Ideal Calculations if Fuel and LPG Subsidies are Replaced with Direct Cash Transfers

Indonesia’s current energy subsidy and compensation scheme remains commodity-based rather than being targeted at specific beneficiaries. This condition is believed to cause subsidies to frequently miss their intended targets.

Consequently, the government is considered to need a shift in the subsidy scheme from subsidising commodities to providing direct subsidies to the public. One method could involve providing compensation to low-income groups.

Imaduddin Abdullah, Director of International Collaboration at the Institute for Development of Economics and Finance (INDEF), stated that his organisation has conducted several calculations regarding the amount of compensation required to maintain public purchasing power if the subsidy scheme is altered.

For example, for households using 3kg LPG, the required compensation is estimated to be approximately Rp2_00,000 per month.

“We have indeed performed several calculations. For instance, to maintain purchasing power, the required compensation is about Rp200,000 per month for 3kg LPG households,” Imaduddin said during the CNBC Indonesia Energy Corner event, as reported on Monday (31/8/2026).

He noted that if the government truly shifts from goods-based subsidies to direct subsidies to the people, the compensation amounts must be adjusted based on the type of energy used.

For users of Pertalite fuel, compensation is estimated to reach Rp300,000 per month, while Solar diesel users would require approximately Rp600,000 per month.

“Rp300,000 for Pertalite and Rp600,000 for Solar users, with a transition period of 1-2 years,” he added.

As is known, Finance Minister Purbaya Yudhi Sadewa and Minister of Energy and Mineral Resources Bahlil Lahadalia have begun deliberating a scheme to restrict subsidized fuel, specifically Pertalite. This is being done to ensure that energy subsidies are truly received by those entitled to them.

In a meeting at the Ministry of Finance on Tuesday (11/8/2026), both ministers discussed the possibility of limiting access to subsidised Pertalite for high-income groups. One group of particular concern is those in deciles 9 and 10.

In economic terms, decile 9 represents the upper-middle class, while decile 10 represents the upper class. However, these restrictions are still in the assessment stage.

“We discussed the possibility of implementing Pertalite subsidy restrictions for the upper tiers, perhaps deciles 9 and 10, so that in a few months, we can reduce it gradually,” said Purbaya, met at the Ministry of Finance, as reported on Wednesday (12/8/2026).

According to Purbaya, the government is currently studying the system that will be used to determine who is entitled to receive Pertalite subsidies. On the other hand, they have reviewed the system owned by PT Pertamina (Persero) to support the implementation of targeted subsidies.

“We are studying the system; I have also seen that Pertamina’s system is quite good and ready to be implemented,” he said.

Although the government is preparing a restriction system, Purbaya emphasised that no decision has been made regarding the timing of the policy implementation.

At the same location, Bahlil stated that the discussion on targeted subsidies is part of close coordination between the Ministry of Energy and Mineral Resources and the Ministry of Finance. He acknowledged that Pertalite is still being enjoyed by high-income groups.

“This is what we are starting to discuss, the system and everything, so that what? The hundreds of trillions in subsidies are truly given to our brothers and sisters who are entitled to receive them. This is in line with the President’s direction. Therefore, we are conducting ministerial coordination meetings, like that,” he said.

On the other hand, he ensured there would be no restrictions on purchasing subsidised fuel for two-wheeled vehicles at petrol stations. According to Bahlil, motorcycles will still be allowed to purchase Pertalite as usual without any specific restrictions or new prohibitions.

“No, motorcycles are not restricted. There will be no change for motorcycles. Be careful not to use that as a headline, be careful, thank you,” Bahlil joked.

Bahlil explained that the restrictions intended by the government relate to types of vehicles deemed inappropriate for using subsidised fuel. He noted that luxury vehicles, such as BMWs and Mercedes-Benz, are examples of vehicles that should not be using Pertalite.

“It’s like this, the restriction will involve certain types of vehicles. Don’t use a BMW or a Mercy to use subsidised fuel. That is what the Minister meant,” he concluded.