Shallot is a national strategic commodity in Indonesia, but it is development has a fundamental technical, socioeconomic, and policy support problems. Therefore, it is essential to know the competitiveness of shallot in Indonesia and the incentive policy to implement the comparative advantage to become a sustainable competitive advantage. The purposes of this study are to (1) analyze the profitability of shallot farming privately and socially, (2) analyze the competitiveness of shallot farming from a competitive and comparative advantage perspective, (3) review the impact of government policy on shallot farming, and (4) formulate incentive policies in the development of shallot commodities. The empirical results of the Policy Analysis Matrix revealed that shallot farming in production centers in Indonesia has both competitive and comparative advantages. The highest competitive and comparative advantages were found in the dry season in the upland of Malang district with the coefficient values of PCR (Private Cost Ratio) of 0.268-0.508 and DRCR (Domestic Resource Cost Ratio) of 0.208-0.323. The lowest competitive advantage was found in the lowland of East Lombok district in the dry season with a coefficient value of PCR 0.728-0.844. The lowest comparative advantage in the dry season was found in East Lombok district with a DRCR of 0.448, while in the rainy season, it was found in Wonosobo district with a DRCR of 0.522. These results mean that it is more profitable for Indonesia to increase domestic shallot production than to import. Improving shallot competitiveness can be carried out by implementing advanced technology, agricultural infrastructure, capacity building of farmers' resources, and government incentive policies to increase productivity and competitiveness sustainability.