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Indonesia is subsidising machinery to cut water and energy use in its largest manufacturing sector, and the saving itself is not being measured

By Sirkularium Editorial Team, 8 min read

Modern food processing line in an Indonesian factory with water treatment and utility infrastructure visible alongside production equipment

The Ministry of Industry set out a resource efficiency agenda for food and beverage manufacturing on 2 September 2026, backed by equipment restructuring subsidies of up to 35 percent. The sector grew 6.77 percent in the first half and supplies 41.86 percent of non-oil manufacturing output. The policy names water and energy optimisation as its objective. No figure is attached to either.

At a glance
6.77 percent
Food and beverage sector GDP growth in the first half of 2026
41.86 percent
Share of non-oil processing industry output the sector supplies
35 percent
Maximum equipment subsidy, for domestic machinery with at least 25 percent local content
4.45 million
Small and medium industry units nationally, 99.79 percent of all industrial units

The Ministry of Industry published its transformation agenda for food and beverage manufacturing on 2 September 2026, and placed resource efficiency at the front of it. The sector is Indonesia's largest manufacturing category, growing 6.77 percent in gross domestic product terms during the first half of 2026 and supplying 41.86 percent of non-oil processing industry output.

Minister of Industry Agus Gumiwang Kartasasmita described the objective as making the sector more productive, innovative, efficient, and competitive. Putu Juli Ardika, acting Director General of Agro Industry, made the more specific point, saying that more efficient technology delivers a double benefit to industry.

The instrument is a machinery and equipment restructuring programme, opened in late August 2026, which covers part of the purchase price of new production equipment. Domestically produced machinery carrying a local content certificate of at least 25 percent attracts up to 35 percent support. Other domestically produced machinery attracts 25 percent. Machinery not produced domestically attracts 15 percent. Allocation runs in order of qualifying submissions.

Alongside the equipment subsidy, the ministry named resource conservation, water and energy optimisation, and environmentally friendly technology as the substance of the transformation.

The stated objective has no number attached

Sirkularium reads this as a well constructed policy with one significant omission, and the omission is the part this beat exists to examine.

The subsidy tiers are precise. Thirty five, twenty five, fifteen. The local content threshold is precise at 25 percent. The sector performance figures are precise to two decimal places. Every number in the announcement describes the machinery, the money, or the industry's size.

The thing the programme says it is buying, which is water and energy efficiency, carries no figure at all. There is no baseline for current water use per tonne of output, no target reduction, and no reporting requirement attached to the subsidy.

A subsidy tier of 35 percent is auditable. A commitment to water optimisation is not. One of those is a policy instrument and the other is a statement of intent, and at present the money is attached to the first while the purpose sits with the second.

This is not a criticism of the intent. Food and beverage manufacturing is genuinely water intensive, covering washing, blanching, cooling, cleaning in place, and boiler feed, and equipment renewal is a real lever on all of them. Newer processing lines use materially less water and energy per unit than the equipment they replace. The effect is real. It is simply not being counted.

What measurement would look like here

The instructive comparison is one this beat published a week earlier. A wastewater installation built for nine sasirangan textile producers in Tapin, South Kalimantan, reported hydrogen sulphide reduction of 98.75 percent, oil and grease at 97.33 percent, phenol at 91.66 percent, biochemical oxygen demand at 81.77 percent, chemical oxygen demand at 80.44 percent, and total suspended solids at 40.74 percent, alongside roughly 90 percent water recovery.

Nine producers. Six pollutants. Laboratory verification. Published including the weakest result.

If that standard of measurement is achievable for a cluster of nine artisan workshops in a regency, it is achievable for a subsidised equipment programme in the largest manufacturing sector in the country. The difference is not technical capacity. It is that one programme required a test and the other did not.

The ministry has the framework available. It runs a Green Industry award scheme, opened for 2026 registration in late August, and it is pushing small and medium industry toward sustainable practice under Indonesia's sustainable finance taxonomy, with 4.45 million such units nationally representing 99.79 percent of all industrial units. Director General Reni Yanita has argued that efficient and sustainable practice improves business efficiency and opens access to sustainable financing. Minister Agus put the underlying principle well in that context: future competitiveness is determined not only by what is produced but by how it is produced.

Measuring how it is produced is the missing step.

Sirkularium's view

Indonesia has spent 2026 building an impressive apparatus for measuring value in the extractive economy. Benchmark price formulas were rewritten. Production quotas were allocated by royalty contribution. Export value is reconciled against customs and counterparty records. Non-tax revenue from nickel doubled while ore output nearly halved, which is the clearest evidence available that accurate measurement changes outcomes.

Industrial resource use has received no equivalent attention, and it belongs in the same programme. Three observations for government and public institutions.

First, the restructuring subsidy should carry a measurement condition. Recipients replacing production equipment could report water and energy consumption per unit of output before and after installation, using their own utility meters. The data already exists in every factory's utility billing. Requiring it as a condition of the grant would cost recipients almost nothing and would produce, within two years, a national dataset on what equipment renewal actually saves.

Second, that dataset would improve the policy itself. At present the subsidy tiers are set by machinery origin, which is an industrial policy criterion. If efficiency outcomes were measured, tiers could eventually be weighted by efficiency gain as well as by local content, directing public money toward the equipment that delivers most.

Third, water deserves particular attention because it is the input with the least visible price. Energy appears on a tariff and enters the accounts. Industrial water abstraction is frequently self supplied from groundwater and effectively costs the abstraction infrastructure alone. A sector supplying 41.86 percent of non-oil manufacturing output, operating in catchments that also serve households and agriculture, should know what it withdraws.

For industry, the case is straightforward and commercial. Efficiency data is what sustainable financing assessments require, what export buyers increasingly request, and what the sustainable finance taxonomy is built around. A manufacturer that measures consumption per unit of output is positioned for all three. One that has installed efficient equipment but never measured the result has made the investment without acquiring the evidence.

What to watch next is whether the restructuring programme publishes any efficiency outcomes, whether the Green Industry award criteria require quantified resource data, and whether industrial water abstraction begins to be reported at sector level.

Equipment restructuring subsidy by machinery origin

Values in percent of purchase price

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Sirkularium

Sirkularium is a thought-leadership and advisory institution accelerating the circular transition across solid waste, water, and energy, working with government and public institutions.

In sustainable resources, Sirkularium advises on water, tailings, and ESG governance so resource projects stay credible and investable.

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