Early assessment of tobacco excise sharing fund as policy for farmers’ viable alternatives in Indonesia: case study of four municipalities in Indonesia

Article 17 of the Framework Convention on Tobacco Control (FCTC) highlights the need for economically viable alternatives for tobacco farmers facing reduced demand. This counters the misconception that tobacco control negatively impacts farmers' livelihoods, a claim unsupported by robust research. Existing literature indicates that tobacco farming is often economically disadvantageous globally. Consequently, farmers are seeking more profitable crops through diversification or substitution. However, reliance on tobacco for economic viability persists in many countries, necessitating strong government incentives for crop diversification. Indonesian tobacco farmers frequently switch due to declining tobacco prices, a trend supported by World Bank research (2017) showing that many tobacco-farming households spend more than they earn, even without considering household labor. Higher input costs for tobacco cultivation compared to other crops exacerbate this issue. Studies reveal that some farmers switch because of low prices, unfair grading, and adverse weather. The shift to non-tobacco crops often leads to improved profitability. The situation mirrors patterns across the ASEAN region, where tobacco farming is labor-intensive and practiced by small farmers with limited land and high input costs. Indonesia addresses this by providing funding for tobacco farming diversification through the DBHCHT, sourced from tobacco product excise.

The paper extensively reviews the existing literature on the economic viability of tobacco farming, highlighting its often unprofitable nature globally. Studies are cited that detail farmers' perspectives on switching crops due to low prices, unfair market practices, and unfavorable weather conditions. The economic challenges faced by tobacco farmers in Indonesia and the ASEAN region are discussed, emphasizing high input costs, low prices, and intensive labor demands. Several studies are referenced showing the economic benefits of switching to alternative crops. Previous research on Indonesia's DBHCHT is also reviewed, pointing out the scarcity of information on its effectiveness in improving tobacco farmers' livelihoods and its role in facilitating the transition to alternative crops.

The study was conducted in four municipalities (two each from East Java and Central Java provinces), selected based on their significant contribution to national tobacco production. Data collection involved focus group discussions (FGDs) with current (n=25) and former (n=15) tobacco farmers and in-depth interviews (IDIs) with key informants at national and subnational levels. National-level IDIs involved representatives from the Ministry of Finance and Agriculture. Subnational-level IDIs were conducted with officials from regional agricultural and development planning agencies, agriculture instructors, representatives of farmer support groups and associations, and village chiefs. FGDs focused on participant background, tobacco farming profiles, DBHCHT utilization, capital sources, profit/loss analysis, challenges faced, tobacco prices, and crop diversification experiences. IDIs explored policy overviews, farmer welfare conditions, DBHCHT utilization based on PMK No. 206/2020, and responses to policy options. Data analysis used content analysis techniques, categorizing data based on themes to understand perspectives on DBHCHT utilization for tobacco farmers. Patient and public involvement included engaging policymakers and public members in identifying informants, developing key questions, and disseminating results through a public webinar.

The study found that tobacco production and profits decreased in Pamekasan, with farmers largely unaware of DBHCHT. In Jember, tobacco land area decreased significantly, and farmers reported declining production and fluctuating prices. Farmers who received DBHCHT assistance reported receiving seeds, fertilizers, and support for intensification programs. In Temanggung, tobacco productivity declined due to decreasing land area and the COVID-19 pandemic, with coffee being the most profitable alternative. Rembang showed more even DBHCHT distribution, with farmers receiving machinery, fertilizers, and comparative studies. However, DBHCHT allocation was far below the mandated level in all locations. Prior to PMK No. 206/2020, no municipalities allocated DBHCHT for tobacco farming diversification; funds were primarily used for healthcare and law enforcement. After the regulation, while several programs were designed, implementation was inconsistent, with only some programs actually implemented in each municipality. Tobacco diversification was mainly a farmer-led initiative rather than a result of government programs. Key challenges hindering DBHCHT utilization include constantly changing government regulations, lack of farmer awareness, delayed implementation, and a mismatch between allocated funds and the number of eligible farmers.

The study's findings highlight the complexities of implementing the DBHCHT policy, revealing significant bottlenecks. The frequent changes in government regulations create confusion among local authorities, hindering effective implementation. Lack of farmer awareness further undermines the program's impact. Delays in implementation cause inefficiencies, particularly impacting the timing of support for farmers. A mismatch between available funds and the number of farmers needing assistance limits the program's reach. These findings build on previous research that has shed light on the complexities of tobacco control in Indonesia but offers a unique focus on the role of DBHCHT in enabling farmer transition to alternative crops. While the policy aims to support diversification, challenges in execution indicate the need for improvements in coordination, clarity of regulation, and awareness-building initiatives. The relatively independent action by farmers highlights the need for more effective support and less bureaucratic constraints.

The study reveals significant challenges in utilizing the DBHCHT for tobacco crop diversification in Indonesia, largely due to complex bureaucracy and inconsistent implementation. To improve effectiveness, the study recommends more detailed technical and practical regulations, along with the establishment of multisectoral taskforces at the subnational level to coordinate implementation. Stronger engagement with local NGOs and cooperatives is also suggested to provide farmers with technical support for transitioning to alternative crops. This is crucial to counter farmers' attachment to tobacco due to its perceived economic viability. The DBHCHT needs to be more effectively allocated to facilitate crop diversification and substitution, providing both financial and technical assistance.

The study's findings are based on data from four municipalities, limiting its generalizability to the entire country. The reliance on self-reported data from farmers and officials may introduce bias. The study does not assess the long-term impact of DBHCHT on farmers' livelihoods or the sustainability of alternative cropping systems.