Why Indonesia Cuts Energy Subsidy Spending in 2027 State Budget - Tempo.co English
TEMPO.CO, Jakarta - The Indonesian House of Representatives (DPR) has agreed to cut the energy subsidy budget in the 2027 State Budget at Rp261.5 trillion, down from the initial plan of Rp272.9 trillion.
This number was announced by Said Abdullah, Chair of the DPR Budget Agency, during a plenary session to decide on the 2027 State Budget Bill in Senayan, Jakarta, on Tuesday, September 29, 2026.
"We agree that reducing the budget for several subsidies, such as kerosene, diesel, and 3-kg LPG, does not mean we care less about the underprivileged citizens," he said.
The government decided to cut the subsidies to improve the data on subsidy recipients to assure more accurate targeting and a more efficient budget. According to Said, improving the data on subsidy recipients aims to remedy the errors that have occurred over the years.
He further stated that people in the lower decile groups have tended to receive less benefit from the implementation of energy subsidies. "Therefore, the government will continue to refine the National Social and Economic Single Data (DTSEN) as the basis for subsidy recipients," Said said.
The budget reduction affected subsidies for fuel and 3-kg LPG cylinders, from Rp142.8 trillion to Rp131.3 trillion. Meanwhile, the electricity subsidy remained at Rp130.1 trillion.
The volume of subsidized fuel was also cut from the initial 20 million kiloliters (kl) to 19.5 million kl. This comprised 561,000 kl of kerosene and 19 million kl of diesel.
The volume of 3-kg LPG cylinders was set at 8 million metric tons, down from the previous target of 8.9 million metric tons. The subsidy for diesel remains at Rp1,000 per liter.
According to the Budget Agency, the Indonesian Crude Price Index (ICP) assumption in the 2027 State Budget Bill was set at US$75 per barrel per day. The rupiah exchange rate, which also affects subsidies, was set at US$17,500 per US dollar.
Read: Indonesia Passes 2027 State Budget: What Are the Key Targets?
