LPG Subsidies Increased in 2022, Reaching a Decade High

Economics & Macro

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Adi Ahdiat 22/06/2023 12:00 WIB

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According to the Indonesian Supreme Audit Agency (BPK) report, the Indonesian government disbursed approximately Rp 100.4 trillion for LPG subsidies in the 2022 fiscal year, the highest in the last de

Realization of LPG Subsidy Spending in Indonesia (2013-2022)

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Realization of LPG Subsidy Spending in Indonesia (2013-2022)

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According to a report by the Indonesian Supreme Audit Agency (BPK), the Indonesian government disbursed approximately Rp100.4 trillion (approximately USD 6.7 billion based on the average 2022 exchange rate) for LPG subsidies in the 2022 fiscal year.

This realization of LPG subsidy spending increased by approximately 48% year-on-year (yoy) compared to the 2021 fiscal year, marking the highest record in the last decade.

The BPK attributed this surge to several factors:

* Payment of outstanding subsidies for 3-kilogram (kg) LPG cylinders from the previous year;
* Depreciation of the Indonesian Rupiah against the United States dollar;
* Increased LPG product prices (Contract Price Aramco), impacting subsidies for 3-kg LPG cylinders; and
* Increased volume of 3-kg LPG cylinder distribution.

Based on BPK records, throughout 2022, the government distributed 7,799 million kg of 3-kg LPG cylinders.

This volume increased by approximately 4.5% compared to the 2021 distribution volume of 7,462 million kg.

"The distribution of subsidized LPG cylinders is crucial for the poor, considering LPG is the primary energy source for cooking in households and small businesses," stated the BPK in its *Report on the Audit of the Central Government's Financial Statements for 2022*.

According to the World Bank, Indonesia is among the world's largest providers of LPG subsidies.

The World Bank criticizes countries that spend large sums on fossil fuel subsidies, as this can have detrimental environmental impacts.

"Governments around the world are spending trillions on inefficient subsidies that worsen climate change," said the World Bank in its report, *Detox Development, Repurposing Environmentally Harmful Subsidies* (June 2023).

In response, the World Bank recommends that countries redirect fossil fuel subsidy funds to programs supporting climate change mitigation and a just energy transition.

"Amidst constrained budgets, rising debt, widening inequality, and worsening environmental degradation, governments must prioritize comprehensive subsidy reforms," stated the World Bank.

"The belief that subsidy reforms will affect the poor is not always supported by data. In some cases, such as in energy subsidies, wealthier groups benefit more due to their higher consumption," it continued.

"To protect vulnerable groups during subsidy reforms, we recommend providing compensation to the poorest through cash transfers or direct assistance," said the World Bank.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."