Jakarta. The Indonesian government is formulating a new energy subsidy scheme to better target assistance toward those who need it most, Energy and Mineral Resources Minister Bahlil Lahadalia announced on Tuesday.

Indonesia currently provides substantial subsidies for electricity, fuel, and cooking gas to support low-income families. These subsidies include special tariffs or affordable products like the widely used 3-kilogram liquefied petroleum gas (LPG) canisters, often referred to as "melon canisters," and subsidized gasoline and diesel fuel distributed by state-owned oil company Pertamina.

Critics argue that the existing subsidy system fails to effectively reach its intended beneficiaries. For instance, cheaper gasoline and diesel prices often benefit car owners who may not fall into the low-income category.

Bahlil acknowledged these shortcomings, emphasizing the need for a more precise subsidy distribution mechanism.

The new subsidy scheme is being designed to ensure that assistance reaches those who need it most. It may involve a mix of cash aid and essential goods, Bahlil said, though he did not provide further specifics.

The minister stressed the importance of utilizing accurate and up-to-date data from the Central Statistics Agency (BPS) to eliminate overlaps and ensure proper targeting.

“We aim to centralize all data at BPS to prevent subsidies from benefiting the wrong recipients. The new scheme will be announced later this year once the data compilation process is complete,” Bahlil said during a visit to the Oil and Gas Upstream Regulatory Body (BPH Migas) office in Jakarta.

Massive Energy Subsidy Burden
Energy subsidies remain a significant burden on Indonesia’s state budget. In 2024, the government allocated Rp 386.9 trillion ($23.9 billion) for energy subsidies, which included:

• Solar Diesel Subsidy (Rp 89.7 trillion): The government covers 43 percent of the market price of Rp 11,950 per liter for Solar diesel, equivalent to Rp 5,150 per liter.
• Gasoline Subsidy (Rp 56.1 trillion): Subsidized Pertalite gasoline is sold at Rp 10,000 per liter, with the government shouldering 15 percent of the market price of Rp 11,700.
• Kerosene Subsidy (Rp 4.5 trillion): Though largely replaced by LPG for cooking, around 1.8 million households still use kerosene. The government subsidizes 78 percent of the market price of Rp 11,150 per liter.
• LPG Subsidy (Rp 80.2 trillion): A 3-kilogram LPG canister is sold at Rp 12,750, with the government subsidizing 70 percent of the market price of Rp 42,750.
• Electricity Subsidy (Rp 156.4 trillion): Subsidies cover up to 67 percent of electricity tariffs for households with a capacity of up to 900 volt-amperes.

Reform Goals
Bahlil, tasked with leading the government team to overhaul the national energy subsidy scheme, emphasized the need for reforms to ensure efficient use of public funds.

“The fundamental principle is to ensure that government subsidies reach the right beneficiaries,” he said, reiterating the government’s commitment to addressing inefficiencies and targeting support where it is needed most.

The new subsidy scheme aims to balance financial sustainability with the government’s commitment to assisting vulnerable communities, providing a more equitable distribution of resources while reducing fiscal strain.