Price hikes a kick in butt for cigarette smokers<\/p>\n
JAKARTA (JP): The increase in cigarette prices by up to 120
\npercent this week might significantly reduce cigarette producers'
\nsales this year, analysts said yesterday.<\/p>\n
The analysts said that the decline in sales would hit
\nproducers of both clove-blended and non-clove cigarettes, which
\nwere mostly imported.<\/p>\n
Chandra Pasaribu, a tobacco analyst with Pentasena Securities,
\nsaid the drop in sales volume would also be caused by the fall in
\nconsumers' purchasing power.<\/p>\n
He said the fall in the rupiah against the U.S. dollar by 70
\npercent since early July had forced many companies to close,
\nleaving millions of workers unemployed. Many companies have also
\ncut salaries to stay alive, while prices of essential goods have
\nincreased by between 100 percent and 300 percent due to the sharp
\ndepreciation of the rupiah.<\/p>\n
Eddy Widjoyo, an analyst with Mashill Jaya Securities shared
\nChandra's view, saying that the rupiah's sharp depreciation
\nagainst the U.S. dollar would cause the purchasing power of
\nmiddle and low-income people to decline sharply.<\/p>\n
The Ministry of Finance announced early this week increases in
\nthe retail price of all types of cigarettes from 60 percent to
\n120 percent.<\/p>\n
The decree called for an increase in the price of machine-
\nrolled clove-blended cigarettes produced by companies with a
\nproduction capacity of five billion cigarettes per year to Rp 175
\n(1.7 U.S. cents) per cigarette in 1998 from Rp 95 last year.<\/p>\n
The decree said that the retail price of the cigarettes
\nproduced by companies producing between 2.5 billion and five
\nbillion cigarettes per annum would be raised to Rp 130 from Rp 70
\nper cigarette.<\/p>\n
For those producing between one billion and 2.5 billion per
\nyear, the retail price was increased to Rp 120 from Rp 60 in 1997
\nand those producing less than one billion per year were allowed
\nto raise the price to Rp 110 from Rp 60.<\/p>\n
The decree also stipulated that the retail price per cigarette
\nfor hand-rolled clove-blended cigarettes by companies with a
\nproduction capacity of more than five billion per annum was
\nallowed to increase to Rp 120 from Rp 70 in 1997.<\/p>\n
The decree also said that for companies producing between 2.5
\nbillion and five billion cigarettes per year the retail price was
\nraised to Rp 80 from Rp 50 previously; cigarette companies with a
\nproduction of up to 2.5 billion per year were allowed to raise
\nthe retail price to Rp 60 from Rp 40; and for companies producing
\nonly 15 million per year, the retail price was increased to Rp 60
\nfrom Rp 30 in 1997.<\/p>\n
Most securities analysts said the government's decision to
\nraise the retail price was understandable to meet the tax revenue
\ntarget of Rp 6 trillion in the 1998\/1999 fiscal year which ends
\nin March 1999.<\/p>\n
\"I think the government has to raise the retail price of
\ncigarettes to offset a decline in revenue in other sectors this
\nfiscal year,\" Chandra said.<\/p>\n
The excise tax for cigarettes ranges from 2 percent to 36
\npercent depending on the size of each cigarette manufacturer's
\nproduction. The cigarette companies which produce above five
\nbillion cigarettes a year have to pay an excise tax of 35 percent
\nof the retail price. Small-scale cigarettemakers, producing less
\nthan 150 million cigarettes a year, pay 2 percent excise tax.<\/p>\n
The analysts said, however, that retail price increases would
\nalso cause most consumers to change their smoking habits as they
\ncould not afford to buy the expensive cigarettes they used to
\nsmoke.<\/p>\n
\"Most consumers in Indonesia are more price-oriented than
\ntaste-oriented,\" Chandra said.<\/p>\n
Most analysts said yesterday that most cigarette companies
\nwere now calculating their price adjustments and the consumers
\nwould only know the new prices next month. (aly)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/price-hikes-a-kick-in-butt-for-cigarette-smokers-1447893297",
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