How Fuel Subsidies Impact Public Transport Quality

Indonesian Transportation Society (MTI) Central Advisory Board member Djoko Setijowarno assesses that the State Budget (APBN) remains overshadowed by unresolved energy financing issues, despite the recent increase in Pertamax prices. One item deemed a burden on the state’s fiscal position is the fuel oil (BBM) subsidy, which is often poorly targeted. According to Djoko, the amount of the fuel subsidy always fluctuates annually because it is influenced by three main factors: the world crude oil price or Indonesian Crude Price (ICP), the rupiah exchange rate against the US dollar, and the volume of public consumption. He noted that the realisation of fuel subsidies had soared to Rp 551.2 trillion in 2022. The figure then fell to Rp 375 trillion in 2023 and shrank to Rp 113.3 trillion in 2024. However, in 2025, the subsidy realisation rose again to Rp 394.3 trillion, before being set at Rp 210.1 trillion in the 2026 APBN. Djoko stated that the transportation sector accounts for around 40 per cent of total national fuel consumption. However, based on data from the Ministry of Energy and Mineral Resources (ESDM), around 93 per cent of subsidised fuel consumption is enjoyed by private vehicle owners, both two-wheeled and four-wheeled. The share of subsidised fuel consumption for goods transport is only about 4 per cent, while public passenger transport is 3 per cent. This condition, according to Djoko, shows that the benefits of fuel subsidies are still mostly enjoyed by the affluent. Therefore, he encourages the acceleration of public transport system development in the regions as a more strategic solution compared to maintaining the current energy subsidy pattern. This step is considered in line with the government’s target to make Indonesia a developed country by 2045, one indicator of which is the availability of an adequate public transport system. Djoko assesses that the time remaining until 2045 is only about 19 years, so the improvement of public transport must be carried out immediately. According to him, the experience of developing Transjakarta over the past two decades can serve as a reference for other regions. However, the condition of public transport in the regions is still lagging. Of the 514 local governments in Indonesia, Djoko said, only 45 regions, or about 9 per cent, have modernised their public transport systems. Moreover, some of them still depend on APBN support. Currently, only two regions have public transport service operations that still receive central government funding support, namely Balikpapan through Balikpapan City Trans and Manado through Trans Manado. Djoko suggested that the government divert a portion of the electric vehicle incentive budget to support public transport development in the regions. According to him, a subsidy fund of Rp 5 million per electric motorcycle unit would provide greater benefits if used to encourage local governments to improve public transport services. If electric vehicle incentives continue, he suggests the programme be prioritised for communities on small islands and in disadvantaged, frontier, outermost, and border (3TP) areas facing limited fuel supply due to geographical constraints. Djoko cited Asmat Regency, which has been utilising electric motorcycles since 2007 as a local transport solution amidst limited fuel access. According to him, improving public transport will provide broader benefits to the community. The government could also implement low tariffs or even free travel for students, university students, labourers, teachers, the elderly, people with disabilities, and low-income community groups. Besides increasing fiscal efficiency, Djoko assesses that a good public transport system can also reduce social risks, improve driving safety, promote equitable development and regional connectivity, as well as provide benefits for the environment and urban spatial planning.