Proposed regulations by Indonesia, the world’s biggest power plant coal exporter, to protect the environment and designate set areas where mining is allowed in the country could reduce coal production.

Indonesia is planning to enforce a moratorium on deforestation, a new environmental law and is currently in the process of segregating areas for mining and forest reserves, Indonesian Coal Mining Association chairman Bob Kamandanu said.

It is feared that the two-year moratorium could completely stop open-cast mining in the country.

Under the proposed laws, a complaint system will be set up for the reporting of land degradation resulting from mining and criminal punishments will be enforced.

Producers are also required to obtain an environmental permit separate from forestry and mining licenses before exploiting land.

Kamandanu told Bloomberg the resource industry is working with the government on clarifying the regulations.

Indonesia expects to increase coal production by 7% this year to 320 million metric tons from about 300 million tons in 2009 as demand from India and China surge.