Jakarta, January 18, 2022—The Government’s plan to expand industrial gas price incentives needs improvement. CELIOS Executive Director Bhima Yudhistira explained, “The state’s losses could be substantial: state revenue from upstream oil and gas in 2020 reached only USD 460 million. This means the state could suffer potential losses while gas prices are experiencing a windfall.”
Bhima added, “The distribution of special gas price incentives should be treated the same as the distribution of gas subsidies in general. Clarity on price formulation, recipient criteria, and oversight mechanisms is essential to special gas policies. In practice, however, transparency and evaluation have been very limited, so it would be inappropriate to immediately extend gas incentives to other business sectors.” He also emphasized the importance of considering indicators such as natural gas rent as a benchmark for gas prices.
Regarding the effectiveness of the incentives, Bhima stressed, “Some industries receiving special gas price subsidies have not performed particularly well. Therefore, the proposal to expand gas subsidies to more industries is considered very premature.” He added, “The Government should also avoid exercising discretion too often. Discretion-based policy models should be avoided, with greater emphasis placed on improving sustainable policy governance.” CELIOS’ study recommends a BPK audit of the risk of state losses resulting from poorly targeted gas price incentives.
The government’s plan to expand industrial gas price incentives requires improvement. CELIOS Executive Director Bhima Yudhistira explained, “The potential losses for the state are significant; state revenue from upstream oil and gas in 2020 only reached USD 460 million. This represents a potential loss for the state during periods of windfall gas prices.”
Bhima added, “The distribution of special gas price incentives should be treated the same as general gas subsidies. Clarity on price formulation, recipient criteria, and oversight mechanisms are essential in special gas policies. In practice, however, transparency and evaluation have been very limited, making it inappropriate to immediately expand gas incentives to other business sectors.” He also emphasized the importance of using indicators like natural gas rent as a benchmark for gas pricing.
Regarding the effectiveness of the incentives, Bhima stressed, “Some industries receiving special gas price subsidies have not performed positively. Therefore, the idea of expanding gas subsidies to more industries is premature.” He further noted, “The government should avoid frequent discretionary policies. Policy models based on discretion should be minimized, and governance should focus on sustainable and well-managed regulations.” CELIOS’ study recommends that the Audit Board ( BPK ) conduct a thorough audit of state risks associated with misdirected industrial gas price incentives.
Kajian_Gas_CELIOS_2022 Download