Business Today

Small units in Sivakasi are in the line of firecrackers

Fireworks units in Sivakasi are feeling the heat of government's policies and a slowing economy.

N. Madhavan        Print Edition: July 8, 2012

The dry heat is scorching. Rains, in this region, are rare. Yet, it is this very uncomfortable climate that has catapulted Sivakasi, a town at the heart of Tamil Nadu's Virudhunagar district, to become the matchstick and fireworks capital of the country. Drying the matches and the fireworks in the sun is critical to the manufacturing process: something which the region's climate enables the local makers to accomplish with speed and ease. Over 4,500 small scale match units and 400 odd fireworks' manufacturers produce as much as 70 per cent of the country's output. A good number of them also export.

But of late, the fireworks' units are feeling heat of a different kind - not the sun's rays, but the one generated by government policies and the slowing economy.

"To a large extent it is the sentiment that drives the purchase of fireworks," says R Sukumar, Managing Director, Sri Krishna Pyro Exports (P) Ltd, one of the small scale manufacturers. "If people are happy and confident about their future they open their purse strings and spend lavishly on fireworks. But when conditions are gloomy as is the case now, the fireworks' budget is among the first to be cut."  Sukumar sells his fireworks under the 'Krishna' brand, bringing him revenues of Rs 12 crore annually. Fireworks are mostly bought on Diwali or other celebratory occasions, like weddings or sporting victories, but when people are feeling low, the urge for a flashy 'sound and light show' diminishes. "Demand from the cities has crashed by 30 per cent this year,'' Sukumar adds.

This could not have come at a worse time, because Indian fireworks' manufacturers were already being edged out globally by their Chinese counterparts.  "Their landed cost of exports is 50 per cent lower than ours as they save a lot in terms of raw material and labour cost. Also labour laws governing the fireworks industry are very relaxed in China, compared to the stringent laws in India," says Sukumar. The industries raw material and labour costs have increased sharply in the last two years and so have the interest costs. "We are surviving because we have been in business for 35 years but players who have come recently are under severe stress and many such factories are up for sale," he adds. Customers' tastes are also changing: they are beginning to prefer colourful fireworks' displays to fireworks which simply make ear-splittingly loud sounds. But the former require significant investment in research and development. "The slowdown is affecting this investment without which our future will be even bleaker," says Sukumar.

The matchmaking units have a very different problem. A few kilometres away in another part of town, workers, predominantly woman, pack matches at the Annarathna group of Industries. Demand is not an issue here. "As long as there are people smoking, demand for matches can only grow," says S. M. Antony Bharati. Managing Director, Annarathna group. He is also Joint Secretary of the South India Match Manufacturers Association.  "Every beedi needs two match sticks." Around 50 per cent of his matches are exported - mostly to Africa. His primary problem is that of labour availability. "Nobody wants to come and work in a match unit," he says. "We cannot provide the kind of wages paid by the Mahatma Gandhi National Rural Employment Guarantee Scheme. We have to send our vans as far as 60 km away from the town to find workers and bring them in." His four units at Sivakasi employ 500 people.

The walls of his factory are full of posters announcing incentive schemes - both for exceeding targets, and for coming to work regularly. ``These are minimum requirements,'' he says. Bharati has imported machines from South Korea to reduce labour needs and has even designed some himself which are labour saving.

The entire small scale sector, including fireworks and matchsticks - which all operate on wafer thin margins - has been hit by the massive power cuts imposed by the Tamil Nadu government. Forced to run generator sets for most part of the day, they find their costs spiralling. "I am incurring losses,'' says S Raman, who runs a cement bag manufacturing unit. ``Higher power and interest costs are the culprits." he adds. There is a apprehension that if the situation does not improve soon, many units in the area could default on their loans and will need financial help to recover.

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