LPG Subsidy Reform in Indonesia: Lessons learned from international experience

This report by the International Institute for Sustainable Development examines the potential for reforming liquefied petroleum gas (LPG) subsidies in Indonesia. It argues that current subsidies are a budget drain and socially inefficient, primarily benefiting wealthier citizens. The document provides case studies from other emerging economies to demonstrate that crises can be opportunities for fossil fuel pricing reform and offers four specific recommendations for the Indonesian government to implement a closed distribution system for LPG subsidies.

• Indonesia's LPG subsidies are considered an increasing drain on the national budget and are socially inefficient because the majority of the subsidies benefit the wealthier classes of society.
• The Indonesian government intends to implement a closed distribution system to limit LPG subsidy access to poorer segments of society, although implementation has been repeatedly delayed, partly due to the COVID-19 crisis.
• The report provides four recommendations for Indonesia's reform: shifting subsidies away from the wealthy to support those most affected by the crisis, implementing robust data collection for beneficiaries, creating a public endorsement plan to engage influential groups and communicate benefits, and utilizing low oil prices as a buffer against economic shocks to reduce opposition.

APA

Boelts,, J. K. M. B. (2021). LPG Subsidy Reform in Indonesia: Lessons learned from international experience. International Institute for Sustainable Development. https://www.iisd.org/publications/lpg-subsidy-reform-indonesia

Chicago

Boelts,, Jonas Kuehl,Martha Maulidia,Kavya Bajaj,Silke. LPG Subsidy Reform in Indonesia: Lessons learned from international experience. International Institute for Sustainable Development, 2021. https://www.iisd.org/publications/lpg-subsidy-reform-indonesia.

Wikipedia

{{cite report |last1=Boelts, |first1=Jonas Kuehl,Martha Maulidia,Kavya Bajaj,Silke |title=LPG Subsidy Reform in Indonesia: Lessons learned from international experience |publisher=International Institute for Sustainable Development |date=19 May 2021 |url=https://www.iisd.org/publications/lpg-subsidy-reform-indonesia |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{boelts2021lpg, author = {Boelts,, Jonas Kuehl,Martha Maulidia,Kavya Bajaj,Silke}, title = {{LPG Subsidy Reform in Indonesia: Lessons learned from international experience}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = may, url = {https://www.iisd.org/publications/lpg-subsidy-reform-indonesia}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }