Small matchbox units trump large players in TN

Ten years ago, there were some 10,000 safety match factories, employing nearly 750,000 people. Now there are barely 1,000 units employing 50,000 people

The past decade has seen a dramatic reversal in the relative market shares of organised and unorganised matchbox manufacturers in Kovilpatti, 570 km from Chennai, which is the main hub of the Rs 1,600-crore Indian matchbox industry.

The share of unorganised players has risen to 70 per cent, and that of organised players has fallen to 30 per cent. A decade ago it was just the reverse.

Matchstick manufacturing is a small-scale industry here, typically a one-man show where the entrepreneur has to manage everything.

“We don’t have a problem if they grow, but there is no balance when it comes to the tax structure,” said S S D Krishnamoorthy, managing director, Liberty Match Company (P) Ltd, the top matchstick-maker in Kovilpatti.

The unorganised sector needs to be brought under the purview of the Central excise regime, enabling the government to crack down on illegal units, he added.

Unorganised players procure machinery illegally and install it in small houses, alleged J Devadoss, secretary, South India Match Manufacturers’ Association and managing director of Baskaran Enterprises. They get 10-15 workers to churn out matchsticks and sell them in the market as handmade matchsticks, which do not attract excise duty.

He noted that duty collection should have been around Rs 130 crore last year, but only Rs 37.7 crore was collected by the excise department here.

The government levies a 12 per cent excise duty on matches manufactured by fully mechanised factories. The 2012-13 Budget reduced the excise duty on matches manufactured by partially mechanised units to six per cent, from 10 per cent earlier.

The industry has been growing at 10-15 per cent year-on-year, but the organised segment’s output has plunged from 150 million bundles in 1995 to 75 million bundles today, according to the association.

Ten years ago, there were some 10,000 safety match factories in southern India, employing nearly 750,000 people. Now there are barely 1,000 units employing 50,000 people.

Some of the biggest production centres include Kovilpatti, Virudhunagar, Ettayyapuram and Sattur. This fall is attributed to the increasing culture of manufacturing in small warehouses.

Safety match production is organised in three ways — entirely hand-made, where the dipping of matches in wax, box filling, labelling and packing are all done manually; partially mechanised manufacturing, where the dipping is done by machines and the box filling, label-pasting and packing are all done manually; and fully mechanised manufacturing, where there are not many units due to the high cost of importing machinery from China.

Today, 80 per cent of all units are partially mechanised and 20 per cent are fully mechanised.

“The industry, which was 100 per cent fully organised, has now become 80 per cent unorganised, which is not a healthy sign,” says Devadoss.

The danger in unorganised production is the probability of accidents, accompanied by human casualties – as happened earlier this month in Sivakasi’s fire-cracker industry. Tamil Nadu is the largest exporter of matchboxes in the world. Last year the industry exported around Rs 300 crore worth of goods and says it could increase this to Rs 1,000 crore, provided the government puts incentives in place.

There is a sharp decline in the availability of wood that can be converted into sticks. The industry estimates that the availability of trees will run out after three or four years more, adding that afforestation is urgently needed across the state.

The industry noted that Japan had offered Tamil Nadu aid worth Rs 600 crore to plant trees for harvesting. It reckons that if this amount is used to cultivate trees, which will give a yield in 7.5 years, 1,000 factories can be added, employing 50,000 people.