Finance Minister Sri Mulyani Indrawati, right, said the government's effective targeting measures would ensure that the subsidies only reach those most in need. (Antara Photo/Rivan Awal Lingga)

Indonesia Plans to Cut Energy Subsidies by 3.4% Next Year

BY : EUIS RITA HARTATI & ALFONSUS ADI PUTRA

AUGUST 19, 2019

Jakarta. The government has proposed cutting energy subsidies by 3.4 percent in next year's state budget, as it is confident that effective targeting measures would ensure that the benefits only reach those most in need.

It plans to spend Rp 137.5 trillion ($9.7 billion) on energy subsidies in 2020, compared with the Rp 142.6 trillion earmarked in this year's budget. President Joko "Jokowi" Widodo has been reducing energy subsidies since taking office in 2014, seeking to allocate more resources for infrastructure development and education. 

Finance Minister Sri Mulyani Indrawati said on Sunday that the government would subsidize diesel fuel by Rp 1,000 per liter next year, while it would also control the prices of kerosene and liquefied petroleum gas.

In detail, the government has earmarked Rp 18.8 trillion for oil fuel subsidies, Rp 52 trillion for subsidized LPG and Rp 62.2 trillion for subsidized electricity. It has also allocated Rp 4.5 trillion to reimburse state energy firm Pertamina for subsidized fuel it supplied in 2018. 

Jokowi said the subsidies were still needed to prop up people's purchasing power, especially those in lower income levels.

He added that the government would continue to improve its targeting scheme, "to be effective in assisting underprivileged people."

Sri Mulyani said the government would improve cooperation between the central and regional governments in controlling and monitoring the consumption of subsidized fuel and subsidized LPG – distributed in 3-kilogram canisters.

"Energy subsidies are aimed at ensuring price stability by strengthening the control and monitoring of energy consumption for the sake of effectiveness," the minister said. 

She added that only consumers with 450 volt-ampere (VA) and 900 VA power capacity installed in their homes, or those listed in the poverty reduction program, would qualify for subsidized electricity.

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