THE Indonesian government is currently designing and implementing a new scheme for fuel oil (BBM) subsidies to ensure that this assistance is more targeted and reduces waste that has occurred so far.
In this new scheme, fuel subsidies will no longer be given evenly, but will be more focused on certain groups of people and sectors that really need them.
The new fuel subsidy scheme aims to ease the burden on low-income communities and optimize the use of subsidy funds for productive sectors.
This step was taken because previously it was felt that fuel subsidies were not on target and there was potential for abuse by groups who did not need the assistance.
Therefore, the government through the Ministry of Energy and Mineral Resources (ESDM) and the Ministry of Social Affairs (Kemensos) is introducing a more measurable mechanism.
The following are several categories of fuel subsidy recipients based on the new scheme that will be implemented:
1. Poor and Vulnerable Communities
The government will prioritize providing fuel subsidies to the people registered in Integrated Social Welfare Data (DTKS). This group consists of poor families who have low incomes and are vulnerable to poverty. Distribution of subsidies to them is expected to help them reduce their burden of expenses, especially in transportation and household energy costs.
2. Micro, Small and Medium Enterprises (MSME) Group
MSMEs are a sector that is very vulnerable to fluctuations in energy prices, especially fuel. Therefore, this business group will receive more attention in the new subsidy scheme. The government hopes that by providing subsidies to MSMEs, small businesses can maintain the continuity of their businesses without having to be burdened with high energy costs.
3. Public Transportation
Public transportation such as buses, public transportation and motorbike taxis are often people’s mainstay in daily mobility. With more focused fuel subsidies, it is hoped that public transportation costs will be more affordable. This will certainly have a positive impact on people who depend on public transportation for their activities.
4. Farmers and Fishermen
Farmer and fisherman groups who need fuel for agricultural and fisheries operations will also be the main recipients of this subsidy. Many farmers use fuel to operate agricultural machinery, while fishermen need fuel for boats and fishing gear. With subsidies, it is hoped that agricultural and fishery products will be more affordable and improve the welfare of farmers and fishermen.
5. Specific Industries
Certain industrial sectors, such as those involved in food security, production of basic commodities, and other sectors that support people’s basic needs, will also receive fuel subsidies. The government considers these sectors to be very important for the continuity of the national economy, so that the subsidies provided can increase competitiveness and reduce production costs.
Use of Technology for Distribution of Subsidies
The government also plans to use technology to optimize the distribution of fuel subsidies. One of the proposed mechanisms is to use special applications and cards that make it easier to monitor subsidy recipients.
Through this system, the government can more easily verify who is entitled to receive subsidies and avoid potential abuse that has often occurred in the past.
In addition, quota restrictions for each type of fuel will also be implemented to ensure that only those who are entitled to subsidies receive them. In this way, it is hoped that there will be no more misuse or waste of subsidies that are not well targeted.
The implementation of the new fuel subsidy scheme certainly faces challenges, especially in terms of verifying accurate recipient data and transparency in distribution.
However, if implemented well, this scheme is expected to increase the efficiency of using the subsidy budget and provide greater benefits for people in need.
The government hopes that with well-targeted subsidies, sectors that depend on fuel can continue to run at more affordable costs, while poor people will no longer be burdened by ever-increasing fuel prices. (Z-10)
Source:
- Ministry of Energy and Mineral Resources (ESDM). (2024). New Fuel Subsidy Scheme and Its Distribution. Jakarta: Ministry of Energy and Mineral Resources.
- Ministry of Social Affairs (Kemensos). (2024). Integrated Social Welfare Data (DTKS). Jakarta: Ministry of Social Affairs.
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What are the main criticisms of the previous universal fuel subsidy system in Indonesia?
## Interview: Indonesia’s New Fuel Subsidy Scheme
**Host:** Welcome back to the show. Joining us today is Sofia, an economist specializing in energy policy, to discuss Indonesia’s newly announced fuel subsidy scheme. Sofia, welcome to the program.
**Sofia:** Thank you for having me.
**Host:** Indonesia has long offered universal fuel subsidies, but the government is transitioning to a more targeted approach. Can you tell us why this change is happening?
**Sofia:** Absolutely. The old system was plagued by inefficiencies and potential misuse. Subsidies were benefitting those who didn’t necessarily need them, and weren’t reaching those who truly struggled. This new approach aims to be more precise, ensuring the benefits go directly to those who need them most. [[1](https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099748505212431959/idu1e31e5e531f16114baa1b62c1b3201c9c2e68)]
**Host:** Interesting. And who are these new target groups?
**Sofia:** The government has identified five key groups. Firstly, **poor and vulnerable communities** registered in the national database DTKS will be prioritized. Then, there’s a focus on **micro, small and medium enterprises**, especially as they’re vulnerable to fluctuating fuel prices. **Public transportation**, including buses, taxis and motorbike ride-hailing services, will also benefit to keep transportation affordable.
**Sofia:** Next are **farmers and fishermen**, who rely heavily on fuel for their operations. **specific industries** vital for national economic stability, such as food security and basic commodity production, will also receive support.
**Host:** This sounds a lot more targeted than the previous system. Will there be safeguards against misuse?
**Sofia:** Definitely. The government plans to leverage technology for more accurate distribution and accountability. They haven’t revealed specifics yet, but it’s likely to involve digital identification and transaction monitoring.
**Host:** This is a significant change for Indonesia. Do you think it will be successful?
**Sofia:** I believe it has the potential to be successful. It addresses the inefficiencies of the old system and prioritizes those who need it most. However, effective implementation will be crucial, and continuous monitoring and evaluation will be necessary to ensure the subsidy reaches its intended recipients.
**Host:** Thanks for sharing your insights, Sofia. This has been a fascinating discussion.
**Sofia:** My pleasure.