Unpacking Indonesia's Coal Supply Chain Problem

The rolling blackouts that recently hit the Java–Bali electricity system sparked a public debate that revolved almost entirely around a single figure: US$70 per tonne, the Domestic Market Obligation (DMO) coal price. The discussion seemed to suggest that simply changing this price would resolve the crisis.

Yet another issue has received far less attention: the structural problems embedded in Indonesia’s coal supply chain, from the mine to the power plant. It is here—not merely in the DMO price—that the real failures lie. Quotas, contracts, and the entire system that governs domestic coal supply are fundamentally broken.

The Opaque Process Behind RKAB Approval

The Work Plan and Budget (RKAB) is the document that determines how much coal each mining company is permitted to produce annually. It is far more than an administrative requirement. It is Indonesia’s principal production control instrument, directly influencing coal availability for coal-fired power plants (CFPPs), export volumes, and ultimately whether households have electricity.

In its study, Transparency in Coal Production Quota Determination for Accelerating a Just Energy Transition in Indonesia, Publish What You Pay (PWYP) Indonesia identified asymmetric information in the production quota-setting process as one of the root causes of governance failures. The study explicitly argues that without transparent data, production control cannot function effectively. The current supply crisis has only reinforced this finding. Annual production quotas become highly vulnerable to political discretion when they are not grounded in reserve data or objective technical assessments, turning into little more than an exercise in quota allocation.

Several critical questions therefore remain unanswered by the government.

Did the decision to reduce national coal production to 600 million tonnes take into account the Feasibility Study (FS) of each Mining Business License (IUP) holder? Or was the reduction applied uniformly, regardless of the vastly different economic conditions faced by individual mines?

These are not rhetorical questions. A mine with a high stripping ratio and substantial operating costs has a very different break-even point from one with more favourable geological conditions. Applying blanket production cuts without considering each project’s feasibility effectively forces some companies to operate below economic viability. The predictable consequence is that these mines simply cease production. When production stops, coal deliveries to PLN inevitably decline.

Equally important, what technical indicators were used to justify the quota reductions? Are these indicators publicly available? Most fundamentally, has the government issued a formal Ministerial Decree establishing the legal basis for this policy? If not, Indonesia is witnessing a nationwide policy with significant implications for energy security being implemented without a formal regulatory foundation. This is not merely a procedural concern—it reflects a governance system operating without transparency.

The timeline further illustrates the problem. RKAB evaluations, which should have been finalized at the beginning of the year, had to be repeated because the data underpinning the quota reductions became available only at the end of January. Companies that had already developed operational plans based on their initial RKAB approvals were forced to revise them. Some had already exhausted their newly reduced quotas and suspended production altogether.

The policy also failed to anticipate its broader consequences, including the risk of mass layoffs in mining regions and disruptions to coal deliveries for PLN. Moreover, fluctuations in industrial fuel prices were ignored in the production assumptions. Production costs remain dynamic, while quotas are fixed, further squeezing already vulnerable mining operations.

This criticism is not directed at production control itself. PWYP Indonesia maintains that Indonesia’s coal production should gradually decline as part of a managed coal phase-down. What we oppose is a production control system that is opaque, arbitrary, and designed primarily to support export prices—not one that is transparent, science-based, and aligned with a just energy transition. Though both approaches are labelled “production control,” their objectives and consequences are fundamentally different.

The Unspoken Problem of Coal Quality Mismatch

The US$70 per tonne DMO benchmark was originally designed around high-calorific coal. Yet most PLN coal-fired power plants, particularly those serving the Java–Bali grid, are engineered to burn medium-calorific coal. This technical limitation cannot simply be overcome by adjusting the DMO price.

Indonesia’s coal production is increasingly dominated by lower-calorific coal, while many power plants remain designed for medium- to high-calorific specifications. Consequently, the blanket 25 percent DMO obligation imposed equally on all IUP holders creates an administrative distortion. Only a portion of Indonesia’s coal producers actually supply coal that matches PLN’s technical requirements.

Without publicly available mapping of coal quality compatibility, raising the DMO price to US$90 or even US$120 per tonne will not magically produce medium-calorific coal at PLN’s power stations. Instead, producers of high-calorific coal would enjoy larger profit margins for coal that PLN cannot effectively use, while producers of suitable coal continue to face the same logistical and transportation challenges.

PLN Is Not the Only Victim

The dominant public narrative portrays PLN as the victim of coal producers prioritizing exports over domestic supply. While not entirely inaccurate, this narrative is incomplete.

The Indonesian Mining Professionals Association (Perhapi) has reported that PLN often delays payments to domestic coal suppliers by more than three months after delivery. For many mining companies, particularly medium-sized operators, such payment delays are not simply administrative inconveniences—they threaten cash flow and business continuity.

