No sparkling demand yet for cracker industry

R Ravikumar Chennai | Updated on October 09, 2014 Published on October 09, 2014

Cracker centre There are 865 factories in Virudhunagar, but technology here is not innovative as in China. R ASHOK

BL10_FIRE_CRACKER   -  The Hindu

Taxes, unskilled labour add to problem of illegal imports from China

The fireworks industry will be facing a dull Diwali this year. Due to a combination of factors, it has reported a 30-35 per cent drop in demand ahead of the festival.

Fall in demand

“Our order books have dwindled by almost 35 per cent, which is the worst ever,” says G Abiruben, President, Tamil Nadu Fireworks and Amorces Manufacturers’ Association. He attributes the fall in offtake chiefly to illegal imports from China. “There was a huge influx of Chinese crackers, which are being stealthily distributed to various cities.” According to Abiruben, who is also Managing Director of Ayyan Fireworks Factory Pvt Ltd that makes ‘Ayyan’ mark crackers, there was a marked drop in demand from the northern and westernmarkets.

However, pointing to the statement of Union Minister for Commerce and Industry Nirmala Sitharaman that the Centre would take stringent action against illegal imports of firecrackers, he said the industry is hopeful that demand will bounce back next year.

Though Chinese fireworks have been available in the past, this time hundreds of containers have landed and are being shipped to markets across the country, says Asai Thambi, Partner, Eagle Fireworks.

S Srinivasan, a member of the association’s legal wing, blames it on the current tax structure. He says the labour-intensive industry faces high incidence of excise duty on many of the raw materials and double taxation in some cases. He says that after paying 12 per cent excise duty on raw materials such as aluminium powder, cellophane, barium nitrate and strontium nitrate, “we pay 12 per cent excise on produced fireworks, 14.5 per cent of VAT and service tax. This makes our products less affordable as opposed to those from China which are at least 30 per cent cheaper.”

Price differences

Virudhunagar district in Tamil Nadu is the country’s firecracker manufacturing hub as it caters to 90 per cent of the total demand. The size of the industry is pegged at ₹4,500-5,000 crore at the factory gate. There are over 50 brands of crackers in the market. The top five brands, including Standard, Cock brand, Sony and Anil, account for 15-20 per cent of the market. And most of these top brands are not affected by the cheap imports. “We did not see any major change in our order books this year. But if the situation (Chinese imports) persists, we will for sure feel the pinch from next year,” said AP Selvarajan, Managing Director, Kaliswari Fireworks, which makes ‘Cock’ brand fireworks.

He says the quality of Indian fireworks is far superior to the cheap imports. “But the problem is that our products are more expensive. Channel partners want the MRP to be marked up by at least four-five times. If that is not done, our products can be more affordable than Chinese imports.”

Endorsing his point of view, Raja Singh Chelladurai, Chairman of Jumbo Fireworks, says the focus should be on making our labour more skilled. “We cannot fight the Chinese, as they are far more innovative than us when it comes to firecrackers,” he says. Chelladurai, a member of the promoter family of Standard Fireworks, which has a manufacturing unit in China as well, says India borrows almost every firecracker technology from China. If the Government encourages innovation and improving skill among our labourers, “we can compete with them comfortably.” Besides, the Government should look at reducing taxes and simplifying the taxation system.

Published on October 09, 2014
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