Energy Ministry Weighs Shifting LPG Subsidy to Coal-Based DME

JAKARTA, Investortrust.id — Indonesia’s Energy and Mineral Resources Ministry opens the option on Friday, Dec 12, 2025 in Jakarta to redirect part of the subsidized LPG budget toward coal-based dimethyl ether to reduce rising LPG imports, a move that could reshape household fuel policy. The proposal emerged as demand for subsidized 3 kilogram LPG cylinders continued to exceed government targets, intensifying fiscal pressure.

The policy discussion was confirmed by Deputy Energy Minister Yuliot Tanjung, who said the government was calculating the cost structure of DME to assess whether subsidies would be required. He stated that any subsidy for DME would likely come from reallocating the existing LPG subsidy budget rather than creating a new fiscal burden.

Indonesia’s consumption of subsidized 3 kilogram LPG was projected to reach 8.5 million metric tons in 2025, exceeding the 8.17 million metric tons allocated in the 2025 state budget. The widening gap has reinforced concerns over import dependency, as domestic LPG production remains limited.

Separately, Indonesia Investment Authority Danantara said replacing LPG with DME remained economically challenging and would require careful policy coordination. Senior Director for Oil and Gas and Petrochemicals Wiko Migantoro said uncontrolled pricing could make DME more expensive than LPG, ultimately increasing subsidy needs rather than reducing them.

Wiko added that Danantara was still finalizing a feasibility study to determine whether DME could partially or fully replace LPG, with scenarios ranging from 20 percent to 50 percent substitution. The study would guide discussions with the national downstream task force on distribution models and commercial schemes.

According to Wiko, strong government intervention would be essential to align DME prices with existing LPG affordability levels, as household willingness to pay had long been shaped by subsidized LPG pricing. Without such support, DME adoption risked facing public resistance despite its strategic goal of lowering imports.

He acknowledged that subsidies would likely remain part of the equation even if DME replaced LPG, noting that the policy objective was not subsidy elimination but better subsidy efficiency. The government, he said, was still searching for the most viable structure to balance energy security, affordability, and fiscal sustainability.