国际可持续发展研究所-印尼液化石油气补贴改革：国际经验教训（英文）-2021.5-39页_1023kb

Summary of LPG Subsidy Reform in Indonesia: Lessons from International Experience

Core Content

This report discusses the challenges and potential reforms of LPG subsidies in Indonesia, drawing on international experiences to provide insights and recommendations. It highlights the inefficiency and regressive nature of current LPG subsidy systems and emphasizes the need for targeted reforms to ensure equitable distribution and fiscal sustainability.

Main Points

• Current Situation:
  Indonesia's LPG subsidies have become a major financial burden on the state budget, with the 3-kg cylinder subsidy being the largest component. Despite the government's intention to reform these subsidies, implementation has been delayed due to the economic impact of the COVID-19 crisis.

• Inefficiency of Subsidies:
  The subsidy system is not well-targeted, with most benefits going to wealthier households. LPG is mostly used in rural areas, where access is limited due to informal distribution and additional transport costs, leading to only about 30% of subsidies reaching the intended poor and vulnerable groups.

• Government Plans for Reform:
  The government is exploring a closed distribution system to target subsidies more effectively. The National Team for the Acceleration of Poverty Reduction (TNP2K) has proposed using biometric verification to ensure only eligible households receive subsidized LPG. This system was tested in pilot programs, showing promise but also some logistical challenges.

• Potential Benefits of Reform:
  Targeted subsidies could reduce government spending by up to 70% and help mitigate the impact of the crisis on the poor. It could also improve social equity and support other fiscal priorities, such as health and economic recovery.

• Climate Impact:
  Reforming LPG subsidies may encourage a shift to electric induction stoves, which could increase greenhouse gas (GHG) emissions due to the reliance on coal for electricity generation. However, the overall impact is considered relatively small compared to Indonesia's total emissions.

• Challenges of Transition:
  Switching to electric cooking involves significant upfront costs, including purchasing the stove, utensils, and upgrading to a higher electricity tariff. These costs may limit the ability of lower-income households to make the switch, thus affecting the effectiveness of subsidy reform.

Key Information

LPG Subsidy Overview

• Introduction: LPG subsidies were introduced in 2008 as part of a government program to replace kerosene with a cleaner fuel.
• Cost Trends: Spending on LPG subsidies increased significantly over the years, reaching IDR 54 trillion (USD 3.8 billion) in 2019.
• Economic Impact: The subsidies have been a drag on the budget, with the deficit increasing to -6.34% of GDP in 2020.

Targeting Subsidies

• TNP2K's Plan: Uses biometric verification (face or fingerprint) and the electricity subsidy database to identify eligible beneficiaries.
• Pilot Programs: Conducted in 2018–2019, showing that the system could work but needed improvements in infrastructure and training.
• Benefits: Targeted subsidies could reduce the number of beneficiaries and improve social equity.

International Lessons

• India: Increased fuel taxes during the pandemic to generate revenue and introduced new social protection schemes for LPG, providing free cylinders to the poor.
• Mexico: Expanded its conditional cash-transfer program with an energy component during the 2008/09 crisis to ensure energy access for the poor.

Recommendations

1. Shift subsidies to the poor: Redirect funds from the wealthy to those most affected by the crisis.
2. Robust data collection: Ensure accurate identification of beneficiaries through reliable data sources.
3. Public engagement and communication: Proactively engage political and influential groups to support the reform.
4. Leverage low oil prices: Use current low oil prices to ease the transition and reduce opposition to reform.

Conclusion

Indonesia's LPG subsidy reform is crucial for improving fiscal sustainability and social equity. While the reform is sensitive and faces challenges, international examples show that it can be implemented effectively with proper planning and support. The use of biometric technology and targeted transfers is a promising approach, though additional measures are needed to ensure accessibility and affordability for low-income households.