Luhut Discusses Electricity Subsidy Reform, Here's the Rationale

National Economic Council (DEN) Chair Luhut Binsar Pandjaitan has spoken about reforming the national electricity subsidy. Luhut considers this important for restructuring the targeting of national energy subsidies, a significant portion of which is still enjoyed by ineligible groups.

Luhut explained that the energy subsidy burden currently stands at over Rp300 trillion per year. He believes a change in the aid distribution scheme is necessary, particularly in the electricity sector, so the state budget can be allocated more equitably for lower-income communities. "From the data we have compiled, it shows the energy subsidy burden is still above Rp300 trillion per year. Ironically, about 62.9% is enjoyed by affluent groups. This is clearly unfair and a restructuring of subsidy targeting is needed," Luhut said in an Instagram post @luhut.pandjaitan, quoted Wednesday (9/6/2026).

Luhut had already conveyed the plan during a Hearing Meeting (RDP) with the National Financial Accountability Board (BAKN) of the Indonesian House of Representatives (DPR RI). He assessed the need to change the subsidy pattern from commodity-based to fully individual-based direct assistance, referring to the National Socio-Economic Single Data (DTSEN). "This policy needs to be changed by shifting commodity-based subsidies to fully individual-based direct assistance. In accordance with Presidential Instruction Number 4 of 2025, we will shift the database to the National Socio-Economic Single Data so that lower-income groups are truly protected," Luhut explained.

In its implementation, the government will utilise GovTech technology encompassing a biometric verification system to close loopholes for data manipulation in the field. The use of this transparent digital system is projected to generate state savings of up to Rp29.9 trillion annually. "This digitalisation step is important to cut bureaucratic complexity and close data manipulation loopholes that have been a source of state losses. Through a transparent system, we can save state coffers up to Rp29.9 trillion per year while ensuring state budget allocation is right on target," he added.

Currently, the digital subsidy system model is being expanded for trials in 42 districts and cities before national implementation. Luhut hopes the assistance will eventually serve not merely as consumption costs, but can be used by the community as capital to build productive businesses. "What must be noted is that subsidy reform is not about reducing the rights of the poor, but ensuring every rupiah of the state budget truly reaches those who are entitled. With courage in execution, I hope this change will eventually realise social justice," he concluded.