Kudus, C. Java. Finance Minister Purbaya Yudhi Sadewa vowed Friday to crack down on illegal cigarettes while offering small producers a path to legalization, saying the move was aimed at creating a fairer tobacco market and protecting jobs in the country’s sprawling cigarette industry.

Speaking during a visit to the Tobacco Product Agglomeration Center (APHT) in Megawon, Kudus --widely known as Indonesia’s “clove cigarette city”-- Purbaya said illegal producers would be granted amnesty if they transitioned into the formal sector.

“Their sins will be forgiven, but moving forward, we will act firmly. We give them room to legalize their products so we can create a fair market for both large and small industries,” he told reporters.

The minister stressed that while illegal tobacco undermines small producers, legalization would ensure businesses survive and employment remains intact. “The important thing is jobs are maintained, but everyone must pay what is due,” he said.

Indonesia loses an estimated Rp 15 trillion ($940 million) annually in unpaid taxes from illegal cigarette sales, according to Industry Ministry data. Roughly 22 billion illegal sticks were sold nationwide in 2023, accounting for nearly 7 percent of the country’s total output.

Tobacco remains Indonesia’s single largest source of excise revenue. In 2024, excise tax collection reached Rp 300.2 trillion, surpassing budget targets, with cigarettes contributing about 90 percent.

The government introduced new excise regulations in 2025 under Finance Ministry Regulations No. 96 and 97 of 2024, which raised minimum retail prices across all cigarette categories to discourage smuggling and under-the-counter sales. Current duties range from Rp 1,231 ($0.08) per stick for premium machine-made clove cigarettes to Rp 223 per stick for lower-tier hand-rolled kretek.

Purbaya confirmed the government will not raise excise duties this year and said authorities are reviewing tariffs for tier-III producers.

But the minister’s surprise decision to scrap a planned 2026 tobacco excise hike has drawn criticism from health advocates. Critics argue that the move prioritizes industry profits over public health.

“Excise is not the same as tax. It is an instrument to curb consumption of harmful products like tobacco, and to support fairness and redistribution,” said Manik Marganamahendra, chairman of the Indonesian Youth Council for Tactical Changes (IYCTC). “Holding off excise increases undermines efforts to protect public health.”