WHY DOES ENERGY SUBSIDY REFORM REALLY MATTER? THE CASE OF LPG AND ELECTRICITY SUBSIDIES IN INDONESIA

Abstract The purpose of energy subsidies is to alleviate the financial burden on expenditures for poor and vulnerable communities, and the government invests significantly in these subsidies. However, these subsidies have resulted in unintended consequences. A majority of the subsidies are actually being enjoyed more by wealthier segments of society. Through a descriptive analysis approach, utilizing various published and unpublished documents and analyzing micro-statistical data sourced from the Integrated Social Welfare Data (DTKS), the research concludes that the current household-based energy subsidy policy fails to function as a welfare instrument. The primary criticism of energy subsidy policies revolves around issues of equality and social inclusion. A significant number of poor and vulnerable households lack access to these subsidies and to energy resources in general. This includes women, people with disabilities, and elderly individuals. Additionally, these policies burden the government budget and increase dependence on imported fossil energy. To rectify these issues, there is a need for a paradigm shift in policy – moving from subsidizing goods to implementing targeted energy subsidies for households. This shift in policy can restore the intended role of current household-based energy subsidies as genuine welfare instruments