Indonesia's coal output is projected at around 720 million tonnes in 2026, well above the roughly 600 million tonne target set at the start of the year but far below the 817 million tonnes produced in 2025 — a decline of about 100 million tonnes.

The drop is not passive. It is the result of active government control through work plan and budget (RKAB) quotas, as Jakarta shifts from maximizing output toward an "optimum production" strategy that balances domestic demand, market prices and resource sustainability.

Tri Winarno, director general of minerals and coal at the Ministry of Energy and Mineral Resources (ESDM), said Indonesia produced 423 million tonnes of coal in January-July 2026, equivalent to a monthly average of about 60 million tonnes, implying full-year output of roughly 720 million tonnes. That compares with a monthly average of about 68 million tonnes in 2025, a decline of nearly 8 million tonnes per month.

The output cut is mainly driven by reduced RKAB quotas. ESDM is capping annual production plans at the supply side, and with the fourth quarter approaching, 50 RKAB applications remain pending.

Winarno said those pending applications involve issues such as outstanding debts and unfinished reclamation obligations, meaning some capacity may not be released on schedule and actual full-year output could fall below the 720 million tonne forecast.

On exports, Indonesia's statistics agency data showed shipments totaled about 270 million tonnes in January-July 2026, down 5.47% from the same period a year earlier and accounting for 63.82% of total output. Domestic consumption was 113.8 million tonnes, or 26.86%, while 39.51 million tonnes went into stockpiles, or 9.32%. China and India remained the main export markets.

Longer term, Indonesia's coal exports face structural pressure. India is accelerating domestic coal mining, with output rising from southern and eastern coalfields, which will gradually squeeze Indonesia's export space to India.

At the same time, the global shift from fossil fuels to renewables is eroding long-term thermal coal demand. As the world's largest thermal coal exporter, Indonesia needs to reposition itself in this context.

Despite lower output, coal-related non-tax state revenue (PNBP) has risen. In January-August 2026, Indonesia's coal sector generated 66 trillion rupiah ($3.73 billion) in non-tax state revenue, up nearly 12% from 59 trillion rupiah in the same period of 2025.

The divergence shows the government's policy focus has shifted from "volume" to "price". By tightening supply to support prices while prioritizing quota relief for companies paying higher royalties, the government can maintain or even increase fiscal revenue even as output falls.

Energy and Mineral Resources Minister Bahlil Lahadalia has said the government will prioritize quota relief for mines paying higher royalties to the state, such as 19%.

Winarno also said the current strategy is to achieve "optimum production", adding that output must be balanced against market conditions, demand, domestic market obligations (DMO), price trends, logistics and reserve sustainability.

In 2025, Indonesia exported 529 million tonnes of coal and supplied 246 million tonnes under DMO, with domestic demand accounting for 30% of the total. Rising domestic supply means the government must balance export revenue against domestic supply.

In the short term, output cuts will support coal prices and fiscal revenue but may erode Indonesia's share of the global export market. Over the medium to long term, production quotas, DMO and priority for companies paying higher mining royalties will determine actual production capacity.

Meanwhile, the global energy transition and reduced import demand from major consuming countries will gradually compress Indonesia's thermal coal export space. This may further push the policy focus from "volume" to "price" and could accelerate the tilt of policy resources toward critical minerals such as nickel and copper.