Indonesia Implements New Compensation Mechanism for Energy SOEs

Accelerated Payments to Support Financial Stability

The Indonesian government, through the Ministry of Finance, has introduced a new regulation (PMK No. 73/2025) to accelerate compensation payments to state-owned enterprises PT Pertamina (Persero) and PT PLN (Persero). These companies have been tasked with selling fuel and electricity at below-market prices, resulting in revenue shortfalls that need to be compensated by the government.

Key Features of the New Regulation

The new regulation mandates that the compensation payments will be made monthly, with payments reaching up to 70% of the total compensation. This represents a significant shift from previous arrangements, providing more timely financial support to these critical energy companies. The regulation aims to ensure that Pertamina and PLN can continue their operations without significant financial strain, maintaining the government's policy of keeping energy prices affordable for the public.

Rationale Behind the Policy

The decision to accelerate compensation payments was made to address the financial implications of the public service obligations (PSO) imposed on Pertamina and PLN. By selling energy products below market prices, these companies incur losses that must be compensated. The new regulation is designed to provide clearer guidelines on the provision, calculation, and disbursement of these compensation funds, thereby enhancing the financial management of these state-owned enterprises.

Impact on Energy Sector Stability

The accelerated compensation mechanism is expected to have a positive impact on the financial stability of both Pertamina and PLN. By receiving compensation more promptly, these companies can better manage their cash flows and continue to fulfill their public service obligations without interruption. This stability is crucial for maintaining the reliability of Indonesia's energy supply and supporting the government's energy subsidy policies.