Chennai: Each time you strike a match, you contribute to the turnover, but not to the profits of the Indian match industry.
The industry produces 90 million bundles a year; each bundle has 600 matchboxes and each box has between 40 and 50 sticks. The Rs3,000 crore industry, which employs around 300,000 people, is expected to end 2007-08 with losses of Rs90 crore, up from the Rs55 crore it lost last year, according to the All India Chamber of Match Industries (AICMI), an association of around 200 match producers.
Tamil Nadu accounts for almost 75% of the production of matches, and the industry here seems to be at crossroads, with many firms diversifying into other industries such as textiles, fireworks and printing. The diversification is mainly on account of labour shortage, an increase in the price of raw materials, and the fact that the price of a matchbox has remained unchanged at around 50paise over the last 10 years.
However, the diversification drive doesn’t augur well for the employees working in the industry, as it could mean downsizing or even shutting down some units.
The owners of a few units, which are mainly concentrated in and around the cracker town of Sivakasi, around 500km south of Chennai, managed to see signs of a coming decline in the industry and entered other businesses around five-six years ago.
One reason for the state of the industry has to do with a tax exemption that encourages people to sell machine-made matches as hand-made ones. Hand-made matches are completely exempt from taxes, while the machine-made ones are taxed at 12%. To benefit from this, many mechanized match factories make the matches and pass them on to units where they are packed by hand. These matches are passed off as hand-made matches.
Units that still make matches by hand cannot increase prices because there is no way they can compete with mechanized units that evade taxes, according to G. Adipathy, secretary of AICMI and partner of Ayyan Group, a matchbox company. “The central excise department isn’t taking adequate steps to curb these practices from tax-evading match units. Organized evasion has become the norm in this industry,” he adds.
Adipathy started diversifying almost a decade ago and has set up spinning, weaving, textiles and chemical factories. He says mechanized matchbox making units that are tax-compliant make losses and some companies that didn’t think it necessary to diversify are suffering now.
“Diversification is too late in the day,” he adds.
Some matchbox makers say they are trying to enter into other businesses but with little success. Their match units make losses and they do not have the capital to invest in new businesses.
S. Sriram Ashok, president of AICMI, says he experimented with various other businesses when he realized that his units were not proving to be as promising as before.
He tried his hand at weaving, where he says he failed, and is currently running a textile and spinning unit. He plans to start making detergents and washing powder soon and bemoans the lack of government support to the matches industry, adding: “No government will give us loans or waivers.”