THE Indonesian government is currently designing and implementing a new scheme for fuel oil (BBM) subsidies to ensure that this assistance is more targeted and reduces waste that has occurred so far.
In this new scheme, fuel subsidies will no longer be given evenly, but will be more focused on certain groups of people and sectors that really need them.
The new fuel subsidy scheme aims to ease the burden on low-income communities and optimize the use of subsidy funds for productive sectors.
This step was taken because previously it was felt that fuel subsidies were not on target and there was potential for abuse by groups who did not need the assistance.
Therefore, the government through the Ministry of Energy and Mineral Resources (ESDM) and the Ministry of Social Affairs (Kemensos) is introducing a more measurable mechanism.
The following are several categories of fuel subsidy recipients based on the new scheme that will be implemented:
1. Poor and Vulnerable Communities
The government will prioritize providing fuel subsidies to the people registered in Integrated Social Welfare Data (DTKS). This group consists of poor families who have low incomes and are vulnerable to poverty. Distribution of subsidies to them is expected to help them reduce their burden of expenses, especially in transportation and household energy costs.
2. Micro, Small and Medium Enterprises (MSME) Group
MSMEs are a sector that is very vulnerable to fluctuations in energy prices, especially fuel. Therefore, this business group will receive more attention in the new subsidy scheme. The government hopes that by providing subsidies to MSMEs, small businesses can maintain the continuity of their businesses without having to be burdened with high energy costs.
3. Public Transportation
Public transportation such as buses, public transportation and motorbike taxis are often people’s mainstay in daily mobility. With more focused fuel subsidies, it is hoped that public transportation costs will be more affordable. This will certainly have a positive impact on people who depend on public transportation for their activities.
4. Farmers and Fishermen
Farmer and fisherman groups who need fuel for agricultural and fishery operations will also be the main recipients of this subsidy. Many farmers use fuel to operate agricultural machinery, while fishermen need fuel for boats and fishing gear. With subsidies, it is hoped that agricultural and fishery products will be more affordable and improve the welfare of farmers and fishermen.
5. Specific Industries
Certain industrial sectors, such as those involved in food security, production of basic commodities, and other sectors that support people’s basic needs, will also receive fuel subsidies. The government considers these sectors to be very important for the continuity of the national economy, so that the subsidies provided can increase competitiveness and reduce production costs.
Use of Technology for Distribution of Subsidies
The government also plans to use technology to optimize the distribution of fuel subsidies. One of the proposed mechanisms is to use special applications and cards that make it easier to monitor subsidy recipients.
Through this system, the government can more easily verify who is entitled to receive subsidies and avoid potential abuse that has often occurred in the past.
In addition, quota restrictions for each type of fuel will also be implemented to ensure that only those who are entitled to subsidies receive them. In this way, it is hoped that there will be no more misuse or waste of subsidies that are not well targeted.
The implementation of the new fuel subsidy scheme certainly faces challenges, especially in terms of verifying accurate recipient data and transparency in distribution.
However, if implemented well, this scheme is expected to increase the efficiency of using the subsidy budget and provide greater benefits for people in need.
The government hopes that with well-targeted subsidies, sectors that depend on fuel can continue to run at more affordable costs, while poor people will no longer be burdened by ever-increasing fuel prices. (Z-10)
Source:
- Ministry of Energy and Mineral Resources (ESDM). (2024). New Fuel Subsidy Scheme and Its Distribution. Jakarta: Ministry of Energy and Mineral Resources.
- Ministry of Social Affairs (Kemensos). (2024). Integrated Social Welfare Data (DTKS). Jakarta: Ministry of Social Affairs.
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What are the main differences between Indonesia’s old and new fuel subsidy schemes? Obstacles that might hinder the successful implementation of Indonesia’s new fuel subsidy scheme
## Interview with an Economist on Indonesia’s New Fuel Subsidy Scheme
**Host:** Welcome back to the show. Today, we’re discussing Indonesia’s newly implemented fuel subsidy scheme. Joining us is Dr. [Economist Name], an expert on Indonesian economic policy. Welcome to the show, Dr. [Economist Name].
**Dr. [Economist Name]:** Thank you for having me.
**Host:** Indonesia has long struggled with ensuring its fuel subsidies reach those who truly need them. Can you tell us about the inefficiencies of the old system?
**Dr. [Economist Name]:** The previous system was widely criticized for being untargeted and vulnerable to abuse. It essentially provided a blanket subsidy to all consumers, regardless of income level. This meant that wealthier individuals who could afford to buy fuel at market prices were also benefiting from the subsidy, essentially diverting funds that could have been used more effectively.
**Host:** So, how does this new scheme aim to address these issues?
**Dr. [Economist Name]:** The new approach focuses on a more targeted distribution of subsidies, concentrating on specific groups most in need. As detailed in a recent World Bank paper [ [1](https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099748505212431959/idu1e31e5e531f16114baa1b62c1b3201c9c2e68) ], the government is focusing on low-income families registered in the Integrated Social Welfare Data (DTKS), micro, small and medium enterprises (MSMEs), public transportation providers, farmers, fishermen, and specific industries crucial for national food security and basic needs.
**Host:** This sounds like a significant departure from the past. What are some of the key measures being implemented to ensure the subsidies reach the intended recipients?
**Dr. [Economist Name]:** The government is leveraging technology to improve the efficiency and transparency of the subsidy system. For instance, the use of digital payment platforms and data-driven targeting mechanisms can help ensure that subsidies are actually reaching the intended beneficiaries and minimize leakages.
**Host:** There are often concerns that more targeted schemes can be complex and burdensome to administer. How does Indonesia plan to address those challenges?
**Dr. [Economist Name]:** That’s a valid concern. It is crucial for the government to ensure that the implementation process is as streamlined and user-friendly as possible. This may involve partnering with local communities and organizations to effectively disseminate information and provide support to beneficiaries.
**Host:** The success of this new scheme will ultimately depend on its ability to balance **sustainability** with **equity**. What are your thoughts on the long-term viability of this approach?
**Dr. [Economist Name]:** It’s a bold step, and its success will depend on several factors, including continued government commitment, robust monitoring and evaluation mechanisms, and effective communication with the public. However, steeper fuel price reduction may arise with Indonesian descent to reduce reliance on fuel.
**Host:** Thank you, Dr. [Economist Name], for providing your insights on this important policy shift. It remains to be seen how this new fuel subsidy scheme will unfold, but its emphasis on targeted assistance and transparency offers a promising path forward.
**
