Lessons Learned from Indonesia's Attempts to Reform Fossil-Fuel Subsidies

Abstract

Part of the GSI’s series of “Lessons Learned” case studies of attempt to reform subsidies in Brazil, France, Ghana, India, Poland and Senegal. This report reviews the history of fuel subsidies in Indonesia and focuses on the performance of two policies that have been used to support reform. The first is the Bantuan Langsun Tunai (BLT), an unconditional cash transfer program used to help cushion low-income households from price increases in 2005 and 2008. The second program, begun in 2007, aims to make low-income households use liquefied petroleum gas (LPG) instead of kerosene, as it is cheaper to subsidize, cleaner and more efficient. The report concludes that both these policies appear to have contributed towards the Indonesian government's reform objectives.