Under the bill currently being discussed in parliament, the consumption, sale, production and distribution of all drinks containing more than one percent alcohol would be prohibited.
"Alcohol consumption is increasing, especially among young people and it threatens their future because it causes addiction and potentially damages their health," lawmaker Muhammad Arwani Thomafi, from the United Development Party, one of the parties pushing for the ban, told AFP.
On Thursday a ban on the sale of alcohol at small retailers comes into force across the country, although supermarkets, bars and restaurants will not be affected.
The new bill put forward by Islamic parties, which could become law by the end of the year, proposes a jail term of between three months and two years for anyone caught drinking alcohol, while anyone caught producing or distributing alcoholic drinks could face between two and 10 years in jail.
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The majority of Indonesian's 250 million people practice a moderate form of Islam, and most do not drink. Drinking alcohol is forbidden under Islamic law.
However, in big cities such as the capital Jakarta and areas popular with tourists, drinking is more common and alcohol is widely available.