Proposal for Affordable Cigarettes for Lower-Middle Class Draws Criticism

A proposal by Andi Yuliani Paris, a member of the House of Representatives’ Commission XI from the National Mandate Party (PAN), to allow the production of cigarettes specifically for lower-middle-class communities has drawn negative responses. The idea is considered likely to accelerate the shift in consumption towards cheaper products and increase pressure on state revenue.

Andi presented the proposal during a Hearing Meeting with several director generals at the Ministry of Finance. She argued that the phenomenon of illegal cigarette sales in several regions occurs because these products are perceived as more affordable for lower-middle-income groups. “Perhaps there are cigarettes that must be produced for the lower-middle class. And space must be given so that they can produce for the lower-middle class,” Andi stated.

Previously, Director General of Customs and Excise Djaka Budi Utama had emphasised that the trend of consumers switching to cheaper products, known as downtrading, is a major challenge for the government in maintaining state revenue. “Downtrading and illegal cigarettes are the main challenges for state revenue,” Djaka affirmed.

Economist Yusuf Rendy Manilet from the Center of Reform on Economics (CORE) assessed that the downtrading tendency has been occurring for several years and is one of the main issues affecting excise policy effectiveness. He noted that this condition is influenced by excise increases and the widening tariff gap, which drives consumers to switch to lower-priced products. “What has been happening in recent years is a downtrading tendency, where consumers gradually switch to products with lower prices,” Yusuf said. He added that providing more room for cheap products would actually reinforce this consumption pattern and affect the overall market structure.

Airlangga University economist Rumayya Batubara shared a similar view, stating that the downtrading trend and the growing illegal market are now the main challenges in formulating tobacco industry policy, especially when linked to the need to maintain state revenue. “From an economic perspective, the biggest problems are regulatory uncertainty, excise increase pressures, downtrading to cheaper products, and the illegal market,” Rumayya explained. She stressed that policies regarding tariffs, supervision, labour protection, and mitigation of impacts on tobacco industry centre regions must be implemented gradually to avoid wider consequences. “The direction of the risk is clear: if pressure on the tobacco industry continues, the impact could spread from factory layoffs to weakening local consumption, supply chains, and the economies of industry centre regions,” she concluded.