Jakarta. The Indonesian government is working to improve the distribution system for subsidized 3-kilogram cooking gas canisters to ensure they reach the intended beneficiaries and prevent an estimated Rp 26 trillion ($1.6 billion) in annual subsidy losses, Energy and Mineral Resources Minister Bahlil Lahadalia said recently.

By improving transparency and regulation, the government aims to eliminate unauthorized markups and ensure that subsidized LPG reaches those who truly need it.

The subsidized liquefied petroleum gas (LPG) canisters should be sold at a maximum retail price of Rp 19,000 ($1.16), but in reality, they often sell for around Rp 30,000 ($1.83), Bahlil noted.

In a written statement, Bahlil explained that the LPG subsidy costs the state budget Rp 87 trillion ($5.3 billion) annually. However, poor monitoring and weak control mechanisms at the retailer level have resulted in about 30 percent of subsidized LPG being sold to non-eligible consumers, such as higher-income households and businesses.

"This represents a loss of between Rp 25 trillion and Rp 26 trillion to the state,” Bahlil wrote.

Bahlil said President Prabowo Subianto has instructed all cabinet members to ensure that every cent of state funds reaches the intended recipients and that subsidies only benefit low-income families and micro, small, and medium enterprises (MSMEs).

"President Prabowo has made it clear that government subsidies must be properly allocated, especially for LPG, which is widely used by the people," he said.

Breakdown of Subsidized LPG Pricing
The government pays Rp 36,000 per 3-kg LPG canister to keep the base price at Rp 12,000 -- less than a dollar -- at Pertamina’s production sites. The state-owned energy company then sells subsidized LPG at Rp 12,750 per canister to authorized distributors, who supply it to agents at Rp 15,000.

At this stage, the government still has price control mechanisms in place through a digital monitoring system.

However, Bahlil admitted that there is no monitoring system in place from agents to retailers, allowing price inflation at the retail level.

"The rightful consumers should pay no more than Rp 19,000 per canister, yet in reality, the price often reaches Rp 30,000 due to a lack of regulation in this final stage of distribution," he said.

To address these issues, the government is revamping the distribution system to ensure that only registered retailers can sell subsidized LPG. Bahlil said that around 375,000 retailers will be granted government licenses to sell the subsidized product legally.