For the cracker manufacturers in Virdunagar district, the coming Diwali season may not be as glittering as it was in previous years. Increase in crude oil prices, which is reflected in road freight, raw material and labour costs, the recent bomb blast and floods have taken a toll on the festive mood.
"The terror attacks have dealt a severe blow to the sales of crackers. Interest among the public on fireworks has come down sharply," said D Mariappan, an industry representative.
The cracker industry in Virudhunagar district, especially Sivakasi, 800 km from Chennai, which accounts for 80 per cent of the total firecrackers industry in the country, is estimated to be around Rs 900 crore. More than 60 villages in this district are involved in the cracker making business for decades. The industry provides more than 100,000 direct and 30,000 indirect jobs.
Speaking to Business Standard, A Asaithambi, president, Tamil Nadu Fireworks and Amorces Manufacturers Association said that early this year the town had got some orders from the northern states, most of which are on a credit basis, for Diwali season, "but so far people are yet to take delivery".
Prices of raw materials used to make crackers have increased five-fold in the last six months. For instance, the cost of sulphur, a major ingredient used in making crackers was Rs 9,000 a tonne in April and now it is Rs 52,000 a tonne. Similarly, price of potassium nitrate increased by 33 per cent to Rs 40,000 from Rs 30,000 and is expected to touch Rs 50,000 in the next two months. Waste paper price increased by 15 per cent to Rs 15,000 from Rs 13,000.
Asaithambi said the rise in fuel price was another concern for the industry. Most of the raw materials are transported from the northern states, mainly Punjab and Haryana. Freight rate has increased almost 50 per cent and labour costs are up from 20 to 30 per cent compared to last year.
The industry, which was thinking of increasing the product cost, is now rethinking since the sales here started slowing down. "Increasing the rates is not possible at this juncture due to poor demand," said V Sekar, a whole saler in Sivakasi. He said 70 per cent of the total production is consumed by north Indian states while 30 per cent by the south. If the north Indian market is going to slow down, then the only market would be south, but competition will be high especially from the unorganised sector.
Asaithambi also expressed concern over the increasing number of unauthorised fire cracker units especially in Sivakasi. "The unogransied sector is growing faster than the organised sector and they are doing half of the business of organised sector currently. He noted, "When it comes to the cost, their products are 40 per cent cheaper than organised sector."
