CORE Researcher: Reduction of 3kg LPG Quota Requires Distribution Reform

The government must ensure that any reduction in quotas stems from restricting consumption by able-bodied groups, rather than reducing the supply available to those who are rightfully entitled to it.

Yusuf Rendy Manilet, a researcher at the Centre of Reform on Economics (CORE) Indonesia, believes that reducing the 3kg LPG cylinder quota must be preceded by improvements in distribution and more accurate targeting of subsidy recipients to avoid impacting eligible citizens.

“The government needs to ensure that quota reductions come from limiting the consumption of the able-bodied group, not from a reduction in supply for the community that is truly entitled,” Yusuf said when contacted in Jakarta on Tuesday.

According to him, reducing the quota before fixing distribution could trigger queues, increases in retail prices, and even scarcity at the consumer level.

He noted that the groups most vulnerable to impact include low-income households, food stalls, MSMEs, and other business actors who depend on 3kg LPG.

He added that the limited availability of subsidised diesel could also increase transport costs and the price of basic necessities in regions heavily reliant on diesel.

Therefore, the government is deemed to need a fix for subsidy recipients and distribution first.

In his view, fiscal savings can still be achieved without suppressing purchasing power, provided that restrictions are directed towards groups that are not entitled to receive subsidies.

Conversely, he continued, direct supply cuts risk increasing food inflation and logistics costs, pressuring MSMEs, and forcing the government to increase quotas again mid-year.

The Government and the House of Representatives (DPR RI) have agreed on an energy subsidy budget in the 2027 State Budget (APBN) of Rp261.5 trillion, a decrease of Rp11.44 trillion compared to the previous allocation of Rp272.94 trillion.

The reduction primarily comes from fuel and 3kg LPG subsidies, which have been set at Rp131.39 trillion, down from the previous Rp143.84 trillion.

Meanwhile, the electricity subsidy remains unchanged at Rp130.11 trillion.

In terms of volume, the 3kg LPG cylinder quota is set at 8 million metric tonnes (MT), down from the previous 8.95 million MT. The volume of subsidised fuel is also set at 19.56 million kilolitres (KL), down from the previous 20.09 million KL.