As Sivakasi, firecracker central, hits a century this Diwali, a pivot beckons

Each shed is 120 sq. ft in size and has four doors to provide enough light and ventilation. Electricity is forbidden—a power leakage can cause combustion of the chemicals that hang in the air during the production process. Each shed can handle only 25kg of chemicals at any given time.

Four people are allowed in each shed and just two if the process involves mixing chemicals. There is no furniture. Workers sit on the floor to work.

Forget cell phones, even mechanised vehicles are banned. Raw materials and finished goods are moved using push carts. The neem trees act as the natural air-conditioners and cool the place, offering workers some respite from the blistering heat in the summer months. About 160 workers work in this unit and Ayyan Fireworks has 13 such units across Sivakasi.

It is a fortnight before Diwali and workers here are busy trying to meet last-minute orders. G. Abiruben, managing director of the company, is busy tackling incessant phone calls from his distributors seeking more supply.

“My production is sold out," he tells them patiently. Demand for fireworks has been good this year. Low-cost Chinese imports, which flooded the market and created havoc for many years, are absent this time around. The Indian government has reigned in such imports and this led to strong demand for local fireworks manufacturers.

The favourable demand-supply gap, however, masks significant challenges the ₹6,000 crore industry faces. It is seen as a polluter even after it graduated to green crackers (fireworks that emit lesser particulate matter) and reduced emission as mandated by the Supreme Court. This year, the Delhi government banned the sale of fireworks as ambient air quality in the capital city reached alarming levels.

Massive labour shortage and restriction on usage of chemicals such as barium nitrate, the most effective oxidiser, has hit production in a big way. Most units operate at 60-70% of their capacity. To meet the sudden spurt in demand, illegal manufacturing units have mushroomed. They follow no safety norms and flood the markets with cheap, poor-quality products which affects the profitability of the more organized companies. High wage costs, reduced productivity and lower prices have eaten into the industry’s once very high margins.

But the industry in Sivakasi, which turned 100 this year, is not giving up. The larger companies are taking the lead and pivoting. By changing tack, they hope to overcome the litany of challenges that has pulled down their business for decades. They are innovating to bring in new products, investing in research and development to cut the pollution their products generate and automating their processes to improve quality and overcome labour shortage. There is a renewed effort to tap the attractive export market. Some are even eyeing diversification into the defence industry.

The match factory

In 1923, P. Iya Nadar, Abiruben’s grandfather, started the National Match Works in Sivakasi, the region’s first fireworks company. Apart from crackers, the company also produced hand-made matches.

Why did he pick Sivakasi? It is among the hottest and driest regions of Tamil Nadu. Sunny weather and low precipitation are critical for manufacturing fireworks. In addition, such a climate meant that agriculture was not a big vocation in the region and local labour was readily available for producing fireworks.

Hundred years later, Sivakasi is today the go-to place for fireworks in India. “We account for 95% of all fireworks made in the country. Over 500 businesses are in operation, and they run as many as 1,085 units employing 300,000 people directly and another 500,000 people indirectly," says P. Ganesan, president, Tamil Nadu Fireworks and Amorces Manufacturers Association (TANFAMA), the apex body of fireworks manufacturers in Sivakasi. Ganesan owns Sonny Fireworks Pvt Ltd, one of the leading companies in the region.

Bloody hands

While Sivakasi’s growth and domination is impressive, it was not achieved easily. The town, and the industry, jumped from one existential crisis to another. Miraculously, they survived.

The first big crisis was that of child labour, which surfaced in the 1990s. Taking advantage of poverty, and the need for cheap labour, many companies started employing children to make fireworks.

At one point in time, almost 70% of the children in the region were employed by the fireworks and match making industries, the media had widely reported. They were overworked—many children worked 12 hours a day—and were massively underpaid. Thousands lost their childhood, not to mention those who lost their lives in accidents at the workplace. Repeated accidents created revulsion among many Indians. Some even stopped bursting crackers.

The state governments finally cracked down on this practice and child labour was more or less eradicated by the turn of the century.

Myths and reality

A decade and a half later, pollution surfaced as a major problem. Fireworks were increasingly panned for the pollution they created, particularly during the festival seasons. Things came to a head when some states began to ban the sale of firecrackers during Diwali. The matter ended up in the Supreme Court and the industry, once again, faced an existential crisis.

The apex court, in 2018, mandated that only green crackers can be sold, and it banned the use of certain chemicals such as barium nitrate and aluminium. The Council of Scientific & Industrial Research (CSIR) and the National Environmental Engineering Research Institute (NEERI) define green crackers as firecrackers with reduced shell size, without ash and/or with additives such as dust suppressants to reduce emissions with specific reference to particulate matter.

The ban on barium nitrate was a big blow as more than 50% of the products made till then could not be produced without it. The chemical was also the best and the safest oxidiser. Its replacement, Strontium Nitrate, is hygroscopic (has ability to absorb moisture) and causes fireworks to fail. It resulted in lower shelf life for fireworks and manufacturers had to put up with lots of returns from distributors.

