Sivakasi: Where the crackers come from, boom threatens to go bust

Sivakasi produces firecrackers worth an estimated Rs 4,000 crore every year, said to be 80% of such products across India. Traders nationwide buy firecrackers from here for Diwali and special occasions. During Diwali, manufacturers say, 15% of orders are from Delhi-NCR.

Written by Arun Janardhanan | Sivakasi | Updated: October 17, 2017 9:01 am
FIRECRACKER, FIRECRACKERs, sivakasi, fireworks, supreme court, FIRECRACKER ban, FIRECRACKERs ban, pollution, FIRECRACKERs pollution, diwali, india news, indian express news At a small factory in Sivakasi; many workers do without gloves. Arun Janardhanan

Firecracker manufacturers in Sivakasi, known as India’s fireworks capital, were already struggling when the Supreme Court banned sale of crackers in the National Capital Region during Diwali to enable an assessment of how much pollution these cause.

“It is not just the Delhi-NCR ban; we were facing a slow death since last November,” says Kalirajan Mariappan, secretary of Tamil Nadu Fireworks and Amorces Manufacturers’ Association and owner of Sri Arumugam Fireworks. Mariappan claims hundreds of fireworks factories are on the verge of closure after Diwali, something he attributes to demonetisation, GST and dwindling orders.

Sivakasi produces firecrackers worth an estimated Rs 4,000 crore every year, said to be 80% of such products across India. Traders nationwide buy firecrackers from here for Diwali and special occasions. During Diwali, manufacturers say, 15% of orders are from Delhi-NCR.

Long tradition

Much of Sivakasi in southern Tamil Nadu’s Virudhnagar comprises dry land, overrun by shrubs and lacking trees. Dirty drains line its roads, and many live in shanties or thatched houses. Water scarcity and a humid climate contribute to its unique business model — a region that depends on a single industry.

It began much before Independence, when young brothers P Ayya Nadar and Shanmuga Nadar went to Kolkata looking for work, returned with expertise in making matches, and started the companies Anil Fireworks and Ayyan Fireworks. From these developed a cracker industry, attracting thousands of workers from neighbouring districts. Machines with new technology were imported from Germany, as well as chemicals from Europe for colour and sound.

“While small industries and companies helped Coimbatore and Trichy grow, Sivakasi remains the same for many reasons including lack of outsiders, a single-focus industry and a largely illiterate workforce,” says a manager with Anil Fireworks. “Low wages and the nature of work doesn’t attract workers from even the poorest regions. Some 90% or 95% of the workers are from neighbouring villages.”

This season, most factories are done with their work. The last of their truckloads are being sent off, workers are getting their Diwali bonus ahead of a month’s holiday, and calls keep coming from politicians and police seeking Diwali “gift packs”.

In nearly a century, World War II was possibly the only time that the industry has ever shut, locals say. Now they fear closure again.

When cash vanished

“Demonetisation derailed the industry and production, and GST was the final blow,” says Mariappan, the fireworks association secretary. “The industry is largely supported by advance payments by traders from North India, who pay in bulk at discounts up to 25%. After demonetisation in November 2016, these advance orders [for Diwali in 2017] no longer came as traders in North India were worried about coming under the scanner. And as the cash flow stopped, production too dropped by 50% this year.”

An industry that runs largely on cash and weekly payments to workers had to halt or slow down operations for five months. Nearly three lakh direct workers and five lakh in subsidiary industries were hit. Mariappan says 300 factories stopped paying wages for many months, while Aditya Roopan, a factory supervisor, puts the number at over 200.

“Some workers agitated, some left their jobs, some left Sivakasi permanently,” says Roopan. “They were used to weekly wages. Most are illiterate, without a bank account; nor does Sivakasi have enough banks for so may people. Thousands of families struggled as weekly payments were paid only once in two or three months until May.”

Manufacturers estimate that Sivakasi deals with around 80 lakh traders from the North. “If a court order has banned our products, why should traders in North India make advance payments? And if there is no order from traders next year, why should we open our factories?” says Mariappan.

Single tax

“Before GST, hardly 5% of Sivakasi’s 821 factories were paying 27% in taxes. The rest were paying 2% central sales tax and 12.5% to the state,” says Mariappan. “Then the GST Council fixed a blanket 28% on the entire sector. They treated hundreds of small industries as equivalent to the other 5%, those with a turnover over Rs 1.5 crore. The result is a 40% hike in firecracker prices,” he adds.

“It was a calculation error by the GST Council,” agrees J Ganesh, who runs Sony Fireworks, which runs 14 factories and employs 3,500 workers and 600 supervisors and managers. “Personally, I wouldn’t say that I am affected because I was already paying 27% tax because of my turnover over Rs 1.5 crore. But what about the other 95% factories and over 500 subsidiary firms?”

What has made the hike a bigger hurdle is competition from firecrackers which were not made locally and which, Sivakasi manufacturers allege, have been smuggled from China. These are 30% cheaper than Indian brands. “There are plenty of Chinese firecrackers, some of which use dangerous substances that burst them if you throw them on the ground, with no need to light a fire,” says Mariappan.

These firecrackers are labelled “Made In India” but locals allege that they were smuggled in several weeks ago and reached markets in the last 10 days ahead of Diwali. “Not less than 200 smuggled containers have reached India. At Tuticorin and Chennai ports, Customs do about half-a-dozen random checks and clear all the other containers,” alleges Mariappan.

Ganesh stresses the need to find “solutions”: “To overcome the loss of business from Delhi, maybe we will come out with more varieties for children.” He says Sony Fireworks has already brought out 200 new varieties. “It is a matter of time releasing them.”

The workers

Gunpowder and chemicals spread on the floor, Rajalakshmi, 21, takes a short break. She says she had passed X and is an expert in making the cracker that spins. She covers these in wrappers; her colleague Dharmeshwari, 35, will dry them before sending to the packaging division, Rajalakshmi handles these substances without wearing masks or gloves.

Rajeswari, 45, sits with Annamayil, also in her 40s. Rajeswari says she is an expert in making “atom bombs”. “They burst like hydrogen bombs,” she says, as she wraps them.

To a question, Rajeswari says hardly any children are employed. “There may be a few in some small factories. In many places, children help parents in production. Otherwise, child labour went out of practice 20 years ago.”

Rajeswari notes that Sivakasi has failed to progress despite the large industry. “For factory owners, this is just a place to run their business. The profit goes into their businesses elsewhere, their children’s education or properties in cities,” she says.

“We are paying back to Sivakasi,” insists Ganesh, when asked why Sivakasi looks so dirty with people living in neighbourhoods similar to slums. “Even if our workers are illiterate, there are 27 schools in this locality run by owners of fireworks factories. There are six arts and science colleges and 12 engineering colleges. I myself run two schools and an engineering college. Most of our students come from families of our own workers. We ensure them free education, textbooks and medical care,” Ganesh says.

At one factory, Karuppusamy, in his 70s, is cleaning the storeroom. “I work from 8 am to 5 pm. I have been doing this since age 14,” he says. Is he worried whether the factory will reopen after Diwali? “I don’t know about tomorrow,” he says, gunpowder all over his clothes.

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