62

**Table 14: Budgetary support for energy subsidies in Indonesia**

|Item|2008|2009|2010|2011|2012|2013|2014|
|---|---|---|---|---|---|---|---|
|Rptrillion|223|95|140|256|306|310|342|
|US$ billion|23|9|15|29|33|29|29|
|% of GDP|4.5|1.7|2.2|3.4|3.7|3.3|3.2|
|of whichpower subsidies|84|50|58|90|95|100|102|
|of which fuel subsidies|139|45|82|165|212|210|240|
|gasoline|44|15|38|80|107|100|109|
|diesel|44|10|22|53|65|73|75|
|kerosene|48|11|8|9|7|6|7|
|LPG|4|8|15|23|33|31|49|

_Source:_ IMF2013c, World Bank staff for 2013 and 2014 _._ Rp 10,933 (US$0.87) to Rp 14,033 (US$1.08) per kg, depending on the location and time <u>(http://www.pertamina.com). This large difference in the LPG unit price between 3‐kg and 12‐kg</u> cylinders provides powerful financial incentives for illegal diversion of subsidized LPG intended for households.

In 2005 and 2008, the government carried out large‐scale, time‐bound unconditional cash transfers targeting the poor and near‐poor. In 2005, more than one‐third of all households received Rp 100,000 (US$11) a month for a total of 12 months in four tranches, equivalent to about 15 percent of the recipients’ expenditures. Remarkably, the program was designed and deployed in less than five months. The top four expenditures using the transferred cash were rice, kerosene, debt repayment, and health, in that order (Widjaja 2009). In 2008, the government transferred Rp 100,000 a month to 18.5 million households for a total of nine months in three tranches. The administrative cost in 2008–2009 amounted to 6 percent of the benefits received. Partly on account of compressed preparation and delivery schedule, there were implementation problems, which led to criticism about lack of transparency in beneficiary selection, unfair distribution, and leakage to ineligible recipients. Informal levies were reportedly extracted from the cash transferred, amount to one‐fifth to one‐third of the benefit. The frequency of such informal deductions increased from about 10 percent in 2005–2006 to 50 percent in 2008–2009. These problems notwithstanding, the just‐in‐time cash transfers have been widely credited for general acceptance of the large price increases. Nearly two‐thirds of the cash went to the poorest 40 percent. The recipients showed slightly improved education, labor, and health outcomes (World Bank 2012). Following two more rounds of large price increases in June 2013 and November 2014, these cash transfers continued, covering 15.5 million households each time. In 2013, the monthly amount transferred per household was Rp 150,000 (US$14) for a total of four months (Rp 600,000 in total per household), and in 2014 it was Rp 200,000 (US$16) for a total of two months (Rp 400,000 in total per household). In 2013, additional compensatory measures were adopted for a total budgeted outlay of Rp 29 trillion (US$2.9 billion), including provision of additional rice to beneficiaries of the Rice for the Poor program and expansion of spending on financial assistance programs for poor students and on the conditional cash transfer program (World Bank 2013a).

On December 31, 2014, two important regulations governing fuel pricing and related policy issues were promulgated. The regulations defined three categories of petroleum products. The first is for fuels with subsidized, controlled prices. The second is for gasoline with 88 RON sold outside of Java‐Bali. This