Removing Subsidies for Gasoline and Diesel Consumption in Indonesia

In 2014, Indonesia removed gasoline subsidies and transitioned diesel to a fixed-price subsidy, saving an estimated USD 15.6 billion in 2015. These funds were used to increase spending on ministries, infrastructure, and regional transfers. While the reform initially reduced fuel consumption and improved fiscal space, the document reports a trend of backsliding by 2018, with the government freezing prices and effectively reintroducing subsidies borne by the state-owned company Pertamina.

• In November and December 2014, the Indonesian government implemented a fuel pricing reform that increased gasoline prices by 31 per cent and diesel by 36 per cent, eventually leading to the complete removal of gasoline subsidies and the introduction of a "fixed price" subsidy for diesel.
• The 2014 reforms resulted in estimated savings of USD 15.6 billion in 2015. While not formally reallocated, these savings enabled budget increases in three primary areas: USD 12 billion for ministries (including health insurance, clean water access, and low-income housing), USD 4.1 billion for state-owned enterprise infrastructure investments, and USD 1.6 billion in transfers to villages and regional governments.
• The subsidy removal led to environmental and consumption benefits, with gasoline and diesel consumption falling by 9 per cent and 6 per cent respectively in the first half of 2015, and a 10 per cent reduction in vehicle trips on toll roads.
• The reform has faced 'backsliding' as the government stopped regular price adjustments after early 2016. By early 2018, the government committed to stable prices until the end of 2019, effectively reintroducing subsidies estimated at IDR 24 trillion (USD 1.7 billion) for the calendar year, costs which were borne by the state-owned oil company Pertamina.

APA

International Institute for Sustainable Development (n.d.). Removing Subsidies for Gasoline and Diesel Consumption in Indonesia. https://www.iisd.org/system/files/publications/stories-g20-indonesia-en.pdf

Chicago

International Institute for Sustainable Development. Removing Subsidies for Gasoline and Diesel Consumption in Indonesia. n.d. https://www.iisd.org/system/files/publications/stories-g20-indonesia-en.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Removing Subsidies for Gasoline and Diesel Consumption in Indonesia |url=https://www.iisd.org/system/files/publications/stories-g20-indonesia-en.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopmentndremoving, author = {{International Institute for Sustainable Development}}, title = {{Removing Subsidies for Gasoline and Diesel Consumption in Indonesia}}, institution = {International Institute for Sustainable Development}, url = {https://www.iisd.org/system/files/publications/stories-g20-indonesia-en.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }