Jakarta – The Indonesian government is evaluating the continuation of the Specific Natural Gas Price (HGBT) policy, which has provided a special price of a maximum of USD 6 per MMBTU (million metric British thermal unit) for several industrial sectors. Minister of Energy and Mineral Resources (MEMR) Bahlil Lahadalia, at a press conference on Tuesday, January 7, stated that this evaluation could reduce the number of industries that receive the special price.
“We are conducting a comprehensive evaluation. The purpose of HGBT is to support industries in achieving reasonable business value. If a sector has earned a sufficient return on capital and profits, there is no reason to stop subsidising gas prices,” Bahlil said.
According to Bahlil, this evaluation includes a review of each sector’s Internal Rate of Return (IRR). If certain sectors have achieved a good IRR, they will no longer be included in the list of HGBT recipients.
“If the IRR is on target, we will consider removing them from the HGBT scheme. However, for sectors that still need stimulus because their IRR is not ideal, we will continue to support them,” he said.
Industrial sectors such as fertilisers, petrochemicals, steel, ceramics, glass, oleochemicals, and rubber gloves have been the main recipients of the HGBT policy. However, with the expiration of this policy period on December 31, 2024, the government considers the need for a new regulation to determine the feasibility of re-implementing special gas prices.
Potential reduction in recipients
Bahlil emphasised that this evaluation has not been finalised, but there is a possibility that the number of HGBT recipient sectors will be reduced. “There may be a reduction in HGBT recipient sectors, but it is still under discussion. We ensure that this evaluation is objectively based on data and economic needs,” he added.
As the HGBT expires, the government is also opening up opportunities to develop a new mechanism that is more measurable and equitable. To continue obtaining HGBT, companies must submit an application to the Minister of Energy and Mineral Resources through the Directorate General of Oil and Gas (Migas), complete with recommendations from the Minister of Industry, audited financial statements, and applicable natural gas sales and purchase contract documents.
Industries that have stabilised are expected to stand on their own without subsidies, while sectors still developing receive support to contribute to national economic growth.
“This policy is part of economic adjustment. Subsidies should focus on sectors that need support to grow, not on already independent sectors,” Bahlil said.
With this step, the government hopes to create more efficient energy governance while encouraging the competitiveness of domestic industries. (Hartatik)
