A week before Deepavali, Sivakasi is bustling with hectic activity, with both wholesale traders and individual buyers like C Sekhar, who has been visiting this small town in Virdhunagar district, with the shopping list for his close cousins and best friends.
Deepavali, the festival of lights, is the grandest festival in the country, and while for many it is a religious festival, people cutting across all faiths enjoy bursting firecrackers. Sivakasi, the major manufacturer, accounts for over 90 per cent of the crackers available in the market. The entire town and neighbouring villages depend upon this industry for a livelihood.
However, the end product which denotes joy and happiness for many, also comes with its share of problems. The accident-prone industry has been facing many challenges in recent years, including high production cost due to inflation, a lowering in demand for certain crackers due to concerns over pollution and the availability of cheaper Chinese products, which are sold illegally. Adding to the heartburn are the recent economic initiatives of the central government, such as demonetisation.
Demonetisation disruption In November 2016, when Rs 1,000 and Rs 500 notes were demonetised with immediate effect, the entire industry was closed for two months, leaving many workers without a job in hand. Soon after, when the industry slowly began limping towards normalcy, the Goods and Services Tax (GST), was promulgated.
The entire firecracker industry protested against the 28 per cent tax imposed on the crackers and even suspended production for a brief period, but the government did not roll back the rates. Traders say retail trade of crackers has also been affected due to the GST. Speaking to DT Next , T Ganesan, proprietor, Lakshmi Agencies, said that due to GST both sales and profit margins have been affected.
“Over 50 per cent of the sales had been affected this year when compared to the previous years, and prices have gone up” he said. According to him, a number of secondary dealers have not registered under GST. There could be relief if the secondary dealer, who is usually a shopkeeper, opts for the GST, since he can them claim credit for the GST he pays, but most of the secondary dealers are not registered under GST as firecracker shops are viewed by them as seasonal ones, and not one with year-round activity.
“Therefore, the burden is passed on directly to the public by traders. Cracker prices have gone up. Because of the increased burden, people are not coming forward to buy the firecrackers, as they used to in the past. The retail business has been affected a great deal,” said Ganesan.
Business sparkles all the way for big units embracing GST
Staff at a retail outlet taking stock of the new arrivals
Although the retail cracker sales has gone down this year, with many pointing a finger at GST as a major cause, big units who comply with the standard tax regime, have reportedly not been affected.
However, many have cut down their production by at least one-fourth of the normal quantity compared, to previous years. There are close to 900 cracker units in Sivakasi and another 150 more in villages surrounding the cracker town. Out of them, over 750 are larger cracker units with a secondary attached to the mother units.
The larger cracker units largely pay their taxes properly and so they are not affected said representatives of crackers association. Speaking to DT Next, AP Selvaraj, Vice President, The Tamil Nadu Fire Workers and Amorces Manufacturers’ Association (TANFAMA) and also shareholder in Sri Kaliswari Fireworks, said that last year, the crackers units paid a total tax of 28.5 per cent, which included 12. 5 per cent excise tax, 2 per cent goods tax, and 14 per cent local VAT.
This year, after GST was introduced, they had to pay 28 per cent, and so the larger companies which do not evade tax, have not been affected. However, around 300 smaller companies, which have not embraced the correct tax regime, have been affected, as they have to pay 28 per cent this year. However, due to reasons such as the pending case in the Supreme Court, incessant monsoon and apprehensions over GST among the public that companies have lowered the production levels, amounting to Rs 1, 000 crore.
Usually, these units produce firecrackers worth at least 4,000 crore, but this year the total production stands at Rs 3,000 crore, said industry insiders. Going hand-in-hand with lower production, there is a good demand for the products, especially from reputed firms, this year.
Also, secondary traders who were in the habit of purchasing stock from the primary traders till last year, have now approached the firms directly to place orders with them, said Selvaraj.
Business needs a fillip
The firecracker industry, one of the oldest, is in need of changes, especially on export policies
- The base of the chemical composition of Indian crackers is aluminium, while the Chinese crackers contain chloride as their base
- The chloride content results in the colours turning more vibrant and the crackers explode at greater heights compared to the Indian counterparts
- At present, chloride is banned by the Indian government. Therefore, crackers made here are not exported
- A relaxation in transport policy would help export of crackers and broaden the horizons of the industry
- Until now, only the Mundra Port at Gujarat has come forward to export crackers in containers
- The industry employs more female workers compared to male workers in both the manufacturing of firecrackers and work related to accessories It is largely a seasonal industry, as it depends entirely on Deepavali and on temple festivals for the sales. However the production works go on throughout the year. Only the retail business is dependent upon the festival season.
- Sivakasi has over 900 manufacturing units, while another 150 more firecracker units operate in villages surrounding the cracker town. Out of them, over 750 are larger cracker units with secondary ones attached to the mother units
- Last year, manufacturers paid a total tax of 28.5 per cent, which included 12. 5 per cent excise, 2 per cent goods tax, and 14 per cent local VAT.