Indonesia to Resume Coal Shipments amid Foreign Pressure over Export Ban

Ronna Nirmala
Jakarta
2022-01-10
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Indonesia to Resume Coal Shipments amid Foreign Pressure over Export Ban Workers walk near a coal barge at a port in Palembang, South Sumatra province, Indonesia, Jan. 4, 2022.
Antara Foto/Nova Wahyudi/via Reuters

Indonesia this week will gradually resume exports of coal used to generate electricity, a senior government official said Monday, as the Philippines joined other countries in pressing Jakarta into lifting its ban on foreign shipments.

The state power utility, PT Perusahaan Listrik Negara (PLN), which reported a coal shortage, now has enough supply to last through January, said Luhut Pandjaitan, coordinating minister for maritime affairs and investment.

“About a dozen ships that are already filled with coal and have been verified will be released tonight,” Luhut told reporters after a meeting with other officials. “Exports will resume gradually starting Wednesday.”

On Dec. 31, the government decided to halt coal exports in January after local producers failed to meet their obligation to supply at least a quarter of their output for domestic needs.

The Indonesian Coal Manufacturers’ Association (APBI) has said the policy, known as the Domestic Market Obligation, is unfair because it requires producers to sell coal to the state electricity company at below the global market price.

“It’s not that we want to change the DMO, but it should also be adjusted so suppliers are encouraged to comply,” APBI Executive Director Hendra Sinadia told BenarNews.

Last week, the association warned that temporarily stopping exports would cause coal prices to soar and result in lost revenue of up to U.S. $3 billion this month.

Meanwhile, the energy ministry said the shortfall could affect nearly 20 Indonesian power plants which generate electricity for 10 million consumers.

In addition, dozens of foreign ships sent to load coal from Indonesian ports have been in limbo since the ban.

On Monday, the Philippines Department of Energy warned that the Indonesian ban would be detrimental to economies reliant on coal for power generation, according to a statement posted on the department’s website.

It said Philippine Energy Secretary Alfonso Cusi had sent a letter to his Indonesian counterpart, Arifin Tasrif, to appeal for the ban to be lifted.

Elsewhere, Japan, which imports about 2 million tons of coal per month from Indonesia, also appealed to end the ban.

In its own letter, the Japanese Embassy in Jakarta said the country imported only high calorie coal which is more expensive, efficient and environmentally friendly. It is not used by Indonesian power stations.

“The sudden export ban has a serious impact on Japan’s economic activities as well as people’s daily life,” the embassy said, according to a copy of the letter obtained by BenarNews.

On Friday, South Korea’s trade ministry expressed concerns about the ban and urged a prompt resumption of shipments, the Yonhap news agency reported.

Indonesia exported 29 million tons of coal in January 2021, slightly down from 32 million tons in January 2020. Almost 32 percent of Indonesia’s total coal production of 405 million tons went to China in 2020.

15 days

Allowing for exports to resume, Luhut said PLN had coal reserves for up to 15 days of coal reserves.

“We can see now things are getting better,” he said.

Luhut said the Indonesian government had considered dissolving PLN Batubara, a PLN subsidiary tasked with supplying power plants with coal, saying it was responsible for the fuel shortage because it bought coal from third-party traders instead of from producers.

“PLN must no longer buy from traders,” he said.

Erick Thohir, minister for state-owned enterprises, sacked a PLN director last week in a move linked to the coal supply crisis.

On Monday, Energy Minister Arifin said he had replaced the director “to improve coal governance.”

He said he hoped the coal industry would “return to normal.”

“[W]e hope that in the coming days we will have coal resilience and be able to continue exports,” Arifin said after meeting Japanese Industry Minister Koichi Hagiuda.

‘A kind of shock therapy’

Fabby Tumiwa, executive director of the Institute for Essential Services Reform, a private think-tank, said the export ban served as a wake-up call for businesses and authorities.

“This is a kind of shock therapy from the government for businesses and officials who like to play games. In the future, there must be a solution to monitor and ensure the availability of supply,” Fabby told BenarNews.

He said businesses and the government should start thinking about long-term energy solutions.

“We have started to think about substitutes for coal. Today there is no supply because there is no shipment. Tomorrow there will be no supply because it is no longer available. What can you do?” Fabby said.

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