INDONESIA ENERGY SUBSIDY REVIEW

The document examines Indonesia's energy subsidy regime, which in 2013 cost the government IDR 299.8 trillion (US$ 27.0 billion), representing 2.5% of GDP. It details the 2013 price increases for gasoline and diesel, the subsequent social compensation packages, and the challenges of LPG and electricity subsidy reforms. The report argues that these subsidies are regressive, encourage wasteful consumption, and crowd out critical infrastructure and social welfare spending. It provides recommendations for transitioning toward targeted assistance and renewable energy to ensure macroeconomic stability and sustainable growth.

• In fiscal year 2013, Indonesia spent a total of IDR 299.8 trillion (US$ 27.0 billion) on energy subsidies, which accounted for approximately 25% of total government expenditure and 2.5% of GDP.
• To prevent the budget deficit from exceeding 3% of GDP, the government increased gasoline prices by 44% (from IDR 4,500 to IDR 6,500 per litre) and diesel prices by 22% (from IDR 4,500 to IDR 5,500 per litre) in June 2013.
• The June 2013 fuel price reforms were supported by a IDR 29.1 trillion (US$ 2.6 billion) compensation package for low-income households, featuring the Temporary Cash Transfer Program (BLSM), the Poor Student Education Support (BSM) program, and the Hopeful Family Program (PKH).
• Energy subsidies in Indonesia are described as regressive, disproportionately benefiting higher income groups and providing little incentive for energy efficiency or the reduction of greenhouse gas emissions.
• The government's Kerosene-to-LPG conversion program has slowed down as it expanded into remote provinces, specifically West Sumatra, Bangka Belitung, Central Kalimantan, Southeast Sulawesi, and Central Sulawesi, all of which failed to meet conversion goals.
• In January 2014, PT Pertamina attempted a 68% price increase for 12kg-cylinder LPG, but public opposition led President Susilo Bambang Yudhoyono to intervene, resulting in the increase being rolled back to a final price of IDR 6,850 per kg.
• Electricity subsidies are managed through different rates for customer classes; in 2013, tariffs were increased for all classes except the lowest power connections (450VA and 900VA), with some industry classes (I3 and I4) facing increases of 38.9% and 64.7% respectively in 2014.
• Small and Medium-Sized Enterprises (SMEs) are highly vulnerable to energy price shocks; anecdotal evidence suggests that fuel price reforms have particularly impacted SMEs in food-processing, rice milling, fishery, food stalls, building materials, and city transportation.
• Indonesia's energy policy is criticized for focusing on demand control rather than supply, and for failing to prioritize new and renewable energy (NRE) despite a target of a 17% share in the primary energy mix by 2025.

APA

Lontoh, L., Clarke, K., & Beaton, C. (2014). INDONESIA ENERGY SUBSIDY REVIEW. International Institute for Sustainable Development. https://www.iisd.org/gsi/sites/default/files/ffs_indonesia_review_i1v1.pdf

Chicago

Lontoh, Lucky, Kieran Clarke, and Christopher Beaton. INDONESIA ENERGY SUBSIDY REVIEW. International Institute for Sustainable Development, 2014. https://www.iisd.org/gsi/sites/default/files/ffs_indonesia_review_i1v1.pdf.

Wikipedia

{{cite report |last1=Lontoh |first1=Lucky |last2=Clarke |first2=Kieran |last3=Beaton |first3=Christopher |title=INDONESIA ENERGY SUBSIDY REVIEW |publisher=International Institute for Sustainable Development |date=March 2014 |url=https://www.iisd.org/gsi/sites/default/files/ffs_indonesia_review_i1v1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lontoh2014indonesia, author = {Lontoh, Lucky and Clarke, Kieran and Beaton, Christopher}, title = {{INDONESIA ENERGY SUBSIDY REVIEW}}, institution = {International Institute for Sustainable Development}, year = {2014}, month = mar, url = {https://www.iisd.org/gsi/sites/default/files/ffs_indonesia_review_i1v1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }