Finance Minister Sri Mulyani Indrawati issued a new regulation on penalty and compensation funds for coal companies that do not follow the rules for fulfilling domestic needs, or known as domestic market obligations (DMO). The regulation, Minister of Finance Regulation (PMK) No. 17 / PMK.02 / 2022 on Types and Tariffs on Types of Non-Tax State Revenue for Urgent Needs in the Form of Fines and Compensation Funds for Fulfilling Domestic Coal Needs at the Ministry of Energy and Mineral Resources, was issued to increase the fulfillment of coal DMO for the interests of the public.
Rules on Obligation to Fulfill DMO
The existing regulation on the obligation of coal mining businesses to fulfill the DMO is stipulated in the Minister of Energy and Mineral Resources (ESDM) Regulation No.139.K/HK.02/MEM.B/2021 on the Fulfillment of Domestic Coal Needs. The regulation stipulates that coal producers are obliged to sell 25% of the planned amount of coal production per year for DMO needs at a benchmark price of 70 US dollars per metric ton. This is based on a reference specification of 6,322 kcal/kg GAR calories, 8% total moisture, 0.8% total sulphur, and 15% ash.
Applicable Non-Tax State Revenue (PNBP)
Article 1 of PMK No. 17/PMK.02/2022 stipulates that the type of PNBP applicable to the Ministry of Energy and Mineral Resources in the context of fulfilling domestic coal needs consists of penalty and compensation funds. All PNBP, both in the form of penalty and compensation funds for fulfilling the coal DMO, must be deposited into the state treasury.
Method of Imposition of Penalty and Compensation Fund
The provisions on the penalty rate (in USD/ton) are as follows:
a. based on the difference between the average selling price of coal abroad based on the quality specified in the sales contract at the Free on Board Vessel handover point during the reporting period of coal fulfillment from domestic coal users with the average benchmark price of coal for the provision of electricity for general purposes based on the quality specified in the sales contract.
b. based on the difference between the average benchmark price of coal based on the quality specified in the sales contract and the average benchmark price of coal for the provision of electricity for public interest based on the quality specified in the sales contract in the event that the selling price of coal abroad is not available.
c. based on reports of fulfillment of sales contracts from domestic coal users that have been clarified to the Mining Business Entity or Coal Transportation and Sales License holder.
Penalty payment must be made if the selling price of coal abroad is higher than the coal benchmark price. The compensation rate is paid if the realization of DMO fulfillment per year (in tons) is less than the obligation to fulfill DMO per year (in tons). The compensation rate is calculated based on coal quality and the reference coal price (HBA) multiplied by the volume difference between the obligation to fulfill the DMO per year and the realization of DMO fulfillment per year.
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