Indonesia to reduce 2027 LPG and fuel subsidy budgets

The Indonesian government and the House of Representatives (DPR RI) have agreed to reduce the energy subsidy budget in the 2027 Draft State Budget (RAPBN) by Rp11.4 trillion. The total energy subsidy allocation will decrease from an initial proposal of Rp272.94 trillion to Rp261.5 trillion.

This reduction is driven by lowered distribution volume parameters. The quota for 3kg LPG cylinders has been cut from 8.9 million metric tons to 8 million metric tons, while fuel (BBM) volume projections have shifted from 20 million kiloliters to 19.56 million kiloliters. Specifically, the 3kg LPG subsidy is set to drop from Rp114.14 trillion to Rp103.05 trillion.

To mitigate the impact of the reduced LPG quota, the Ministry of Energy and Mineral Resources (ESDM) is preparing alternative energy sources to reduce import dependency and maintain price stability. These alternatives include the development of compressed natural gas (CNG), gas networks (jargas), and electric stoves. Despite the quota reduction, the government maintains that existing consumption regulation mechanisms will remain in place.