Indonesia is considering withholding next year's mining work plans from coal producers that fail to fully meet domestic market obligations, potentially making compliance with the country's coal supply rules a more direct condition for maintaining future production rights.

At an industry discussion in Jakarta on September 18, Asep Kurnia Permana, director of coal business development at the Energy and Mineral Resources Ministry's Directorate General of Mineral and Coal, said the government was preparing stronger administrative sanctions for companies that divert coal meant for the domestic market to exports. Under the approach being considered, the ministry could refuse to issue a company's RKAB for the following year. The proposal has not yet become formal policy.

Indonesia's formal DMO requirement remains 25% of actual annual production for most producers, as stipulated in Ministerial Decree No. 267.K/MB.01/MEM.B/2022. However, the effective domestic share has been rising because overall production quotas are being cut.

For 2026, the government was originally targeting roughly 600 million tonnes (Mt), down from more than 800 Mt in the previous year. First-generation PKP2B holders and some state-owned enterprises were requested by the ESDM in February to allocate at least 30% of their output upfront for DMO, mainly to secure supply for PLN in the first half, and in return they were granted 100% of their requested 2026 RKAB quotas.

Indonesia produced 817.5 Mt of coal in 2025. Of that total, 246.9 Mt or 30.2% went to the domestic market, 522.6 Mt or 63.89% was exported, and the rest of over 40 Mt was held as stock, the energy ministry said in its Handbook of Energy & Economic Statistics of Indonesia 2025. The power sector took the largest share of domestic supply, about 141.4 Mt, smelters ranked second at 76.3 Mt, followed by cement, fertilizer, paper and other industries.

For 2026, the ministry has assigned 212 Mt under the DMO framework, including 154 Mt earmarked for PLN. Yet execution continues to face persistent problems. The DMO price for power generation has remained capped at about $70/t since 2018, well below international benchmarks and rising production costs.

Some coal producers were favoring exports over domestic supply because of higher export profits, with some even opting to pay fines rather than prioritize the home market, according to local industry analysts and energy observers.

The burden is also unevenly distributed. State-owned PT Bukit Asam has repeatedly reported domestic sales well above 50% of its volume. In a hearing with Commission XII of the House of Representatives on September 15, 2026, PTBA management stated that excess DMO fulfilment between 2018 and 2025 resulted in an estimated cumulative profit shortfall of about Rp 14.5 trillion and called for a fairer sharing of the obligation across the industry, CNBC Indonesia reported lately.

Quality mismatches compound the difficulty. Most PLN plants require mid-CV coal (roughly 4,200-5,200 Kcal/kg GAR), while the pricing framework is calibrated mainly to higher-grade material. As a result, paper compliance does not always translate into usable supply at power stations, according to ESDM Minister Bahlil Lahadalia's statements in June 2026. Contracting delays, logistics bottlenecks and weather disruptions have further slowed physical deliveries.

Outside power generation, domestic coal is also required by industries including cement, fertilizer and other strategic sectors. The regulatory framework requires miners to prioritize domestic requirements before exporting, with the government able to direct supply according to national needs.

These non-power consumers have increasingly become a test of whether the DMO system is working at the level of individual industrial users.

At the September 18 discussion, the Indonesian cement industry reported ongoing difficulties securing physical coal supplies. Lilik Unggul Raharjo, chairman of the Indonesian Cement Companies Association, previously highlighted tight inventories and temporary plant shutdowns linked to supply constraints. Those figures were industry association estimates and were not independently confirmed by the government.

Putu Nadi Astuti, director of cement, ceramics and non-metallic mineral processing industries at the Industry Ministry, has noted that fuel costs account for about 30-40% of cement production costs and that national cement industry capacity utilization was around 51%.

The cement industry's experience highlights a potential weakness in relying on an aggregate DMO percentage. A producer may meet its overall domestic allocation while particular consumers still face shortages if the coal supplied does not match their required calorie, sulfur or other quality specifications, or if deliveries are delayed.

That issue is particularly relevant because the government has been trying to manage coal supply through both DMO and RKAB controls. In June, ESDM said it had temporarily held some coal exports to secure coal with the specifications required by PLN power plants. At that time, about 141 Mt had been secured against PLN's annual requirement of 154 Mt, while exports were subsequently allowed to resume as domestic supply conditions improved.

The government has already tightened scrutiny of companies seeking additional RKAB approvals. ESDM Director General Tri Winarno said earlier this month that companies with outstanding financial obligations or incomplete reclamation work could not proceed with their RKAB addition applications.

This makes the proposed DMO sanction potentially significant for producers. If failure to meet domestic supply obligations can result in the withholding of the following year's RKAB, DMO compliance would become more closely linked to future production capacity rather than remaining primarily a compensation or financial issue.

The proposal remains under discussion and has not yet been formalized into regulation. Market participants are closely watching whether it will be adopted. The potential impact on exports would depend on how the government defines non-compliance and applies the sanction.