Jakarta. The Indonesian government and the House of Representatives (DPR) have agreed to reduce the volume of subsidized fuel in the 2025 Draft State Budget (RAPBN). This measure is aimed at ensuring a more targeted distribution of subsidies.

Energy and Mineral Resources Minister Bahlil Lahadalia announced that the volume of subsidized fuel, which includes kerosene and diesel, will be reduced to 19.41 million kiloliters, down from the 2024 target of 19.58 million kiloliters. 

Minister Bahlil explained that this reduction is part of a broader plan for a more efficient and targeted distribution of subsidies in 2025. The Ministry and state oil and gas company Pertamina have conducted evaluations and studies to ensure the subsidies are accurately targeted.

"When subsidies are well-targeted, they lead to greater efficiency. We want to make sure that these subsidies are not used by luxury vehicles," Bahlil said during a working meeting with Commission VII of the DPR in Jakarta on Tuesday.

He also noted that the government and DPR have agreed to maintain the diesel subsidy at Rp 1,000 per liter, the same as in the previous year. In contrast, the volume of subsidized LPG for the 2025 budget will be increased to 8.17 million metric tons, up from the 2024 target of 8.07 million metric tons, driven by rising public demand.

"We are also exploring the development of a gas network and the growth of the LPG industry in Indonesia. While there are challenges related to raw materials, we are working with the oil and gas regulator SKK Migas and Pertamina to address these issues," he added.

The outgoing administration of President Joko "Jokowi" Widodo has allocated Rp 525 trillion for subsidies and compensation in the 2025 RAPBN. Of this amount, Rp 394.3 trillion is designated for energy subsidies and compensation to Pertamina, marking a 17.8 percent increase from the 2024 allocation of Rp 334.8 trillion. This funding will continue subsidies for 3-kilogram LPG canisters, diesel, and kerosene, while ensuring these programs are accurately targeted.

Additionally, energy subsidies will support electricity for poor and vulnerable households and efforts toward an energy transition.

Non-energy subsidies have been allocated Rp 131.3 trillion, reflecting a significant 35.5 percent increase from Rp 96.9 trillion in the current year’s budget. This allocation will mainly support food security, including fertilizer subsidies.

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