JAKARTA (TheInsiderStories) – The Energy and Mineral Resources Ministry will issue Ministerial Decree as well as Ministry Stipulation in the immediate future that give mandate to the ministry to determine the floor and ceiling price of coal. The rulings came as the coal price continues its upward trend.
The energy ministry announced Wednesday that the Indonesian Coal Reference Price for March has been set at US$101.86 per ton, up from $100.96 per ton in February. The price hike was driven by higher demand for coal from Indonesia’s key export markets, in particular China.
The heavy rain in the first two months of the year which has disrupted coal production has also pushed up coal price. The March coal price is the highest in the last five years, the energy ministry said.
The two ministerial rulings will be issued as an implementation of the Government Regulation Number 8, 2018, which has been reportedly signed by President Joko Widodo.
“We’ll see the ministerial decree. Hopefully, the rulings will be issued next week,” Directorate General for Mineral Resources and Coal Bambang Gatot Ariyono told reporters on Wednesday (8/3).
Ariyono said the ministerial decree will set the formula of the floor and ceiling price of coal.
President Widodo however said yesterday that he has yet to sign the regulation, in contradiction with the energy ministry officials statement.
Regardless of whether the Government Regulation on the coal price under the domestic market obligation (DMO) has been signed or not, the ruling has triggered heated public debate over the past few months.
The debate was initially sparked by the demand of the state electricity company PT Perusahaan Listrik Negara (PLN), requiring the government to set floor and ceiling price of coal to be purchased by the electricity company, as the coal price continues to spike.
The reason is that PLN could not pass on the coal price hike as the government has decided to keep the electricity price unchanged until March 2019. As a result, PLN has suffered additional burden of around Rp 14 trillion due to coal price hike.
The EMR Ministry was reported to be setting the lower coal price to be purchased by PLN at US$60 per ton and a ceiling price at $70 per ton, which is far lower than the current global coal market price of around $100 per ton. Coal producers want the ceiling price to be higher than $70 per ton, in order to more closely reflect the current market price.
Director Executive of the Indonesian Coal Producers Association Hendra Sinadia said coal producers through the Association have proposed the government raise the ceiling price to $85 per ton, which is still lower than the current global market price.
He said the coal producers will adhere to the government ruling on the coal price band, however, the price limit should take into consideration the interest of producers as well. “The coal producers have suffered until two years ago after coal price dropped sharply. The coal producers just start to gain benefit from coal price hike after suffering low price for two-three years,” he said.
(1US$ = Rp13,500)