Faces competition from multinationals and low demand in the domestic market.
The Tamil Nadu matchbox industry, which accounts for 85 per cent of the Rs 2,000 crore Indian matchbox industry, has decided to take a leaf out of the notebook of FMCG players.
Forced with rising input prices, FMCG players have chosen to reduce pack sizes rather than raise prices. Similarly, representatives of the matchbox industry, comprising thousands of small units, said instead of increasing matchbox prices, they have decided to reduce the number of match sticks in each box as well as focus on export markets.
Sriram Ashokan, president of the Matchbox Manufacturers Association in Sivakasi, said, “It is not viable to stay in the industry. People have started moving to textile and paper industries.” This was, according to him, due to a reduction in the demand for matchboxes, increase in raw material prices and competition from multinationals.
The industry in Tamil Nadu employs over 250,000 people across Sivakasi, Kovilpatti, Kazhugumalai, Ettaiahpuram, Sankarankoil, Sattur, Ezhayirampannai and other towns of Virdunagar district. The labour-intensive handmade and semi-mechanised match industry is largely a cottage industry.
A cross-section of industry representatives told Business Standard that consumption of matchboxes has come down by 15-20 per cent in these towns, mainly due to introduction of gas; electric, induction and other stoves; lighters and solar energy.
Another factor was the entry of multinationals, who offer 600 boxes for Rs 120, compared to Rs 250 charged by units at Sivakasi, said Ashokan, managing director of the Arasan Group.
An office-bearer of the National Small Match Manufactures Association added that after the oil price hike, the price of wax (a petroleum product) has increased to Rs 53 a kg from Rs 49 a kg. Similarly, the price of cardboard, used to make matchboxes, has increased by 18 per cent to Rs 32,000 per tonne from Rs 27,000. The prices of other major raw materials, including sulphur and chlorate, have almost doubled in the past six months.
While on the one hand the cost of raw materials is going up, on the other hand, manufacturers said they were are not able to increase the retail prices of matchboxes, due to competition. A matchbox currently sells for around a rupee in the domestic market.
Ashokan said the industry had decided to bring down the number of sticks packed inside a matchbox to 50 from 70, since customers are not willing to pay the additional cost.
To address the issue, the units have approached the Union government, seeking tax benefits and a relief package. “We want the government to supply raw materials at concessional rates through SIDCO and need an incentive of a minimum of 10 paise a matchbox from the government, which gives similar incentives to the tea industry,” he said.
“We have made representations to Union Finance Minister Pranab Mukherjee on several occasions but so far the industry has yet to get a reply,” said Ashokan.
The association has also sought the state government’s support for softwood plantations, in the districts of Dindigal and Dharmapuri. Currently the industry is sourcing softwood from Kerala.
Commenting on the international market, an exporter from Sivakasi said the price in the international market has come down to around $5.5-6 from $9 for 100 boxes. He added, “But we are not able to meet the Chinese price, which is about $4-4.5.”
Ashokan noted that Sivakasi town alone used to export 10-20 containers every month until five years ago, and this has now increased to 200. The demand is mainly from countries of southern and western Africa.
To cut freight and other logistics costs, some units — like Pioneer Industries, which owns the Asia Match brand — have set up units in African countries. Others have started exporting matchboxes.
