Cigarette Producers Association (Gappri) chairman Henry Najoan expressed disappointment on Wednesday over the failure of the government to consult with factory owners before deciding on the 23 percent excise hike.

He said the increase was “excessive” in comparison to the yearly average increase of 10 percent. The Association of Cigarette Employers regional chairmen in West Java’s Surabaya and Central Java’s Malang echoed Henry’s dismay.

The cigarette excise was increased by 10.04 percent in 2018, 10.5 percent in 2017, 11.3 percent in 2016 and 8.7 percent in 2015, according to Statistics Indonesia.

“If you want to kill [the tobacco] industry, is there already a replacement? Is it really true that if cigarette factories cease to operate, public health will improve and air pollution will be significantly less?” asked Henry, who warned that cigarette smuggling would become rampant as legal cigarettes become more expensive.

He also claimed that tobacco and clove absorption would fall by 30 percent, potentially causing job losses at factories in an already faltering industry.

Citing 2019 data from market research firm Nielsen, he said tobacco industry output had slumped by 8.6 percent year-on-year as the association’s internal data showed the industry’s growth falling by 1 to 3 percent in the last three years.

He also noted that the sector employed around 7.1 million people and contributed around 10 percent to the current state budget, or around Rp 200 trillion (US$14.18 billion) in excise, regional cigarette taxes and value-added tax. Thus, any move to weaken the industry could put the state in jeopardy.

The Indonesian Tobacco Farmers Association (APTI) also urged the Finance Ministry to lessen the tax increase, although it was more concerned that the new policy would hamper purchasing of tobacco in the current harvest season.

APTI Central Java chairman Wisnu Brata took it a step further by directly lodging a complaint with the Central Java administration after the tobacco price recently dropped in the area.

Central Java’s tobacco center in Temanggung regency saw Grade D tobacco buying prices fall from Rp 80,000 to Rp 70,000 per kilogram, while tobacco products in Demak regency dropped from Rp 45,000 to Rp 30,000 per kg.

Central Java Governor Ganjar Pranowo has since explained that the excise hike had previously been planned to be rolled out last year, before it was moved to 2020.

“I will communicate this to the central government [to learn] how much tolerance there will be with the [tax] hike, especially since the planning excluded [tobacco] farmers,” he said.

The hike comes after the government left the cigarette excise unchanged in 2019 — for the first time since Jokowi assumed office in 2014.

The Finance Ministry has said that the government’s excise policy was taken in accordance with a variety of factors, namely efforts to reduce the smoking prevalence, to allow revenue management for the tobacco industry as well as to raise state revenue.

“From the consumption side, the rising prevalence of smoking, particularly among women and children, has come to our attention,” said the former World Bank managing director. “We have to pay attention to how to use excise policy to reduce the rising trend in cigarette consumption.”

Finance Minister Sri Mulyani acknowledged a potential rise in illegal cigarettes as a result of the steep increase in retail cigarette prices, but she also pointed out that customs and excise authorities had reduced the distribution of illegal cigarettes to around 3 percent of all cigarettes sold in the market.

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