Jakarta. Facing increasing competition from China and India, Indonesian industry leaders are urging the government to extend its natural gas subsidy policy, set to expire on Dec. 31, 2024.

The HGBT program, which was introduced in 2020, offers subsidized gas prices to seven key industrial sectors — including fertilizers, petrochemicals, oleochemicals, steel, ceramics, glass, and rubber gloves — at a rate of $6 per MMBTU. This policy is seen as a crucial measure for maintaining competitiveness in the market.

"If the government does not extend this policy, the industry will struggle," said Budi Susanto, director of the Indonesian Olefin, Aromatic, and Plastic Industry Association (Inaplas), recently.

The price of natural gas in Indonesia remains high compared to other Southeast Asian countries. Currently, businesses are required to pay the state-owned gas company, Perusahaan Gas Negara (PGAS), a regasified gas price of $16.67 per MMBTU from Jan. 1 to March 31, 2025. In contrast, gas prices in Malaysia are $4.5 per MMBTU, Thailand $5.5 per MMBTU, and Vietnam $6.39 per MMBTU.

A lower gas price policy would significantly improve cost efficiency for the petrochemical industry, enabling it to focus on expanding production capacity and attracting investment.

Budi also emphasized that extending the HGBT policy would provide a positive boost to the national economy. "If the HGBT policy is not extended, the industry will face even more challenges, and the government's target of 8 percent economic growth will be difficult to achieve," he added.

Yustinus Gunawan, chairman of the Indonesian Gas Users Industry Forum (FIPGB), raised concerns over the high gas prices, warning that they could hamper national economic growth in 2025. "This issue should be addressed by the government, particularly the Energy and Mineral Resources Ministry (ESDM), with input from the Ministry of Industry," he said.

Edy Suyanto, chairman of the Indonesian Ceramic Industry Association (Asaki), called on the government to extend the HGBT policy to prevent layoffs. "This will further erode our competitiveness, especially with the threat of imported products from China, India, and Vietnam," he explained.

Edy highlighted the importance of the HGBT policy for the ceramic industry, which is highly energy-intensive. Gas accounts for approximately 30 percent of production costs, and no viable substitutes exist. "The presence of the HGBT policy has had a significant multiplier effect, such as new investments, increased employment, and contributions to national tax revenue," he added.

During the initial implementation of the HGBT policy, particularly in Western Java in 2021 and 2022, energy costs as a percentage of total production costs were reduced from 30 percent to 26 percent. However, this benefit was not seen in industries located in Eastern Java due to a quota in gas contracts.

He also criticized the high price of regasified gas, describing it as the most expensive in Southeast Asia. "With this policy, Indonesia's gas price is the highest in the region," he said.