Coal Oversupply Triggers Regulatory Reversal as Indonesia Weighs RKAB Reforms
Main Takeaways
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JAKARTA, Investortrust.id – Indonesia’s Minister of Energy and Mineral Resources Bahlil Lahadalia has endorsed a parliamentary proposal to revise the permit structure for coal and mineral mining operations, aiming to restore price stability and optimize state revenue.
In a working meeting with Commission XII of the House of Representatives (DPR) on Friday, Bahlil agreed to reevaluate the current three-year validity of the work plan and budget submissions (RKAB), suggesting it be returned to an annual basis.
The proposal seeks to realign production with real-time market dynamics, ensuring coal supply better matches global demand. “Oversupply has led to a significant drop in coal prices,” Bahlil said. “Mining governance must be improved across the board, especially for coal.”
The RKAB framework, set by the Ministry of Energy and Mineral Resources (ESDM), regulates annual production quotas for licensed mining companies. It was extended to a three-year term in 2022, but this has since triggered unintended market disruptions.
Indonesia Supplies Nearly Half of Global Coal Trade
Although global coal consumption stands at roughly 8 to 9 billion tons annually, only about 1.2 to 1.3 billion tons enter the international market, according to Bahlil. Of that, Indonesia contributes between 600 million and 700 million tons—close to 50% of global seaborne supply.
“This dominant share means Indonesia’s production decisions heavily influence global prices,” Bahlil added. “The current RKAB structure makes it difficult to recalibrate output in response to market shifts, leading to depressed prices.”
A prolonged glut has undercut mining profitability and reduced non-tax state revenues (PNBP), a key fiscal stream from the extractive sector. “Apologies to those operating mines, but with prices this low, even PNBP is suffering,” Bahlil said. “This is a result of the overly generous three-year RKAB approvals.”
Mining Industry Pushes for Equilibrium
The minister also noted that similar issues have emerged in the mineral sector, signaling broader support within the DPR and government for reforming how production targets are set across Indonesia’s resource industries.
The proposed one-year validity aims to restore flexibility, enabling the government to adjust production guidelines annually in line with shifts in global demand, price trends, and environmental considerations.