International Experiences with LPG Subsidy Reform: Options for Indonesia

This executive summary examines international best practices for reforming liquefied petroleum gas (LPG) subsidies to assist the Government of Indonesia in transitioning from regressive subsidies to targeted support. It analyzes various global pricing mechanisms and evaluates specific targeting strategies used in countries such as India, Peru, and El Salvador to ensure low-income households maintain access to clean cooking energy during price increases.

• LPG subsidies in Indonesia are currently regressive because the availability of low-cost 3-kg cylinders allows higher-income households with more buying power to capture a larger share of the benefits.
• International LPG pricing generally falls into four categories: deregulated (minimizing market distortions), automatic adjustment (linked to world prices), stabilization mechanisms (using funds to smooth prices), and ad hoc (unpredictable, often politicized pricing).
• Effective subsidy reform should adhere to three core principles: depoliticizing pricing to move toward market rates, managing impacts on vulnerable groups through targeted policies, and using consultations and communications to build public support.
• Various countries have implemented diverse targeting mechanisms: El Salvador used a barcode and later mobile phone systems for vendors; India introduced volume caps and the Direct Benefits Transfer for LPG (DBTL) to pay subsidies into bank accounts; Peru created the Fondo de Inclusión Social Energético (FISE) providing monthly vouchers via electricity bills; and Thailand used an SMS-based system linked to electricity consumption limits.
• India's "Give it Up!" campaign sought to encourage wealthy households to voluntarily waive their subsidies by using a website and a "scroll of honour" to establish the ethical principle that the affluent should not use subsidized fuel.
• Public support for subsidy reform is strongly correlated with high levels of awareness, political alignment, and the perceived effectiveness of the alternative delivery system. In El Salvador, approval for policy change rose from 70 per cent disapproval in January 2011 to 68 per cent approval a year later as the new system was delivered effectively.

APA

Toft, L., Beaton, C., & Lontoh, L. (2016). International Experiences with LPG Subsidy Reform: Options for Indonesia. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/international-experiences-with-LPG-subsidy-reform-executive-summary-en.pdf

Chicago

Toft, Lasse, Chris Beaton, and Lucky Lontoh. International Experiences with LPG Subsidy Reform: Options for Indonesia. International Institute for Sustainable Development, 2016. https://www.iisd.org/system/files/publications/international-experiences-with-LPG-subsidy-reform-executive-summary-en.pdf.

Wikipedia

{{cite report |last1=Toft |first1=Lasse |last2=Beaton |first2=Chris |last3=Lontoh |first3=Lucky |title=International Experiences with LPG Subsidy Reform: Options for Indonesia |publisher=International Institute for Sustainable Development |date=January 2016 |url=https://www.iisd.org/system/files/publications/international-experiences-with-LPG-subsidy-reform-executive-summary-en.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{toft2016international, author = {Toft, Lasse and Beaton, Chris and Lontoh, Lucky}, title = {{International Experiences with LPG Subsidy Reform: Options for Indonesia}}, institution = {International Institute for Sustainable Development}, year = {2016}, month = jan, url = {https://www.iisd.org/system/files/publications/international-experiences-with-LPG-subsidy-reform-executive-summary-en.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }