Proposal for Cheap Cigarettes Must Consider Various Aspects

Jakarta, VIVA – The discourse regarding opening more space for the industry to produce cheap cigarettes for lower-income groups has drawn scrutiny from various circles.

The proposal emerged after Andi Yuliana Paris, a member of Commission XI of the Indonesian House of Representatives (DPR RI), urged the implementation of special excise taxes for the lower-middle segment and an increase in production thresholds to over 3 billion sticks per year.

This idea is presented as an effort to curb the widespread circulation of illegal cigarettes. However, several observers believe the policy risks creating new problems, ranging from wider access to cheap cigarettes to the potential reduction of state revenue from the tobacco excise sector.

Beladenta Amalia, Project Lead for the Tobacco Control Center at the Centre for Indonesia’s Strategic Development Initiatives (CISDI), believes that increasing the production limit for machine-made cigarette groups with lower excise rates will allow more companies to remain in the low-tariff category even as their production capacity increases.

“With the ability to produce more at a relatively low excise rate, this could certainly increase the presence of cheap cigarettes in the market,” she told reporters on Monday, 22 June 2026.

According to Beladenta, this condition has the potential to hinder the optimisation of state revenue. This is because the more producers remain in the low-tariff group, the greater the potential for revenue that cannot be maximised.

Currently, the excise rate for Group 1 Machine-Made Kretek Cigarettes (SKM) is recorded at Rp1,231 per stick. Meanwhile, Group 2, with a production limit of up to 3 billion sticks, is subject to a rate of Rp746 per stick. The difference between the two is Rp485 per stick.

“This will actually be detrimental from a revenue perspective because the potential to achieve higher revenue is not met. This has already been evident over the last two years,” she said.

A similar view was expressed by the Head of the Centre of Human and Economic Development (CHED) ITB, Ahmad Dahlan, Roosita Meilani Dewi. She believes that changing the production threshold for the low-tariff group will instead provide greater advantages to large-scale cigarette companies.

According to Roosita, companies operating near the production threshold will have more room to market cheap products without having to move into a higher tariff category.