Factories at Sivakasi, the fireworks hub of India, have cut down production by 25-30% this festive season. For this industry, which thrives during the months leading up to Deepavali, where the bulk of its sales happens, this is a cruel blow. While it was anticipated that the ban on importing firecrackers from China would lead to improved prospects for the fireworks industry in south Tamil Nadu, what has happened is quite the contrary. Factory owners claimed that there were two reasons for the unfortunate and unexpected fallout: demonetisation, which came into effect in November 2016, and the recently introduced Goods and Services Tax (GST).
“Post Deepavali, (2016) the centre announced its demonetisation programme. The money for the consignments that we dispatched for the festive season came into our coffers very late. Some of the traders settled their dues only in March/April. With consumers not having enough cash, the usual wedding orders and party orders (for New Year) were all put on hold. This was a major setback to the industry,” said P. C. A. Asaithambi, President of The Tamil Nadu Fireworks and Amorces Manufacturers Association (Tanfama). The GST rollout was another big blow, he added.
The Union government has levied a 28% GST on fireworks. Prior to this, the industry was paying 2% towards Central Sales Tax and 12.5% towards central excise duty, a total of 14.5%. The industry has now knocked on the Centre’s doors requesting to bring GST on fireworks below 5% or atleast 12%.
Tanfama’s secretary K. Mariappan said that only 50% of the usual production has been achieved so far, this year. According to him, the working capital for this industry comes primarily from bank loans and advance payments.
“Post demonetisation, the quantum of advance payments tumbled down,” he said.
The hub in the south
This little town, also known as Kutty Japan (Little Japan), provides 90% of India’s fireworks and 80% of safety matches. Some 70% of the printing happens here, say industry sources. Currently, the fireworks industry of Sivakasi is pegged at ₹1,800 crore per annum. There are illegal units too whose business is pegged at ₹2,000 crore by Tanfama.
A. P. Selvaraj, managing partner of Kaliswari Fireworks, said that until August, there was a production shortage at his company.
“When I decided to increase the production, the rain came in and played spoilsport,” he said. He says his firm has seen a 30-40% dip in production.
The smaller units in Sivakasi said that it was business as usual for them. Inquires revealed that these units accepted pre-bookings using the demonetised ₹500 and ₹1,000 currency notes. A manufacturer said: “Many firms accepted the banned notes and paid their employees, who in turn exchanged it at their banks.” Tanfama Secretary Mr. Mariappan added, “For a section of ‘bold’ industrialists and the majority of the illegal sector, demonetisation was a windfall as they took a risk and accepted the demonetised currency notes from traders as advance payment.”
One shop along the Sivakasi-Virudhunagar highway road also wore a deserted look. There are over 60-odd shops on this belt. “I have had only about 25% sales when compared to last year. Post GST, people have tightened their purses — some have reduced their budgets while others are just not buying crackers,” said S. Subash Chandrabose, who runs a shop at Tiruthangal. With the monsoon getting better, he expects people to spend more on firecrackers during Dussehra, leading up to Deepavali.
Ban in NCR
Industrialists lamented that the regulation on firecracker sale in Delhi NCR was a dampener. Earlier this month, the Supreme Court lifted a November 2016 ban on selling crackers in the NCR, but subsequently put in place regulations to control the sale and use of firecrackers. The court directed the authorities to issue only half the number of temporary licences and those with permanent licences have been asked to cut back on sales.
“The court had banned the sale of fireworks in this region citing pollution. The ban has been lifted now, but we are told that only the existing stock at this region can be sold and we cannot send any fresh stocks,” Mr. Asaithambi said. For Kaliswari fireworks, the NCR is the biggest market. “Every manufacturer here has a pocket where they own a big market share. For us NCR is the market,” Mr. Selvaraj said. “Some 20% of the total sales during Deepavali happens in the NCR,” Mr. Mariappan added.
Judging by Dussehra
Traders in Chennai are also evaluating the market sentiments before placing their orders this festive season. Ramanathan, a trader in Chennai, said: “People are cautious about buying products post GST. Be it food or any other commodity – they are cutting down on their expenses. We need to see if or how demand picks up this Dussehra,” he said. If the Dussehra sale is good, then Deepavali demand will be good, he explained.
For their part, manufacturers have indicated that there will not be a price hike this year. “Any further hike would burn the consumers’ pockets and they will absolutely stay away from buying crackers. We want people to buy and celebrate with fireworks,” Mr. Asaithambi said.
Some of the industrialists in Sivakasi are still continuing with manufacturing to meet eleventh hour demands.
Explosives Rules 2008, Rule 15
“Marking on fireworks: In case of fireworks, explosive composition, quantity of such composition, whether sound emitting crackers or colour or light emitting crackers, sound level, a caution or warning indicating the name of the item, manufacturer’s name, method of firing, precautions to be taken both in words and pictorial view shall be printed on each piece of fireworks and cardboard box and where adequate space is not available on the fireworks, such caution or warning shall be printed on a separate label and inserted in the smallest packet or carton.”