The House of Representatives (DPR) has vehemently denied claims that subsidized fuel (BBM) will be phased out in Indonesia. Deputy Chairman of Commission XII, Bambang Haryadi, emphasized that any policy change related to subsidies must be approved by the legislature.

Speaking in an official statement on Monday, February 24, Bambang Haryadi asserted, “There is no plan to remove fuel subsidies, and any changes to the subsidy mechanism must be approved by the DPR because subsidies are embedded in the state budget (APBN).” He went on to explain, “President Prabowo is committed to protecting the needs of lower-income citizens.”

In the realm of U.S. energy policy, this debate resonates similarly with discussions on federal subsidies for oil and gas, which often face criticism for their impact on energy prices and environmental sustainability. Comparatively, Indonesia’s fuel subsidy debate highlights the global challenge of balancing economic support with fiscal responsibility, much like the ongoing discussions in the U.S. senators and representative from the Energy Committee frequently conduct hearings and roll out reports comparing subsidy policies to other countries, focusing on economic growth and national energy security.

Targeted Subsidies: A Moving Discourse

Bambang Haryadi, a politician from the Gerindra Party, clarified that President Prabowo Subianto aims to make fuel subsidies more targeted. Recognizing that current distributions are not always precise, he assured improvements are forthcoming.

“The President wants subsidies to reach those who truly need them. We recognize that some allocations have been misplaced, but we will work to fix this moving forward,” he stated.

This approach mirrors initiatives in the U.S., where programs like the Low-Income Home Energy Assistance Program (LIHEAP) aim to provide targeted assistance to low-income households for energy costs. The Indonesian government’s efforts to improve subsidy allocation can draw lessons from U.S. models, focusing on data-driven policy adjustments and transparent evaluation processes.

The National Economic Council (DEN) Chairman, Luhut Binsar Pandjaitan, had commented on the potential elimination of subsidies, which sparked debate. Bambang clarified Luhut’s remarks, stating,

Perhaps Mr. Luhut’s suggestion is not about eliminating subsidies, but refining the system to ensure they benefit the right people, he said, calling for a more targeted and efficient use of state funds.

A Path to Reform: 2023 Specifications and Future Plans

During a 2023 working meeting with Commission VII and then-Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif, specific allocations for subsidized fuel were agreed upon. Pertalite would be designated for motorcycles and public transport, while diesel would be reserved for public transportation, logistics, fishermen, and farmers.

This strategy aligns with U.S. initiatives to support unprivileged populations and industries, such as specialized insurance subsidies in Louisiana post-Hurricane Katrina, helped jump-start economic recovery in affected regions. Indonesia’s specific fuel allocations demonstrate a sector-focused approach to energy subsidies, which can be replicated in regions affected by energy usage perturbations and environmental challenges in U.S.

Luhut had previously hinted at potentially phasing out subsidized fuel by 2027, suggesting a transition to a single fuel price policy. At the Economic Outlook 2025 event in South Jakarta on February 20, he discussed this possibility with the President, indicating significant progress within the next two years.

“There will be no more subsidies for fuel, diesel, or other materials. Instead, the former Coordinating Minister for Maritime and Investment Affairs proposed that subsidies be distributed directly to those who qualify. ‘Subsidies should go to those who truly need them,’ he said, arguing that such a system could lead to massive savings for the state budget.”

Author: Bambang Haryadi

This plan resonates with U.S. proposals to modify the Supplemental Nutrition Assistance Program (SNAP), aiming to ensure that benefits are directed more efficiently to those in need. The Director of National Economic Council had argued,

“In my view, this is the best approach—we could save billions of dollars.”

Spokesperson: Luhut Binsar Pandjaitan

Critics, however, argue that such reforms could unintentionally burden those who rely on subsidies the most. Historically, similar transitions, such as the shift in federal housing subsidies during the 2008 housing crisis, faced significant backlash due to the perceived lack of protection for the most vulnerable populations.

Fears, Subsidies and Changing on the Energy Landscape

As Indonesia navigates the complexities of fuel subsidies, it serves as a compelling case study for the rest of the world, particularly the United States.

Arguments from key policymakers on subsides reduction has sparked fears of potential social instability, especially among lower-income groups that heavily depend on subsidized energy. Critics highlight that abrupt policy changes without robust social support systems could lead to widespread protests and unrest, much like the “Yellow Vests” movement in France in 2018, triggered by increases in fuel prices.

To mitigate these risks, advocates suggest a phased approach to subsidy reduction, coupled with increased investments in alternative energy sources. Indonesia’s commitment to environmentally responsible energy policies could potentially pave the way for similar initiatives in the U.S., focusing on renewable energy and green technologies while gradually reducing reliance on traditional subsidies, ensuring a sustainable energy transition that maintains the energy security.

At the heart of this debate lies the question of whether subsidies should be transformed or eliminated and how can this process be managed equitably and efficiently. With lessons from Indonesia’s approach and comparisons with U.S. policy frameworks balancing economic stability, energy security, and environmental sustainability will post ahead.