INDONESIA ENERGY SUBSIDY BRIEFING

The Indonesian government implemented significant energy subsidy reforms starting in November 2014, transitioning from fixed prices to a more market-responsive pricing mechanism. While initial price hikes in November 2014 led to inflation and public protests, a sharp decline in global oil prices allowed the government to lower fuel prices in January 2015 while simultaneously removing subsidies on Premium gasoline in the Java-Madura-Bali region. The government aims to reallocate an estimated IDR 194.2 trillion in savings toward productive sectors, including infrastructure and state-owned enterprises. Additional reforms targeted LPG and electricity tariffs, supported by social assistance programs like the Indonesia Smart Card to mitigate impacts on vulnerable populations.

• On 31 December 2014, President Joko Widodo announced the removal of subsidies for Premium gasoline and the implementation of a "fixed" subsidy for Solar diesel. This coincided with a price decrease on 1 January and 19 January 2015, driven by low global oil prices.
• The Indonesian government introduced a new fuel classification system: "specific fuels" (subsidized Solar diesel and kerosene), "special designed fuels" (gasoline for remote areas with distribution cost subsidies), and "general fuel" (non-subsidized gasoline sold at market prices in Java-Madura-Bali).
• The Revised State Budget 2015 anticipated a significant reduction in fuel subsidy expenditure, plummeting from IDR 276.4 trillion (US$ 22 billion) to IDR 81.8 trillion (US$ 6.5 billion), resulting in total expected savings of IDR 194.2 trillion (US$ 15.5 billion).
• The government plans to reallocate subsidy savings from consumptive to productive sectors. This includes proposed injections of IDR 67.86 trillion (US$ 5.4 billion) into state-owned enterprises for infrastructure, and IDR 16.9 trillion (US$ 1.4 billion) for the Ministry of Agriculture to revitalize irrigation for 3.3 million hectares of farmland.
• Price reforms extended to other energy sources: 12kg-cylinder LPG prices were increased on 1 January 2015 and then reduced on 19 January 2015. Electricity tariffs for several classes were also increased, with adjustments now conducted monthly based on the IDR-USD exchange rate, Indonesian Crude Price, and inflation.
• To mitigate the impact of the November 2014 price hikes, the government launched the Productive Family Program, which utilized card technology to provide assistance: the Indonesia Smart Card (KIP) for education, the Indonesia Healthy Card (KIS) for healthcare, and the Prosperous Family Saving Card (KSKS) for direct cash transfers.
• The November 2014 price increases led to economic volatility and social unrest, including an estimated annual inflation contribution of 2.6 to 3 per cent and violent protests in cities such as Makassar, Jakarta, Solo, Yogyakarta, Surabaya, Medan, and Banjarmasin.

APA

International Institute for Sustainable Development (2015). INDONESIA ENERGY SUBSIDY BRIEFING. https://www.iisd.org/gsi/sites/default/files/ffs_newsbriefing_indonesia_feb2015_eng.pdf

Chicago

International Institute for Sustainable Development. INDONESIA ENERGY SUBSIDY BRIEFING. 2015. https://www.iisd.org/gsi/sites/default/files/ffs_newsbriefing_indonesia_feb2015_eng.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=INDONESIA ENERGY SUBSIDY BRIEFING |date=February 2015 |url=https://www.iisd.org/gsi/sites/default/files/ffs_newsbriefing_indonesia_feb2015_eng.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2015indonesia, author = {{International Institute for Sustainable Development}}, title = {{INDONESIA ENERGY SUBSIDY BRIEFING}}, institution = {International Institute for Sustainable Development}, year = {2015}, month = feb, url = {https://www.iisd.org/gsi/sites/default/files/ffs_newsbriefing_indonesia_feb2015_eng.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }