Bahlil Lahadalia argues that the Domestic Market Obligation (DMO) coal price has caused a supply crisis for PLN’s power plants. But will simply raising the DMO price solve the problem?
JAKARTA — Minister of Energy and Mineral Resources Bahlil Lahadalia plans to revise the Domestic Market Obligation (DMO) coal price, which is currently capped at US$70 per tonne. The proposal comes in response to shortages of medium-calorific-value coal for PLN’s power plants, which have triggered rolling blackouts over the past two weeks.
According to Bahlil, the current DMO price places an excessive burden on mining companies because it no longer reflects rising production costs. As a result, he said, many coal producers prefer to sell medium-grade coal to export markets where prices are significantly higher than those offered domestically.
“Production costs have increased substantially. We must be fair so that mining companies are not forced to sell at prices that cause them losses. We need to ensure that businesses remain viable,” Bahlil told reporters on Thursday, 18 June 2026.
Bahlil said the government is seeking a balance between maintaining the sustainability of the coal mining industry and ensuring a secure domestic coal supply for electricity generation.
“We are calculating the pros and cons so that neither PLN nor mining companies suffer losses,” he said.
However, Yayan Satyakti, an energy economist at Padjadjaran University, argued that increasing the DMO price demonstrates the government’s failure to identify the real cause of the electricity supply crisis.
He pointed out that in 2022–2023, the gap between the DMO price and international coal prices was far wider than it is today. During that period, Indonesia’s benchmark coal price reached US$250–300 per tonne, while the DMO price remained fixed at US$70 per tonne. Despite this significant price disparity, PLN did not experience the kind of supply disruptions currently affecting the electricity system.
“If the low DMO price were truly the main cause, the crisis should have been much worse during that period,” Yayan said in an interview on Tuesday, 23 June 2026.
Drawing on these facts, Yayan argued that the current coal supply crisis stems primarily from production quota cuts imposed through the government’s Work Plan and Budget (RKAB) approvals. Lower production quotas have reduced the overall volume of coal available.
At the same time, medium-calorific-value coal—the type required by PLN’s coal-fired power plants—has increasingly been exported, while producers fulfill their DMO obligations using lower-calorific-value coal.
In 2022, Indonesia produced 687 million tonnes of coal, of which 216 million tonnes were allocated to the domestic market. Production increased to 775.2 million tonnes in 2023, with 213 million tonnes sold domestically.
In contrast, the government reduced its 2026 production target from 790 million tonnes to approximately 600 million tonnes, with domestic market allocations expected to fall to around 150 million tonnes.
“The current electricity crisis is primarily the result of failures in production and supply planning, while pricing policy merely adds another layer of distortion to the underlying problem,” Yayan said.
Earlier, Minister Bahlil stated that PLN requires approximately 154 million metric tonnes of coal annually. Thus far, PLN has secured contracts for 134 million tonnes, leaving a shortfall of around 20 million tonnes.
Aryanto Nugroho, National Coordinator of Publish What You Pay (PWYP) Indonesia, shared a similar assessment. According to him, the DMO price has become a convenient scapegoat for a crisis that is actually rooted in deeper structural governance problems within Indonesia’s coal sector.
Aryanto argued that the recent rolling blackouts are primarily the result of systemic governance failures in upstream coal management. He identified at least two major structural issues.
First, the public is rarely informed that the US$ 70-per-tonne DMO price applies specifically to high-calorific-value coal (6,322 GAR). In reality, most of PLN’s coal-fired power plants require medium-calorific-value coal with a GAR of 4,200 to 5,000.
Consequently, the government’s policy requiring every mining permit holder to allocate 25 percent of production to the domestic market is unrealistic because only a portion of coal producers actually mine coal that matches PLN’s technical specifications.
“The government has never transparently mapped which mining companies produce coal suitable for PLN. As a result, many companies prefer paying penalties rather than complying with their DMO obligations,” Aryanto said.
Second, Aryanto argued that the government’s use of RKAB production controls has deviated from its intended purpose.
Production controls, he said, should support a just energy transition and protect environmental carrying capacity. Instead, the decision to reduce national coal production to 600 million tonnes in 2026 appears aimed primarily at maintaining high global coal prices and preserving export profits.
“Because the underlying objective is export-oriented, the RKAB approval process has become highly political, opaque, and excessively prolonged,” he said.
Meanwhile, Bhima Yudhistira, Executive Director of the Center of Economic and Law Studies (CELIOS), argued that the DMO policy itself creates long-term uncertainty in domestic coal supplies whenever international coal prices are high.
As long as domestic coal prices remain substantially below market levels, mining companies have little incentive to enter long-term supply contracts with PLN.
“As long as the DMO system remains in place, mining companies’ interest in signing long-term contracts with PLN will continue to decline. This is where the government’s policy has fundamentally failed,” he said.
Bhima warned that these conditions increase the risk of future coal supply disruptions and electricity shortages. Furthermore, artificially cheap coal weakens PLN’s incentive to accelerate the energy transition.
According to him, continued dependence on low-cost coal discourages investment in renewable energy, electricity grid modernization, and battery energy storage systems—all of which are essential for supporting Indonesia’s energy transition.
As an alternative, Bhima proposed replacing the DMO scheme with an export duty on coal. He argued that such a mechanism would be simpler and could generate greater state revenue.
Revenue from the export duty could then be earmarked for the electricity sector, both to strengthen energy security and to finance the country’s clean energy transition.
“The real discussion should focus on designing an allocation mechanism that ensures export duty revenues are genuinely used to strengthen Indonesia’s electricity sector,” Bhima said.
Tempo sought comments from Tri Winarno, Director General of Mineral and Coal at the Ministry of Energy and Mineral Resources, regarding the criticisms of the proposed DMO price revision. However, as of publication, he had not responded.
Source: Tempo