Local cigarette production to fall
Local cigarette production to fall
JAKARTA (JP): The Association of Indonesian Cigarette
Producers estimated yesterday that the country's cigarette output
and sales would fall between 25 percent and 30 percent this year
due to higher prices.
Association chairman Ismanu Soemiran said cigarette sales in
the domestic market had fallen by 30 percent in the past three
months.
"The downfall in sales will continue due to higher prices," he
said in a hearing with the House of Representatives Commission V
for for industry, mining, trade, manpower, cooperatives and the
environment.
He estimated that the sales volume of cigarettes in the
domestic market in the 1998/1999 fiscal year, which ends next
March, were projected to fall by 25 percent from about 220
billion cigarettes in the last fiscal year.
"In the current situation where most people's buying power is
declining, the rise in prices makes cigarettes too expensive," he
told the House members in the hearing.
In April, the government issued a decree which increases the
retail prices of cigarettes.
The decree states, among other things, that companies with a
production of up to 15 million cigarettes per year are required
to increase their prices by 50 percent to Rp 45 from Rp 30, while
those producing above 15 million to 2.5 billion a year are
required to increase their prices by 50 percent to Rp 60 from Rp
40 previously.
Price increases for companies which produce more than two
billion cigarettes a year are set at above 100 percent.
Ismanu said the country's cigarette production would decline
due to the increase in production costs and the high excise
imposed by the government which have forced cigarette makers to
cut production.
"The increase in production costs is because we use imported
materials such as cigarette paper," he said.
The excise on cigarettes ranges from 2 percent to 36 percent
depending on the size of each cigarette manufacturer's
production. Cigarette companies which produce above five billion
cigarettes a year have to pay excise of 35 percent of the retail
price. Small-scale cigarette makers, producing less than 150
million cigarettes a year, pay 2 percent excise.
Ismanu added that Indonesian cigarette makers would face a
scarcity of cloves this year due to bad harvests in the country.
He said this years' clove harvest was expected to reach only
80,000 metric tons, down from about 150,000 tons last year.
This year, Ismanu added, Indonesian cigarette makers would
consume 113,000 tons of cloves, 90 percent of which would be
consumed by three large and five medium-scale cigarette
companies. The remaining 10 percent would be consumed by over 300
small-scale companies. (gis)