Indonesia could save Rp200 trillion by fixing fuel subsidy errors: DEN

Jakarta (ANTARA) - Indonesia could save between Rp170 trillion and Rp200 trillion (approximately US$9.49 billion to US$11.17 billion) annually by eliminating ‘inclusion errors’ in its fuel subsidy distribution, according to the National Energy Council (DEN).

DEN member M. Fadhil Hasan stated that reforming the current subsidy distribution model would unlock massive fiscal space, allowing the state to redirect critical funding toward targeted social welfare programs.

"These funds could then be used for social protection and other public programs," Fadhil said in Jakarta on Thursday (June 25).

According to him, an inclusion error occurs when state assistance mistakenly reaches individuals who do not meet the low-income criteria for the program.

Fadhil highlighted a severe imbalance in the current subsidy framework, noting that the wealthiest 20 percent of the population currently receive more than 50 percent of all fuel subsidies and government compensation.

Citing recent data, he pointed out that the richest 10 percent of the population receive fuel subsidies worth Rp2.5 million (US$139.66) per capita annually.

In contrast, the poorest 10 percent receive only Rp50,000 (US$2.79) per capita annually through the combined subsidy and compensation schemes.

Fadhil criticized the current system as inequitable, arguing that subsidies originally intended to protect low-income households are instead disproportionately benefiting wealthier citizens.

He further emphasized that both the government and the House of Representatives (DPR) share responsibility for significantly reducing—or ideally eliminating—these structural inclusion errors.

To address the issue, the DEN member recommended overhauling the current distribution mechanism by replacing open commodity subsidies with a more targeted approach.

"I believe we should implement a closed subsidy scheme or integrate the distribution system with the latest socioeconomic data," Fadhil concluded.

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Translator: Khaerul Izan, Yashinta Difa

Editor: M Razi Rahman

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