LPG subsidy reform in Indonesia

Last updated: 2 August 2023

The Indonesian government started to design a new LPG subsidy scheme in 2016, to target the subsidy specifically for poor households, small businesses, fishers and farmers. To achieve this, the Parliament proposed a solution to use the unified poverty database of Indonesia for social protection programmes, to better identify subsidy targets; such a methodology was previously implemented for electricity subsidy reforms. The main objective was to provide subsidies to only 40% of the poorest households and small businesses owned and run by these households. In doing so, the subsidy’s beneficiaries could fall from 57 million people to 26 million poor households, 2.3 million small businesses and a number of small fishers and farmers. The president recommended that these beneficiaries receive a 3 kilogram LPG subscription card linked to the banking system, where each household receives three canisters per month and small businesses nine canisters per month. In 2017, the Office of the Cabinet Secretariat mandated that the subsidy programme be integrated with the social assistance programme, thus creating a unified welfare card system that merges energy subsidies and social protections. 

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