Planned cigarette excise scheme goes up in smoke

Planned cigarette excise scheme goes up in smoke

JAKARTA (JP): Minister of Industry and Trade Rahardi Ramelan
said on Monday the government had canceled plans to set
cigarette excise rates according to nicotine and tar content
because of technical difficulties.

Rahardi said it would be difficult for the government to
implement such an excise system because it did not have the
technology to measure the nicotine and tar content of cigarettes.

"We cannot expect the customs and excise office to examine
every single cigarette produced by our cigarette makers.

"Not a single country in the world has implemented such a
system because of the difficulties in tracing violations in the
field," he said during a hearing with the House of
Representatives Commission V for industry, mining, trade,
manpower, cooperatives and the environment.

Rahardi said after reviewing the plan, the government realized
implementing an excise system based on nicotine and tar content
would only harm local cigarette producers rather than encouraging
the production of low-tar cigarettes.

He said such an excise system would adversely affect clove-
blended cigarette producers, which are for the most part small
and medium-size companies which do not have the technology to
measure tar and nicotine content.

He added such a system would only benefit machine-rolled
cigarette producers, most of which are international cigarette
companies, because they do not use cloves, the main source of
tar.

It would also hurt local tobacco farmers because tobacco crops
planted by local farmers have a higher nicotine content, he said.

"Tobacco used in regular cigarettes is Virginia tobacco whose
nicotine content is very low due to genetic engineering," he
said.

The government's plan to peg the cigarette excise tax to
nicotine and tar content was criticized as an attempt to
accommodate international cigarette producers.

Indonesia produced 228.98 billion cigarettes in 1998, 87
percent of which, or 196.5 billion, were clove-blended.

Sugar

House members criticized the government's controversial
decision to impose zero import duty on sugar, warning the measure
would kill the local sugar industry.

They also blasted the decision by Rahardi, in his capacity as
the chairman of the National Logistics Agency (Bulog), to sell
600,000 tons of Bulog's sugar stocks at reduced prices.

Legislator Samsul Bahri from the ruling Golkar faction urged
the government to revoke the zero import duty policy to protect
sugar farmers.

A legislator who asked for anonymity said he had evidence the
zero import duty was imposed to protect sugar importers,
including Rahardi's son.

Rahardi denied the allegation, saying the move was designed to
protect consumers and force the local sugar industry to become
more efficient.

The liberalization of sugar imports is part of the reform
programs agreed to by the government and the International
Monetary Fund. Bulog previously held a monopoly on the import and
distribution of sugar.

Local sugar currently sells for about Rp 2,500 per kilogram,
much higher than imported sugar, which sells for between Rp 1,600
and Rp 1,800 per kilogram.(gis)