KM Santika Nusantara caught fire when it was passing waters off Maselembu in Sumenep district on Thursday night. Search and rescue operation was underway but it was not being carried out smoothly as the fire had not been extinguished, said head of operation section of the provincial search and rescue office Supriono Mesiham.
"The fire is still burning in the ship. Our focus is to help and search for the victims first," the official told Xinhua news agency over phone.
Rescuers with two ships were searching for victims in waters around the burning ship, the official said.
Supriono said the fire erupted in the engine room, but he did not elaborate, saying an investigation would be launched by the national transport safety committee (KNKT).
So far, a total of 140 people have been rescued, some of them being rushed onto a nearby island and others to the provincial sea port.
The "overloaded" ship was en route to a sea port in Balikpapan of Indonesia's East Kalimantan province.