Observer Of BLU Scheme Value Complicates Coal DMO

Illustration. (Photo: Unsplash)

JAKARTA - Observers assess the government's plan to form a Public Service Agency (BLU) to maintain the availability of coal supply will complicate the Domestic Market Obligation (DMO).

Mining Law Observer Ahmad Redi said that the new institution by forming the BLU, according to him, added to the bureaucratization of DMO governance.

"The management of DMO for coal fulfillment for PLN is more complicated, convoluted, potential moral hazard because it involves fee management, the pattern of subsidies from BLU is complex," he told VOI, Friday, January 14.

In fact, so far, he continued, the mechanism for fulfilling coal for PLN has been very simple.

"There is a DMO, the benchmark price for buying and selling coal for PLN is determined by the government. Business actors just have to fulfill their DMO obligations in accordance with the amount and price determined by the government," said Redi.

He continued, the concept of a coal price for PLN that follows the market price will certainly be detrimental to PLN, including the Ministry of Finance will be affected because coal sold at market prices will burden the state finances.

"Then there is a subsidy mechanism from the BLU which incidentally is also a government work unit," added Redi.

Furthermore, Redi said that business actors have actually been bound by the Law and Government Regulation in the field of mineral and coal, that they are obliged to DMO and the benchmark price is determined by the government.

"If they do not comply, export bans and the revocation of IUP/IUPK can be carried out," he said.

Even so, there will be a potential increase in the price of the Basic Electricity Tariff (TDL) if the price of coal rises, especially when it is released at a very volatile market price.

"It is the state's duty to maintain the economic price of energy properly so that energy security occurs, namely the availability of energy easily (accessibility) and affordable (affordability) for the community," he concluded.