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Stable cigarette industry but decline in production

Cigarette production in 2020 had declined by 11 percent after the government raised the excise rate on tobacco products by 23 percent. Cigarette production is estimated to decline by 3.3 percent in 2021 after the government raised the excise rate on tobacco products by 12.5 percent, effective since February 1. Cigarette production in 2021 will decline by 2.2 to 3.3 percent.

The total production of cigarettes comprising machine-made kretek cigarettes (SKM), machine-made white cigarettes (SPM), and hand-made kretek cigarettes (SKT) had reached 298.4 billion in 2020. Production in 2021 is expected to decline to 288 billion.  

The increased excise rate in 2021 has indicated that the price of cigarettes will be less affordable for the public.  The government has decided to raise the cigarette excise tax by 12.5 percent (weighted average) for 2021. Cigarette excise is a policy whose main objective is to reduce the consumption of cigarettes certainly with ramifications on the industry and employment, as well as illegal cigarette production.

Meanwhike, the income of the cigarette industry was stable due to the industry’s ability to mitigate the price increase. The industry was dominated by seven big companies accounting for 79 percent of the total market share (2019).

(source: Antara/The Jakarta Post)