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n estimated 35,000 workers at small-scale cigarette producers in Malang, East Java, could be out of a job if the government goes through with a plan to increase the tobacco excise by 2010.

Indonesian Cigarette Industry Communication Forum (Formasi) secretary Johanes Paulus Suhardjo said that figure excluded those working in related sectors in the cigarette production chain, which could be four to five times higher.

"The government can't just ignore this," he told The Jakarta Post on Tuesday.

"The workers are the ones who will suffer the most from the excise hike."

The Finance Ministry announced in December 2008 an increase in the excise on tobacco products, to take effect in February 2010, which Johanes said could slash the number of cigarette companies operating in Malang by nearly 42 percent, from the current 367 to 154, affecting 35,000 workers.

He added such an impact could be avoided if the government implemented its regulation with fairness.

"We agree on the excise increase, but it has to be applied fairly," he said.

The regulation stipulated different increases in the tobacco excise for large-scale producers and small- and medium-scale producers.

While the increase for the bigger players is set at between 3.5 and 5 percent, the increase for smaller firms has been set much higher, at between 15 and 42 percent.

"What's going to happen once an excise increase of 42 percent implemented come February next year?" Johanes said.

"All the small-scale producers will undoubtedly fold."

He said an acceptable excise increase for such producers should be no higher than 10 percent, which could then be gradually raised to bring it to the required level.

Johanes added another example of the government's unfairness toward smaller producers could be seen in its policy to allow large-scale producers to set up factories under different names to make middle- to low-end cigarettes that put them in direct competition with small-scale cigarette companies.

Eighty percent of the cigarette market in Indonesia is dominated by products in this class, he said.

"We're being squeezed here," Johanes said.

"We have to pay higher excise and on top of that we have to compete with the big producers."

He acknowledged the excise revenue from small-scale tobacco companies amounted to only 5 to 10 percent of the country's total tobacco excise, but said the government should consider the impact of possible mass layoffs.

He also warned of the possibility of illegal cigarette producers cropping up if small-scale producers began closing up shop en masse following the excise increase.