UI Professor: Subsidy policy and energy transition need improvement

Professor at the Faculty of Economics and Business, University of Indonesia (UI), Telisa Aulia Falianty, has assessed that improvements to subsidy policy and the energy transition are needed as fiscal space continues to narrow.

Telisa said the shrinking fiscal space forces Indonesia to face difficult choices in energy subsidy policy: maintaining it at the risk of burdening the State Budget (APBN), or cutting it at the risk of eroding people’s purchasing power, especially among lower-middle income groups.

“The energy transition in Indonesia is no longer viewed solely as an effort to reduce short-term fiscal burdens, but rather as a long-term strategy so that this nation can achieve equitable energy security,” Telisa said in her statement in Jakarta on Tuesday.

This discourse is reinforced by increasingly challenging global geopolitical dynamics, prompting the government to continue optimising the APBN as a shock absorber against external turmoil in ensuring energy availability for public consumption.

Telisa added that energy transition policies must be implemented gradually, inclusively, and participatively through thorough socialisation involving the public and stakeholders.

This agenda also requires support from equitable subsidies. This can be achieved in a measurable way through the integration of socio-economic profile data (DTSEN) based on family welfare deciles, so that assistance schemes can operate in a targeted, recipient-based manner.

“This approach is important so that transition policies do not sacrifice the actual socio-economic dimensions of society. Poor and vulnerable decile groups receive adequate protection, while the purchasing power of the middle class remains maintained amid ongoing economic pressures,” she said.