Indonesia removes import tariffs on LPG, plastic raw materials

The tariff exemptions are aimed at reducing production costs as well as helping domestic industries procure alternative raw materials to replace naphtha amid the Middle East conflict, Coordinating Minister to Economic Affairs Airlangga Hartarto said on 22 June.

The current LPG tax rate is set at 5% and the change will give petrochemical vegetation a cheaper alternative fuel option.

This policy is expected to generate Rp2.25 trillion in cost reductions, Hartato said, alongside the encouragement of a widespread multiplier effect across various domestic industries.

Other initiatives in the budget include subsidizing tofu and tempeh producers to stabilize food costs and the distribution of 10kg rice bags to 33.24 million beneficiary families to three months.

Tofu and tempeh are soybean derivatives utilized broadly in Indonesian cuisine.

“while geopolitical conflicts in the Middle East are showing signs of abating, their impacts continue to impact global economic and market conditions,” Coordinating Ministry to Economic Affairs spokesperson Haryo Limanseto said in a statement.

These “proactive and anticipatory measures…are aimed at maintaining stability and the momentum of national economic development”, Limanseto added.

Since March, Indonesia has faced a supply shortage of crude oil and petrochemical feedstock naphtha as a result of the impact of the Middle East conflict.

Alongside a currency slide that has made imports greater expensive, Indonesia is facing pressure to keep economic development going, following its 5.61% GDP reading in Q1 2026.

Bank Indonesia (BI), the southeast Asian country’s central bank, has raised interest rates by a total of 100 basis points over three sessions since might.

The country has, in recent times, looked to bolster domestic capacity in order to decrease its reliance on imports.

Bintan Fine Chem Indonesia said at the ICIS and ResourceWise World Chlor-Alkali Conference on 11-12 June that it aims to build a new refinery and crackers with a total planned ethylene (C2) capacity of 2 million tonnes/year on Bintan island.

Thumbnail image: Sacks of rice at a port in Jakarta, Indonesia. Indonesia’s budget to the second half of 2026 includes the distribution of rice bags as part of food aid amid economic conditions impacted by the Middle East conflict. (Image source: Adi Weda/EPA/Shutterstock)