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To prevent illegal coal trading due to the introduction of
the proposed domestic market obligation (DMO) policy, producers have
urged the government to introduce a market-based pricing system.
Indonesian Mining Society chairman Herman Afif Kusumo told The Jakarta
Post on Monday the implementation of the DMO policy might tempt
producers and traders to seek further gains from foreign markets
through illegal trade measures such as price fixing.
Herman said setting up a market-based pricing system domestically would
address the huge disparity between local and international coal prices.
The domestic coal price currently averages around US$20 per ton under
existing contracts between producers, industries and the government,
while the international price hit the $90 mark last week.
The government has been weighing up whether to implement the DMO policy
on coal, under which producers would be obliged to allocate a certain
percentage of the coal they produce for local consumption.
"I hope the government will be able to do something to raise the local
coal price. With an appropriate price, I believe this policy could run
well," Herman said.
This year, the country expects to produce up to 234 million tons of
coal. Last year, the country produced 203 million tons of coal,
exporting about 170 million tons.
The domestic demand for coal is expected to rise significantly during
the next two years as state-owned power company PLN starts to operate
several new power plants. PLN's demand for coal is expected to soar to
70 million tons annually as of the end of 2009, from a current 30
million tons per year.
The demand for coal in the industrial sector is also expected to
increase, with many companies switching to coal as an energy source due
to the increasing price of oil and gas.
The price of coal in the international market has doubled during the
last five years. Recently the international coal price reached a record
high of $91 per ton.
The director of mineral, coal and geothermal energy at the Energy and
Mineral Resources Ministry (ESDM), M. S. Marpaung, said coal-using
industries would be asked to inform the government of their annual coal
needs before the DMO policy was introduced.
Indonesian Coal Mining Association chairman Jeffrey Mulyono told the
Post he would support the plan if the government also introduced a
quota mechanism based on market prices. Under such a lan, coal
producers who still wanted to export the commodity would be permitted
to buy coal from other local coal producers in order to meet their DMO
quota.
He said the plan would not only secure the supply of coal domestically
but would also protect the interests of coal producers.
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