Under these circumstances, should it really be surprising if some companies choose to pay DMO penalties or prioritize export markets instead?

This is not a defence of coal producers. Rather, it acknowledges that the supply crisis reflects systemic failures on both sides: a monopsonistic PLN with poor payment discipline meeting an opaque coal industry whose lack of transparency has been enabled by the state. Fixing only one side of the equation will solve nothing.

Several questions therefore deserve public answers. Has PLN’s payment performance under the DMO scheme ever been independently audited? What is the total value of outstanding payments? To what extent have these payment delays contributed to supply disruptions?

Transparency should not apply only to coal companies. As the sole domestic purchaser, PLN should be held to the same standards of accountability.

The 134 Million-Tonne Contract That Remains Unverified

Amid these governance failures lies another figure demanding closer scrutiny: 134 million tonnes of coal reportedly contracted between producers and PLN.

On paper, this volume should guarantee sufficient domestic electricity supply. Yet signed contracts do not necessarily translate into physical deliveries.

How much coal has actually been delivered? How much remains delayed? Are the delays caused by production quota reductions, coal quality mismatches, logistical bottlenecks, or PLN’s payment arrears?

The public has no access to this information. Without transparent delivery data, every debate about Indonesia’s domestic coal supply remains speculative. Policymakers cannot meaningfully determine whether the DMO should be maintained, adjusted, or fundamentally reformed.

Where Is PT Danantara Sumberdaya Indonesia Headed?

All of these governance failures—from opaque RKAB approvals and technically unsupported quotas to coal quality mismatches and undisclosed delivery data—are now set to be inherited by a single institution: PT Danantara Sumberdaya Indonesia (DSI).

Under Government Regulation No. 24/2026, by 1 January 2027, DSI will assume control over Indonesia’s coal exports while determining its own commercial margins. Yet the mechanism governing the DMO under this centralized export system remains to be regulated at a later stage.

In other words, DSI risks inheriting a fundamentally flawed governance system while simultaneously consolidating commercial authority and oversight within a single institution.

Consolidation without transparency is not governance reform—it is the centralization of economic rents under an even less accountable system.

PWYP Indonesia therefore emphasizes that DSI should not begin operating as Indonesia’s sole coal export aggregator before upstream governance reforms are completed. The current regulatory window must be used to embed transparency as a fundamental principle before DSI’s institutional design becomes entrenched as a mechanism protecting a new generation of oligarchic interests.

A Roadmap for Supply Chain Transparency

Indonesia’s coal supply crisis is not driven by a single variable. It represents the cumulative consequences of opacity throughout the entire supply chain.

Calls for greater transparency are not new. Indonesia is an implementing country of the Extractive Industries Transparency Initiative (EITI), whose global standards explicitly require disclosure of production data down to the project level.

To repair this broken system, PWYP Indonesia proposes a seven-point roadmap for coal supply chain transparency:

First, disclose the technical basis and decision-making process behind RKAB production quotas. The public should know whether feasibility studies genuinely underpin quota decisions and what legal instruments authorize them.

Second, publish a national coal quality compatibility map, identifying which mining concessions produce coal suitable for which power plants, along with transportation distances and logistics costs.

Third, audit and publicly disclose PLN’s payment performance under the DMO, including average payment periods and outstanding arrears.

Fourth, regularly publish DMO contract implementation data, showing contracted volumes, delivered volumes, delayed shipments, and the reasons behind each delay.

Fifth, if DMO prices are revised, introduce a transparent windfall levy. Additional export profits should be captured by the state and allocated transparently, without shifting higher costs onto vulnerable electricity consumers.

Sixth, reform DSI’s governance before it becomes operational. Publicly disclose SIMBARA data—not merely for inter-ministerial access—separate commercial and regulatory functions, and ring-fence export margins so they finance a Just Transition Fund rather than disappearing into general investment portfolios.

Seventh, ensure that both financial management and supply chain governance fully comply with the 2023 EITI Standard, particularly regarding revenue disclosure and natural resource governance within the context of a just energy transition.

Supply chain transparency is not an end in itself. It is the prerequisite for enabling Indonesia to chart a fair pathway away from coal dependence—one that protects consumers’ right to affordable and cleaner electricity, addresses the long-standing burdens borne by coal-producing regions, provides certainty for mining workers facing transition, and safeguards future generations from escalating climate impacts.

Without transparency, there can be no just energy transition.

There will only be the transfer of economic rents from one set of actors to another, while coal extraction continues and the climate crisis deepens.

That is where the real work begins.