Addition of SKM Layer 3 is Estimated to Potentially Worsen the Downtrend in Cigarette Consumption

JAKARTA - The discussion of adding the Sigaret Kretek Mesin (SKM) 3 layer is considered to have the potential to exacerbate the phenomenon of downtrading or shifting cigarette consumption to cheaper products. This condition is feared to weaken the efforts to control cigarette consumption in Indonesia. Beladenta Amalia from Tobacco Control CISDI said that currently the SKM 3 layer has not been implemented, but the trend of shifting consumption to cheap cigarettes has already occurred in the current tariff structure. This can be seen from the increasing consumption of lower-grade cigarettes such as hand-rolled cigarettes (SKT)."We can see from the current situation with only eight layers, without SKM 3 there has been a lot of consumption shift from the upper layer, from SKM 1 or from SPM to the lower layers, especially to the SKT or hand-rolled cigarettes," said Beladenta. He explained that the quite different tariff between layers makes consumers tend to look for cheaper alternatives. Currently the consumption share of SKT is said to be close to 50 percent of total production or excise band purchases. Beladenta said that this condition shows that the layered tariff structure actually opens up a large space for consumption shifts. With the addition of a new layer, he said, the potential for downtrading is considered to be increasing."Obviously because by adding the SKM 3 group which logically has the lowest tariff from the SKM group, consumers from SKM 1 and 2 will certainly change their tariff to SKM 3 or maybe even from SKT 1 because we don't know what the tariff is," he said.

Beladenta added that the addictive nature of cigarettes made consumers tend not to stop smoking but switch to more affordable products. So, without price restrictions, the control efforts are not effective. Beladenta reminded that policies that give space for illegal cigarette players to enter the legal market can create a precedent for weak law enforcement. This is actually a potential increase in the number of illegal business actors in the future. "The problem now is that the government is only focusing on monitoring and eradicating illegal cigarettes, but it actually weakens the tariff policy or the structure or other fiscal policies for this tax," he said. He emphasized that the shift to illegal cigarettes depends heavily on availability in the market. If the supply increases and the price is cheaper than legal cigarettes, consumers will likely switch. In addition, the addition of SKM 3 layer is also considered to have the potential to cause market distortions. The increase in the variety of cheap cigarettes will expand access, including for vulnerable groups such as children and adolescents. "So, consumers will still have the option to continue to consume their cheap cigarettes, especially for active smokers, but for non-smokers, for example, children or adolescents, they get the option of cheap SKM machine cigarettes as well," he said. According to him, this condition will be opposite to various non-fiscal policies such as smoke-free areas and advertising restrictions. Without the support of strong fiscal policies, the control efforts are not effective. Beladenta also emphasized the importance of monitoring illegal cigarettes that goes hand in hand with the tariff policy. Both approaches must be strengthened simultaneously so that consumption control runs optimally. "These are two equally important things and must be done together, not just one," he said.