There are other disadvantages, too. Strontium Nitrate costs twice that of barium nitrate, and it increases production time as it needs a longer time to dry. The industry is still battling it out in the apex court—instead of an outright ban, they want barium nitrate allowed with a reduced quantum.

“It is a myth that barium nitrate is bad. The US, China and Japan have not banned its use," says Ganesan. In its September order, this year, the Supreme Court refused to lift the ban on the chemical.

The industry began manufacturing green crackers from 2019, after getting the specification from CSIR-NEERI. “The 2018 Supreme Court order mandated 15% to 20% reduction in emission. We have achieved almost 30% reduction," claims Ganesan.

But, again in 2020, many states banned the sale of fireworks during Diwali. Fireworks players lament that their industry is being singled out despite shifting to green crackers and reducing the pollution to levels mandated by the Supreme Court.

This year, the Delhi government has again banned the sale of crackers to prevent worsening pollution in November. The city-state is unable to do much to stop crop stubble burning in Punjab and other neighbouring states, which is the major cause of air pollution during the winter months.

The ban in Delhi will cost the industry about ₹450 crore as it is a high volume and high value market, companies estimated.

Problem of plenty

Pollution apart, labour shortage is a major pain point for the industry now. Quite a change from 1923 when the first factory started.

Shortages are as high as 30%, forcing most units to work at far less than their full capacity. “We pay ₹680 per day for packing and finishing work and ₹800 for just two hours of chemical-related work. Yet, we do not find enough people to work," says Ayyan Firework’s Abiruben. The productivity of those who come to work has dropped by as much as 20%, adds Ganesan.

There are many reasons for the labour shortage. One, there is a proliferation of fireworks units in Sivakasi. “The catchment of workers is the same but the number of units in operation keeps increasing rapidly," says Abiruben.

The inability of established players to meet the demand is causing more units to sprout. If this is not enough, illegal manufacturing of fireworks has gained monstrous proportions. Industry players say that it has become a parallel industry. Illegal units follow no safety norms. They mix chemicals, roll the crackers and pack them all under one roof, often causing accidents. They price their products cheap. This has forced the industry, at an aggregate level, to drop prices.

High labour costs, lower productivity, and poor realizations have hurt the margins significantly and caused cash flow problems for smaller units. “The industry is not as profitable as before," says Ganesan.

Bullet dreams

Some of the larger companies are trying a new approach. Players like Ayyan Fireworks, Sri Kaliswari Fireworks and Sonny Fireworks, to name a few, are investing heavily in innovation. They are launching new products that they hope will ‘wow’ their customers.

Ayyan Fireworks recently launched ‘Mega Peacock’, a fountain cracker that when lit gives the effect of a fan. It also launched ‘Lotus’, a ground chakra that burns in the shape of a lotus.

“Firework is both an art and science. It is here that Sivakasi thrives. With the same raw material, we bring out different products," says Abiruben.

These companies have increased their research and development spending and are discovering new ways of working with different eco-friendly chemicals. “We want to produce products which are even more eco-friendly and conform to existing ambient levels," says Ganesan.

Companies are now investing in technology and automation. The labour shortage problem, we mentioned before, won’t ease. Government policies, such as the Mahatma Gandhi National Rural Employment Guarantee Scheme, which guarantees 100 days of wage employment in a financial year to adult members of a rural household, are only making things more difficult. This is forcing the industry to automate parts of its processes. Mixing chemicals and packaging operations can be automated, for instance.

Nonetheless, automation is not easy as it has to be customized and approved by bodies such as the Petroleum and Explosives Safety Organisation, India’s nodal agency for regulating safety of hazardous substances such as explosives, compressed gases and petroleum.

“It is costly as the process handles corrosive chemicals and only non-ferrous metals can be used. Nevertheless, an automated process significantly reduces production cost and increases output," says Ganesan.

There is another incentive to boost productivity—exports. Crackers made in Sivakasi have a good name in the global market. Companies often get requests from buyers in Poland and Russia. But exports, thus far, are a nightmare due to logistical reasons. Fireworks cannot be exported directly from the nearest port at Tuticorin as large mother vessels do not berth here. They have to be transshipped from Colombo port where most mother vessels are of Chinese origin. These vessels refuse to pick Indian fireworks cargo. Why so?

China is a big player in the fireworks export market, and they do not want Indian companies to spoil their party. “China’s annual exports is around ₹45,000 crore. Even if we tap 15% of that market, it will almost double our industry size," says Ganesan.

Encouragingly, crackers are not the end of the road for some large companies. They want to diversify into defence production.

The central government has pressed the accelerator on make-in-India for defence production, and Sivakasi’s fireworks industry, by virtue of handling explosives, is well placed to participate in some areas. For instance, the manufacturing of bullets and gunpowder. Companies such as Standard Fireworks, Sri Kaliswari, Sonny and Ayyan are already exploring this opportunity.

The first 100 years of Sivakasi’s famed industry saw little change. Now, a cocktail of circumstances is forcing it to pivot. In a decade from now, its look and feel could be very different from what we now see and hear.