Indonesia to Restrict Cigarette Machine Sales to Combat Illegal Trade

Indonesia's Ministry of Industry is set to implement new regulations to curb the proliferation of illegal cigarettes, a problem that costs the country trillions of rupiah in lost excise revenue. The upcoming rules will restrict the sale and distribution of key components used in cigarette production, including rolling machines, paper, and filters.

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For the rolling machines, they will be regulated and tightened. We will also try to regulate the distribution of paper.

Merrijantij Punguan Pintaria, Director of Industrial Beverages, Tobacco Products, and Refreshment at the Ministry of Industry, announced that the restrictions would be incorporated into a revision of Ministry Regulation No. 72 of 2008. The ministry is collaborating with industry stakeholders and other government bodies to finalize the revisions, aiming for completion within the year. "Now it's still in the finalization stage because our internal legal team does not want any unintended impacts," Merrijantij stated.

Illegal cigarettes, primarily machine-rolled kretek types, represent 13.9% of the Indonesian market. The ministry estimates that the government loses at least 31 trillion rupiah annually in potential excise revenue due to this illicit trade. Merrijantij expressed concern that standardizing cigarette packaging to a single color could inadvertently facilitate the production of illegal cigarettes, as counterfeiters would find it easier to mimic existing brands without significant investment.

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Now it's still in the finalization stage because our internal legal team does not want any unintended impacts.

The government's move aims to protect legitimate businesses and secure much-needed revenue. By controlling the supply chain for cigarette manufacturing, officials hope to significantly reduce the availability and sale of untaxed products. The success of these regulations could lead to a substantial increase in state revenue, which could then be allocated to public services or other national priorities.

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Because so far they need investment to disguise (similar to) existing cigarettes.