VP asks cigarette firms for sacrifice<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
The lower profits cigarette-makers were likely to experience when
\nthe government raised the retail price on cigarettes should be
\nviewed as a sacrifice to the state, Vice President Jusuf Kalla
\nsaid on Tuesday.<\/p>\n
"The tobacco industry is one of the most profitable sectors in
\n(Indonesian) business. Raising the (retail) rate won't affect
\ntobacco firms much, since they will still be able to make a
\nprofit. Remember that cigarette prices here are still the lowest
\nin the world," Kalla said.<\/p>\n
By increasing the retail price of cigarettes the government
\nplanned to make more money on the excise duty it charged
\nmanufacturers, which was calculated on the final retail price.<\/p>\n
The amount of the increase has not been finalized but last
\nweek the Minister of Finance Jusuf Anwar suggested it would be in
\nthe range of 15 to 20 percent. This extra revenue would help plug
\nthe state budget deficit that has increased in line with the
\nrising costs of the government's fuel subsidy.<\/p>\n
Economists have said the cost of the subsidy my well reach
\nsome Rp 90 trillion (US$9.5 billion) this year, more than two
\ntimes higher than the initial forecast.<\/p>\n
Kalla stressed the government would be cautious in
\nimplementing the hike so as to avoid any drop-off in the
\nconsumption of tobacco products. The industry already accounted
\nfor 95 percent of the government's excise receipts, he said.<\/p>\n
The current state budget, which does not factor in the
\nincrease, targets excise revenue this year at Rp 31.4 trillion,
\nhigher than Rp 28.9 trillion aimed for last year.<\/p>\n
"I have ordered the Ministry of Finance to go ahead with the
\nplan in increasing the retail cigarette prices. All cigarette
\ncompanies must comply with the decision," Kalla said.<\/p>\n
"I believe that they will not be burdened by the policy."<\/p>\n
Meanwhile, PT H.M. Sampoerna, the country's second-largest
\ncigarette maker by sales, said that more than a 10 percent
\nincrease in the cigarette prices could hurt producers as it would
\naffect sales.<\/p>\n
Sampoerna is 98 percent-owned by U.S. cigarette giant Philip
\nMorris International.<\/p>\n
"Less than a 10 percent increase in the price is likely to be
\nOK, but more (than that) could disturb sales," Sampoerna director
\nAngky Camaro said after meeting Kalla earlier in the day.<\/p>\n
Angky said the industry had not yet fully recovered from the
\naggressive excise rate hikes in 2002 and 2003, which had resulted
\nin declines in the volumes of cigarette produced and lower
\nprofits across the board.<\/p>\n
Last year, local cigarette company profits rose on increased
\nconsumption spurred on by higher general economic growth and the
\nabsence of any increases in excise duty.<\/p>\n
The Indonesian Cigarette Producer Union (Gappri) estimates
\nthat some 141 million of the country's 220 million people are
\nsmokers.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/vp-asks-cigarette-firms-for-sacrifice-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}