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Jakarta Post

The price the poor are paying for LPG subsidy failures

The crisis exposes a disconnect between theory and the lived experiences of vulnerable populations.

Eva Fauzyah Rahmah (The Jakarta Post)
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Bogor, West Java
Wed, February 5, 2025

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The price the poor are paying for LPG subsidy failures Diminished accessibility: Residents line up to exchange 3-kilogram liquefied petroleum gas (LPG) canisters in Cibodas, Tangerang city, Banten, on Feb. 3, 2025. (Antara Foto/Putra M. Akbar)

I

ndonesia’s bustling markets and small eateries depend heavily on liquefied petroleum gas (LPG). However, in recent weeks, shortages of subsidized 3-kilogram canisters have left many struggling to cook, exposing serious policy implementation and governance flaws. While welfare economics highlights the importance of equitable resource distribution, this crisis exposes a disconnect between theory and the lived experiences of vulnerable populations.

Lessons from other countries, such as Brazil’s Bolsa Família program, show that adequately implemented targeted subsidies can be effective. Such programs promote long-term economic stability by ensuring financial relief directly reaches those in need. Similarly, sustainable energy transitions focus on reducing dependency on non-renewable energy sources while ensuring accessibility for all.

This crisis underscores Indonesia’s governance failures, particularly in ensuring fair access to essential resources. With many low-income households relying solely on LPG, any disruption exacerbates economic hardship and food insecurity. As Finance Minister Sri Mulyani stated, local sellers sell subsidized LPG canisters at 58 percent higher than the government’s official retail price (HET), reflecting inefficiencies and mismanagement in distribution networks and exacerbating inequality and access issues.

In urban centers, where LPG is often the only viable cooking fuel, the crisis has left many with no alternative but to pay exorbitant prices or go without. Unlike rural areas where biomass options exist, urban populations depend entirely on government policies that fail to protect them.

Research by Diah Krisnatuti Pranadji, Muhammad Djemdjem Djamaludin and Nuriza Kiftiah from IPB University (2010) on the kerosene-to-LPG conversion in Bogor found that 80 percent of households use only LPG for cooking, while 17.5 percent use LPG alongside other fuels and only 2.5 percent rely on alternative energy sources. This suggests that urban households relying solely on LPG are particularly vulnerable to supply disruptions and price fluctuations.

The tragic case of a street vendor collapsing after hours in an LPG queue highlights the human toll of these policy failures. His story is just one of many, as families across Jakarta and other urban areas are forced to ration their cooking fuel, wait in long lines and barely get the LPG due to lack of distribution.

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This situation reflects broader systemic issues, including inadequate subsidy targeting, inefficient distribution networks and weak enforcement of price regulations. The failure to implement a transparent and accessible distribution system has left many low-income households vulnerable to market distortions and price exploitation, further exacerbating energy insecurity among the most marginalized communities.

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