Indonesia to Reform LPG 3 Kg Subsidy Distribution with New Presidential Regulation

Comprehensive Changes in Distribution and Eligibility

The Indonesian government is preparing a new Presidential Regulation (Perpres) to fundamentally reform the distribution of LPG 3 Kg subsidies. The current system, governed by Perpres No. 104/2007 and Perpres No. 38/2019, is being replaced to address long-standing issues of subsidy leakage and mis-targeting ³

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Source 4

https://industri.kontan.co.id/news/pemerintah-siapkan-perpres-baru-untuk-penyaluran-lpg-3-kg-apa-isinya

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Key Reforms in Distribution Channels

1. Extended Distribution Chain: The new regulation will formalize the distribution chain up to sub-depots, creating a closed-loop system from suppliers to end-consumers ³
   Source 3

   https://newssetup.kontan.co.id/news/era-baru-lpg-3-kg-penyaluran-dikunci-penerima-disaring-berdasarkan-desil
2. Margin Regulation: Profit margins will be set for all levels of distributors, including agents, depots, and sub-depots, to ensure fair pricing ³
   Source 3

   https://newssetup.kontan.co.id/news/era-baru-lpg-3-kg-penyaluran-dikunci-penerima-disaring-berdasarkan-desil
3. Enhanced Monitoring: With the new sub-depot system, the government aims to improve supply chain visibility and control

Targeting the Right Beneficiaries

The reform also focuses on improving the targeting of subsidy beneficiaries. The new system will use household income deciles to determine eligibility, ensuring that the subsidy reaches the most vulnerable populations. This approach moves away from the current system, which has been criticized for its lack of specificity in targeting beneficiaries ⁵

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Current Challenges and Future Prospects

The LPG 3 Kg subsidy program involves significant government expenditure, with the 2024 budget standing at Rp 93 trillion for 8.02 million tons of LPG ¹

. Despite this substantial investment, there have been persistent issues with subsidy leakage and mis-targeting. The new Perpres aims to address these challenges through a more robust regulatory framework.

Ensuring Food and Energy Security

In related developments, the Ministry of Trade has assured that the supply of cooking oil (Minyakita) to eastern Indonesia will remain stable during the upcoming holiday season. This assurance comes as part of the government's broader efforts to maintain food and energy security across the archipelago ²

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