Jakarta, CNBC Indonesia - The Ministry of Energy and Mineral Resources (ESDM) has affirmed its commitment to ensure the availability of coal supply for the power plants of PT PLN (Persero) amid critical issues surrounding coal supply in recent weeks.

This was conveyed by Minister of ESDM Arifin Tasrif during a Working Meeting (Raker) of Commission VII of the Indonesian House of Representatives (DPR RI) on Thursday (26/08/2021).

He stated that to guarantee domestic coal supply, they have issued Ministerial Decree No. 139.K/HK.02/MEM.B/2021 regarding Domestic Coal Supply Fulfillment.

"We assure the availability of coal for PLN. Decree 139 of 2021 imposes stricter sanctions on companies failing to fulfill domestic coal contracts," he explained.

These sanctions include export bans until the company complies with domestic supply obligations or Domestic Market Obligations (DMO), fines based on international price differentials, and adjustments in coal production for the following year.

He emphasized that Decree 139 currently in effect is stricter compared to the previous decree, Ministerial Decree No. 255 K/30/MEM/2020, concerning Domestic Coal Supply Fulfillment.

"The penalties have been increased. Decree 139 regarding domestic coal supply fulfillment is more stringent," he added.

He mentioned that previous regulations did not include export bans or fines until companies could fulfill DMO coal obligations.

During the same forum, Commission VII DPR RI member Muhammad Nasir expressed serious concerns about the obligation to supply domestic coal, especially for PLN power plants. He called for strengthened commitment to enforce DMO for coal.

"DMO agreements with the DPR and previous Ministers need to be reinforced, not reduced. Previously, we asked for DMO compliance, with permits revoked, now there's a 1% penalty," he stated.

Amid the currently high coal prices, he believes that businesses will prefer exporting and paying fines rather than selling to PLN. He noted that if there were power outages during Covid-19, especially in hospitals treating many patients, it would create chaos.

"With coal priced at US$125 per ton, it's better to pay fines than sell to PLN. PLN is currently scrambling to secure coal," he continued.

As previously reported, in early August, the Ministry of Energy and Mineral Resources decided to ban 34 coal companies from exporting due to their failure to fulfill coal supply obligations as per contracts with PT PLN (Persero) and/or PT PLN Batubara for the period January 1 to July 31, 2021.

This decision was made due to critical coal stocks at PLN. Muhammad Wafid, Director of Mineral and Coal Revenue at the Directorate General of Mineral and Coal of the Ministry of ESDM, stated that coal stocks at several power plants were even less than 10 days at that time.

However, on August 23, the Ministry of ESDM mentioned that three coal companies initially sanctioned from exporting have now been allowed to resume exports. These companies include PT Arutmin Indonesia, a subsidiary of PT Bumi Resources Tbk (BUMI), PT Bara Tabang, a subsidiary of PT Bayan Resources Tbk (BYAN), and PT Borneo Indobara, a subsidiary of the Sinar Mas Group's PT Golden Energy Mines Tbk.