Supply chain incentives: Why does the CIPP recommend to keep the Domestic Market Obligation (DMO), but to remove Domestic Price Obligation (DPO)?

To ensure the affordability and security of electricity, GoI has implemented two key regulatory backstops’:

(i) a domestic market obligation (DMO) which controls the volume of coal to supply domestic power supply; and (ii) controls the domestic price of coal (Domestic Price Obligation or DPO).

Currently DMO requires 25% of domestic coal production to be sold within the country, while the price for domestic usage is capped at US$ 70/ton with a cap price set by MEMR. DMO policy is necessary to ease procurement efforts and ensure a stable and certain supply of coal for domestic needs, while DPO distorts market price and creates artificially low price for coal power plants during high coal price. The CIPP suggests the removal of DPO to be able to reflect the real market price.

More explanation on DMO dan DPO can be found on Sub-Chapter 8.2.

PLN Financials: By law, PLN is allowed to receive 7% margin for its operational but not for its investment return. The policy recommendation in the CIPP introduces a new revenue model structure for PLN to be able to recoup some of their investment. How does this new revenue model structure work?