Raising tobacco prices through excise tax policy is widely recognized as the most effective instrument for reducing tobacco consumption. Yet when price increases cannot outpace income growth, cigarette affordability may remain unchanged or even rise, limiting the policy's effectiveness. In this context, affordability—which accounts for both price and income—serves as a more comprehensive measure for designing effective tobacco excise policies.

Using the latest data from BPS and the Ministry of Finance alongside the 2017–2024 Susenas, this study employs descriptive analysis and a two-part model to track trends and estimate cigarette affordability elasticity in Indonesia.

The findings show that the relative income price (RIP) remained low at 3 percent over 2010–2024, indicating that price increases could not outpace income growth, keeping cigarettes highly affordable. The estimated affordability elasticity of –0.77 suggests that a 10-percent reduction in affordability could decrease cigarette demand by 7.7 percent. Lower-income households are also found to be considerably more sensitive to affordability changes than higher-income groups.

These findings underscore the need for substantial and sustained tobacco excise increases alongside simplification of the complex multi-tiered excise structure, which currently enables wide price differentials across brands and downtrading to cheaper alternatives.