Economist: Cheap gas subsidy for industry failed, evaluate subsidied programs

Jakarta – The continued increase in energy subsidies in Indonesia needs to be re-evaluated, according to energy observer Komaidi Notonegoro, especially regarding the natural gas price for specific industries (HGBT) program, which he considers ineffective.

The special price program is eligible for seven industries, namely, the fertiliser industry, petrochemical industry, oleochemical industry, steel industry, ceramic industry, glass industry, and rubber glove industry.

Previously, Minister of Energy and Mineral Resources Arifin Tasrif told the media that this year’s energy subsidy target reached IDR 186.9 trillion, which includes IDR 113.3 trillion for fuel oil (BBM) and liquified petroleum gas (LPG) and IDR 73.6 trillion for electricity subsidies. This target recorded a significant increase compared to the realisation of subsidies in 2023 of IDR 159.6 trillion.

According to Notonegoro, the HGBT program was initially intended to increase the competitiveness of certain industries by providing cheap gas prices of USD 6 per MMBTU; however, after evaluation, it still needs to meet expectations.

He said that the HGBT program’s sustainability could impact the upstream oil and gas sector and the business chain as a whole if not properly evaluated. The program has cost the government IDR 29.4 trillion in lost state revenue until 2022. Notonegoro said, that in terms of employment, the program also failed during the period between 2020 and 2022, despite an increase in tax revenue in the seven recipient industries. (Hartatik)

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