The 2027 draft budget sets energy subsidies at Rp272.9 trillion and steers them toward named recipients

Budget documents circulated in mid August 2026 set energy subsidies in the 2027 draft state budget at Rp272.9 trillion, recorded precisely as Rp272,945.3 billion. That is an increase of 20.1 percent on the 2026 outlook of Rp227.3 trillion. Energy accounts for the larger share of a total subsidy envelope of Rp387.9 trillion, with non energy subsidies making up the remaining Rp114.9 trillion.

The allocation divides into three lines. Subsidies for certain fuel types come to about Rp28.7 trillion. Subsidies for 3 kilogram LPG cylinders come to about Rp114.1 trillion. Electricity takes the largest single share at about Rp130.1 trillion. Grouped the way the budget presents them, fuel and LPG together reach Rp142.8 trillion, up 22.2 percent, while electricity rises 17.8 percent from the Rp110.4 trillion expected this year.

What is driving the increase

Two sets of forces sit behind the numbers, and both are largely external.

The first is price and currency. The 2027 assumptions put the Indonesian Crude Price at USD 75 per barrel, up from USD 70 used for 2026. The rupiah is assumed at 17,500 to the US dollar, a movement of 1,000 from the 2026 assumption. Oil lifting is projected at 610,000 barrels per day and gas at 954,000 barrels of oil equivalent per day. Because subsidised fuel, LPG and a meaningful part of generation cost are priced in dollars against international benchmarks, a shift in either variable moves the subsidy bill before any policy decision is taken.

The second is volume. The electricity line reflects a rising cost of supply, known domestically as biaya pokok penyediaan, together with growth in the volume of subsidised electricity itself. Budget documentation attributes the higher supply cost to exchange rate movement, crude price effects from global geopolitical conditions, and increased output from gas fired generation. The LPG line shows the sharpest single jump, from Rp90.4 trillion to Rp114.1 trillion.

Ahmad Erani Yustika, Secretary General of the Ministry of Energy and Mineral Resources, framed the allocation as a function of these inputs rather than a fixed decision, noting that the size of the subsidy depends on quota volumes and international crude oil dynamics alongside other variables. The ministry was scheduled to take the figures to Commission XII and the Budget Committee of the House of Representatives on 31 August, with final amounts subject to legislative approval.

From commodity subsidies to named recipients

The headline figure is the part that draws attention. The structural commitment underneath it is the part worth studying.

The budget note sets out a medium term transformation from subsidies attached to commodities toward subsidies attached to beneficiaries, delivered by name and by address. This direction draws on evaluation of the 2022 to 2026 period, and it carries three practical priorities. Fixed subsidy arrangements for diesel and price differentials for kerosene continue with volume control. The 3 kilogram LPG subsidy moves gradually toward targeted delivery built on integrated recipient data. Electricity subsidies are directed to low income households through the integrated social assistance system.

The scale of that targeting exercise is substantial. The government works toward covering 87 million electricity beneficiaries and 66.4 million LPG beneficiaries by 2029, with subsidised fuel consumer registration and integration into the National Socio Economic Registration Data, known as DTSEN, providing the underlying identification layer.

A subsidy attached to a commodity protects whoever buys the commodity. A subsidy attached to a household protects the household. The difference between those two designs is the difference between a bill that grows with consumption and a bill that grows with need.

This is a data and delivery reform as much as an energy reform. It depends on registration coverage, on the accuracy of socio economic records, and on the payment channels that carry assistance to recipients. Those are capabilities that public institutions build over years, and the 2029 horizon in the documents reflects that reality.

The efficiency dividend hiding in the numbers

For Sirkularium's readership the most useful observation is that the electricity line responds directly to demand side performance.

Consider the trajectory. Electricity subsidies stood at Rp56.24 trillion in 2022 and are estimated at Rp110.41 trillion for 2026, average growth of 12.9 percent a year. The 2027 draft takes the figure to Rp130.1 trillion. Across 2022 to 2025 the average annual energy subsidy sat at roughly Rp174.73 trillion, with fuel and LPG averaging Rp104.28 trillion and electricity Rp70.45 trillion.

Two levers move that line. One is the cost of each kilowatt hour supplied, which policy influences through the generation mix and through network performance. The other is the number of kilowatt hours consumed by subsidised customers, which policy influences through efficiency. Efficiency is the quieter of the two, and it compounds. Every kilowatt hour a subsidised household does not need is a kilowatt hour the budget does not fund, in that year and in every year after.

The government has previously estimated that energy efficiency can contribute roughly 37 percent of the emissions reduction target for the energy sector by 2030. The subsidy arithmetic gives that estimate a fiscal companion. Programmes that improve appliance standards, lighting quality, building performance and metering accuracy in low income housing serve the climate target and the budget line at the same time, which is a rare alignment and a persuasive one.

Sirkularium's read for government and public institutions

Three implications follow for policy, financing and implementation.

On policy, the move to recipient based delivery creates an opening that did not exist under commodity based subsidies. Once a household is identified by name and address, it can be reached with more than a price discount. The same registry supports efficient appliance programmes, rooftop solar for low income housing, and targeted advice on consumption. Institutions designing the DTSEN integration should build for that wider use from the outset rather than retrofitting it later.

On financing, the Rp130.1 trillion electricity line is best understood as an annually recurring commitment that responds to supply cost and consumption volume. Investments that lower either one, whether cleaner and cheaper generation, reduced network losses, or demand side efficiency, return value every year rather than once. Framing efficiency programmes against that recurring line, rather than against a one off capital budget, makes the business case considerably stronger.

On implementation, the 2029 targets of 87 million electricity beneficiaries and 66.4 million LPG beneficiaries describe an administrative task of national scale. Regional governments hold much of the ground level knowledge that determines whether registries are accurate. Early involvement of provincial and district institutions in data validation is the most reliable way to protect both coverage and accuracy as the transition proceeds.

What to watch next is the outcome of the deliberations with Commission XII and the Budget Committee from 31 August, the pace of DTSEN integration through 2027, and whether efficiency programmes for subsidised households are funded alongside the subsidy itself rather than separately from it.