Indonesia's Ministry of Energy and Mineral Resources (ESDM) will allow thermal coal prices under Domestic Market Obligation (DMO) to fluctuate based on the market mechanism from early 2023, following the establishment of a special coal entity or public service Agency (BLU) in the first quarter.

Still, the minister Arifin Tasrif said the price liquidation won't make it difficult for state power generator PLN to get domestic coal with the price limit of $70/t, as the BLU will pay the difference between the market prices and the PLN price cap to miners. Later, BLU will levy export fees from mining companies to build a compensation fund to cover the difference.

On December 2, the minister Tasrif said BLU will start operation in the first quarter of 2023, although he didn't give explicit date.

Tasrif explained charges collected from coal sales will depend on the caloric value of coal miners produce. "That's what each company will submit RKAB (annual production plan) first, which include production and calorific values. Then the compensation rate will be determined there. Like PNBP, it's deposited directly into a certain account," he said.

Assuming the HBA price averages $200/t, the compensation fund managed by BLU is estimated at Rp 137.6 trillion ($8.95 billion), he added.

BLU will distribute the collected funds to business entities supplying PLN and other domestic industries based on the potential difference in payment. Mining companies should issue an invoice.

(Writing by Alex Guo  Editing by Tammy Yang)
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