Indonesia considers scrapping domestic ‘requirement for coal’

Bloomberg

The Indonesian government is seeking to boost coal exports and increase foreign exchange earnings by scraping an obligation on miners to supply domestic power stations, according to a senior minister.
The proposal, which will be discussed in a cabinet meeting on Tuesday, can generate an additional $5 billion annually in export proceeds, Coordinating Minister for Maritime Affairs Luhut B. Pandjaitan said in Jakarta.
“The government has been reviewing this plan and has collected inputs from the market,” Pandjaitan told reporters. Given the current levels of coal prices, the move will have a “good impact” to our current account deficit, he said.
The current-account shortfall is set to swell to the highest in four years as foreign investors turn net sellers of Indonesian bonds and stocks amid a selloff in emerging
markets triggered by rising US interest rates and a stronger dollar.
With three interest rate hikes since mid-May and regular central bank market intervention failing to stem a rupiah rout, President Joko Widodo’s government is exploring ways to shore up dollar inflows.
Indonesia had asked miners to sell 114.5 million tons of coal to the local market, or 24 percent of this year’s production target, the energy ministry said in May.
“The proposal is positive for Indonesian coal miners but I doubt this can be implemented,” said Isnaputra Iskandar, head of research at PT Maybank Kim Eng Securities.
“This will put Perusahaan Listrik Negara in difficult position as the primary reason for having this DMO was to maintain steady supply of coal to keep electricity prices in check and mitigate the impact on inflation.”