The government is currently revising the subsidy scheme for the sea toll program amid concerns that it has fallen short of its objectives. Introduced by the administration of President Joko “Jokowi” Widodo, the program aims to improve national logistics connectivity and narrow price disparities between Western and Eastern Indonesia, where goods have been traditionally more expensive than on Java. After nearly a decade of implementation, however, price gaps have barely shifted, raising questions about the effectiveness of the subsidy.

The Transportation Ministry’s Sea Transportation Directorate General has announced that several routes currently operating under the subsidized shipping tariff scheme will be moved to a cargo consignment scheme. The ministry estimates this adjustment could save up to Rp 4.56 billion (US$271,000) in subsidy spending, with higher potential savings if the scheme is extended to cover subsidized fuel users, given that fuel accounts for around 40 percent of ship operating costs. For 2026, the subsidy allocation for the sea toll program amounts to Rp 524.98 billion of the Rp 4.74 trillion total budget for marine public service obligation (PSO).

Within this framework, the ministry has authorized 197 pioneer shipping routes under the 2026 PSO program, increasing sea toll routes from 39 in 2025 to 41 this year. These consist of 18 assigned routes and 23 routes procured through competitive tenders. These break down further into 12 assigned routes under the shipping subsidy scheme and six under the cargo consignment scheme of state-owned PT ASDP Indonesia Ferry. Meanwhile, seven procured routes are under the shipping subsidy scheme, and 16 others are under the cargo consignment scheme.

The legal framework for the program was established in 2015, with the latest rules outlined in Presidential Regulation (Perpres) No. 27/2021. Article 1 of the regulation stipulates the sea toll program to use a cargo PSO mechanism, which is clarified in Article 5 as a type of subsidy with the explicit objective of connecting disadvantaged, frontier and outermost (3TP) regions. Article 6 mandates the transportation minister to assign state-owned shipping companies, such as PT Pelayaran Nasional Indonesia (Pelni), to implement the program, while private operators are permitted to participate through public procurement mechanisms.

The types of subsidized cargo are also tightly regulated. Article 2 of Perpres No. 27/2021 limits full subsidies to basic necessities, important goods and other essential commodities for 3TP regions, including livestock, fish and return cargo. Additional provisions in Transportation Minister Regulation No. 5/2024 allow vessels with excess cargo capacity to carry other types of goods under the program, with the subsidy reduced by deducting a commercial tariff as calculated by the ministry.

In November-December 2015, goods transported under the sea toll program reached 30 tonnes and 88 twenty-foot equivalent units (TEUs). In 2025, the program recorded 756 voyages carrying goods totaling 2,003 tonnes and 32,732 TEUs to 104 ports nationwide. Realized spending for the sea toll program contributed Rp 623.37 billion of the Rp 5.04 trillion marine PSO budget realization for 2025. Pelni says the program helped reduce interisland price disparities by 20-40 percent.

Nevertheless, the Transportation Ministry acknowledged that the program had not significantly encouraged shipping companies to lower prices for basic goods in eastern regions relative to western regions. For instance, the wholesale price of premium rice on Kisar Island in Southwest Maluku is still around Rp 16,000 per kilogram. At the same time, the ministry recognized that the program had improved the flow of goods from Java to outlying regions and bolstered local economies by expanding logistics access, as observed in areas like Kalabahi, the capital of Alor regency in East Nusa Tenggara.

Experts have criticized the sea toll program’s current scheme as ineffective, as transportation accounts for only 15-20 percent of the broader logistics ecosystem. They therefore proposed replacing the subsidy with low-interest working capital financing, similar to models used in Singapore, contending that domestic shipping companies struggle to remain competitive while servicing loans with interest rates above 10 percent per annum and facing additional collateral requirements.

Given these limitations, the sea toll subsidy scheme warrants comprehensive review. While the program is important for maintaining interisland connectivity, its limited impact on price convergence suggests a necessity for reform.

In the short term, the government could expand the more cost-efficient cargo consignment scheme. Over the medium term, shifting from direct subsidies to low-interest working capital financing could reduce shipping companies’ dependence on state support and foster healthier industry growth. Ultimately, more balanced industrial development outside Java will be essential to address the structural causes of nationwide container imbalance.