International Experiences With LPG Subsidy Reform

The report analyzes the regressive nature of universal LPG subsidies in Indonesia and examines reform strategies from El Salvador, India, Mexico, Peru, and Thailand. It argues that successful reform requires depoliticizing pricing mechanisms, implementing targeted social mitigation measures to protect vulnerable groups, and utilizing strategic communication to build public support. Key findings highlight the effectiveness of direct benefit transfers, voucher systems, and gradual price increases, while warning against overly complex registration processes and differential pricing structures.

• LPG subsidies in Indonesia are regressive, with a disproportionate share of benefits captured by wealthier households due to the universal availability of subsidized 3-kg cylinders.
• International evidence suggests that LPG subsidies are generally regressive across developing countries, with an average of only 3.8 per cent of benefits reaching the lowest income group.
• Effective LPG subsidy reform should follow three core principles: depoliticizing pricing to move toward market levels, managing impacts on vulnerable groups through targeted policies, and building support via consultation and communication.
• El Salvador successfully shifted public opinion from 70 per cent disapproval to 68 per cent approval of its 2011 reforms over 18 months, driven largely by the perceived effective delivery of the new targeted subsidy system.
• India's 'Give it Up!' campaign uses an ethical narrative to encourage wealthier households to voluntarily forgo subsidized LPG, serving as a low-risk preparatory step for mandatory targeting.
• India's Direct Benefits Transfer for LPG (DBTL) requires consumers to buy LPG at market prices and receive the subsidy value as a bank transfer, aiming to reduce corruption and commercial leakages.
• Mexico reduced its LPG subsidy expenditure through consistent annual retail price increases of 7 to 8 per cent since 2010, supported by a pre-existing comprehensive social safety net like the Oportunidades program.
• Peru's Fondo de Inclusión Social Energético (FISE) uses a cross-subsidy model and provides monthly vouchers (worth approximately USD 5.70) redeemable via mobile phones to ensure energy access for the poor.
• Thailand's attempt to target LPG subsidies to low-income households and small businesses failed largely because the registration and purchase processes were too burdensome and inflexible for beneficiaries.
• Differential pricing structures, such as those previously used in Thailand for different consumer categories, create economic distortions and encourage the illegal resale of low-cost LPG to higher-cost groups.

APA

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

Chicago

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

Wikipedia

{{cite report |last1=Toft |first1=Lasse |last2=Beaton |first2=Christopher |last3=Lontoh |first3=Lucky |title=International Experiences With LPG Subsidy Reform |publisher=International Institute for Sustainable Development |date=January 2016 |url=https://www.iisd.org/system/files/publications/international-experiences-with-LPG-subsidy-reform.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{toft2016international, author = {Toft, Lasse and Beaton, Christopher and Lontoh, Lucky}, title = {{International Experiences With LPG Subsidy Reform}}, institution = {International Institute for Sustainable Development}, year = {2016}, month = jan, url = {https://www.iisd.org/system/files/publications/international-experiences-with-LPG-subsidy-reform.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }