Export orders keep industry hopes alive

T.E. Raja Simhan Recently in Kovilpatti | Updated on May 10, 2011 Published on May 10, 2011

kovilpati   -  Business Line

Lighter has replaced safety matches; pan and gutkha have replaced beedi and cigarettes and there is a ban on public smoking in most of the places. “So, where is the need for safety matches?” Questioned Mr J. Devadoss, Secretary, South India Match Manufacturers Association.

The demand for safety match is diminishing at a rapid pace in the country. It is only export that is helping this age-old industry going. Added to the problem is the ‘unhelpful' tax that has hurt the industry very badly, he said.

In the past, a family used at least one or two safety matches. But today, lighters have replaced safety matches. . It is only in villages that safety matches are in great demand, while in the city it is for lighting the lamp and incense sticks, he said.

There are nearly 1,000 safety match-making units in southern India producing nearly 800 bundles a year — an excess production of nearly 27 per cent after meeting the domestic demand. While 16 per cent of the safety matches are exported, the excess capacity every year is around 11 per cent, he said.

Exports help

The survival of the industry is only because of exports, said Mr Devadoss. The industry exports nearly 8,00,000 bundles a month in nearly 250 sea containers to Africa, Europe and Asia. The annual export value is around Rs 200 crore, he said.

The total safety match industry size is estimated to be around Rs 2,100 crore with an annual production of nearly 800 lakh bundles of matches.

Higher Tax, a big thorn

There are three types of safety match production — hand-made, partially mechanised and fully mechanised. The future of the industry will depend on partially mechanised where substantial portion of the labour is employed. However, the tax incidence in this ‘high cost-low profit margin' product used by common man is quite high at around 16 per cent. The country is one of the biggest markets for safety matches and the consumers in India pay the lowest price in the world for a box of matches (60 sticks at Re 1), he said.

Mr Devadoss said the industry has been fighting with the Centre for tax exemption from the purviews of the Central Excise duty. Post 2003, the Union Budget classified both fully machine-made safety matches and partially machine-made safety matches under the same category as ‘machine made.' For the last ten years due to shortage of workers, the handmade sector went into modernisation but was levied 10 per cent excise duty on par with fully mechanised sector that gives only eight per cent labour potentiality whereas the semi-mechanised units gives nearly 60 per cent labour.

The Tamil Nadu Government exempted sales tax and value-added tax for fully handmade and partially mechanised safety matches but also levied heavy sales tax at 12.5 per cent for fully mechanised matches to protect the smaller players. The association wanted exemption from Cenvat for the survival of the partially mechanised safety match industry, which gives job for 95 per cent of women force in drought-prone rural areas such as Kovilpatti, Sivakasi, Ettaiahpuram and Sattur, said Mr Devadoss. “While shortage of workers is a major problem, the tax structure has further ruined the industry. Officials concerned could not differentiate between partially mechanised and fully mechanised sectors,” he said.

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Published on May 10, 2011
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