Because Indonesian law requires ID for every Indonesian SIM, and so do most countries.
GSMA, the global mobile industry body, counted 147 countries that require ID to register a prepaid SIM in 2018, including Australia, Singapore, Thailand, Malaysia, Germany, France, Spain and Italy.
In Indonesia, every mobile number must be registered to a verified identity, and every foreign phone must have its IMEI registered before it can use a local network. That is why every legitimate SIM seller in Indonesia asks for your passport, from the Telkomsel counters at Bali airport to Balitel.
Travel eSIMs such as Airalo skip this step only because they are foreign numbers roaming in Indonesia, not Indonesian numbers.
Balitel's form asks for a photo of your passport, a selfie holding your passport, your phone's IMEI and your arrival date.
Balitel deletes your passport details 30 days after your line is activated.