceiling price at US$65 per ton.

Executive Director Indonesian Resources Studies (IRESS) Marwan Batubara said considering the big contribution of power plants to coal consumption reaching 60 percent, and the rise and fall of coal prices in the past year, had significantly raised the provision basic cost of (BPP) of electricity.

Therefore, the government has an important role through policy and regulation on coal prices to protect the interest of PLN and the people. If the government could issue a special regulation setting cheaper gas price for the industrial sector, the government should be able to act similarly setting a special coal price for PLN, Marwan said .

Coal producers have recorded big profit as a result of the coal price hike lately but the government has only an additional royalty of Rp1.3 trillion. Coal reserves are owned by the state according to the Constitution with mining companies have only the exploitation license.

The government should maintain the authority to determine allocation and prices, to optimize the state income including in regulating cost of goods produced for electricity .

Coal is not merely a commodity but it is a source of energy important to sustain and propel the country's economic development.