Ministry of Finance Identifies Four Key Fiscal Pillars Threatened by Proposed Nicotine and Tar Restrictions
The Government, through the Coordinating Ministry for Human Development and Culture (Kemenko PMK), is conducting a review concerning plans to restrict nicotine and tar levels in tobacco products. Various stakeholders have noted that the proposed policy will affect multiple areas, ranging from fiscal matters to farmer welfare, and therefore requires careful consideration during the formulation process.
Djaka Kusmartata, Director of Technical Affairs and Excise Facilities at the Directorate General of Customs and Excise (DJBC), explained that regulating tobacco products is not merely a single-sector issue. From a fiscal perspective, four main pillars form the basis of consideration: state revenue, industry sustainability, labour welfare, and farmer protection.
According to him, every policy to be implemented must provide a clear path for all involved parties so that no sector is disadvantaged unilaterally. He referenced the complex technical characteristics of tobacco products.
Additionally, according to Djaka’s presentation, data shows that revenue from tobacco excise is a strategic contributor to the State Budget (APBN). In 2025, for instance, the tobacco products industry (IHT) contributed Rp211.9 trillion to the state.
“This means it is fresh money for our APBN and we need to anticipate this. Looking ahead, we also need to consider state revenue, because what is currently needed is 6 per cent economic growth, and in the future up to 8 per cent. Furthermore, there is currently a global crisis and global geopolitical economy,” he stated during the Public Testing of the Study on Determining Maximum Limits for Nicotine and Tar, organised by Kemenko PMK in Jakarta.
Furthermore, Djaka warned of potential negative impacts if industry players struggle to comply with such regulations. Non-implementable regulations could become a gateway for certain parties, possibly shifting to illegal products to avoid overly stringent rules, therefore, monitoring must be properly prepared.
He hoped for a sufficient transition period and integrated capacity building. He also requested that affected sectors receive adequate protection to maintain economic growth.
Meanwhile, Sukadiono, Deputy for Coordinating Health Quality Improvement at Kemenko PMK, stated his commitment to absorbing all aspirations from various stakeholders. During the public testing process, the government has listened to views from academics, worker associations, and tobacco farmer representatives directly.
Sukadiono emphasised that Kemenko PMK is not merely going through formalities in accommodating such inputs. They will use the feedback provided as a strong data foundation for policy refinement.
He affirmed that every objection and suggestion from the public will become invaluable evaluation material for the study team before proceeding to the final decision-making stage. Particularly given that the regulatory process is still quite lengthy and involves rigorous bureaucracy.
Following public testing, the next agenda includes refinement of study materials, discussion at inter-ministerial echelon I meetings, and ministerial-level coordination meetings. According to Coordinating Ministry Regulation (Permenko) PMK Number 2 of 2025, Article 6, the determination of maximum nicotine and tar content limits will be decided in a final plenary led directly by the Coordinating Minister for PMK, involving other technical ministries, including the Ministry of Industry (Kemenperin) and the Ministry of Finance (Kemenkeu).
Without proper ecosystem readiness, tobacco farmers will face serious economic pressure.
The Research and Community Service Institute of UNS highlighted tension between health aspects and economic protection in tobacco regulations. Overly strict, overlapping, or disproportionate policies are considered triggers for increased risk of worker redundancy (PHK) in labour-intensive sectors. It is hoped that this excise moratorium momentum is followed by more targeted distribution of Revenue from Tobacco Excise Results (DBHCHT).
The tobacco industry is weakened by overlapping regulations and policy conflicts, which put farmers under increasing strain.
Heru D Wardhana, Vice Chairman of the Indonesian Clove Farmers Association (APCI), explained that the average nicotine content of Indonesian tobacco is above 3-5 per cent, with some even higher.