The Match Box Industry

An Overview

Major Players In The Market Today.

• Vishwa Group of Concerns.• Swarna Match Factory.• Thangavel Match Industries.• The Venus Candle Works.• Maxwell Inc.• M/S Wimco Ltd.• ITC Ltd.

“Each time you strike a match, you contribute to the turnover, but not to the profits of the Indian match industry”.

Match Box Industry

• The industry produces 90 million bundles a year• Each bundle has 600 matchboxes and each box has

between 40 and 50 sticks. • The Rs 3,000 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(AICMI)

• Tamil Nadu accounts for almost 75% of the production of matches

• The industry here seems to be at crossroads, with many firms diversifying into other industries such as textiles, fireworks and printing.

• 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

“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”.

Light Facts of the Industry

• Mechanized matchbox making units that are tax-compliant make losses and some companies that didn’t think it necessary to diversify are suffering now.

• Match Box makers are trying to enter new fields but are suffering as their match making units are making losses and they do not sufficient capital to invest.

The Industry Today

• Per capita consumption of matches in India increased steadily from 2.45 sticks per capita in 1970 to 4.25 in 1985.

• There are wide fluctuations in the annual growth rate in the consumption of matches varying from as low as 3% (before 1970) to as high as 28% (from 1977 to 1983).

What are the Reasons for an Increase in the Matchbox Sales?

• The rising levels of income in relation to which prices of matches have shown remarkable stability over the years, growing urbanization, swelling numbers of smokers, and changes in fuel consumption patterns indicate that the future rate of growth could be higher than the 6% as supported by past trends.

• Consumption of matches in 1977 was 1,965,138 cases (one case = 7,200 boxes).

• The requirement for matches in 1990 was 4,191,663 cases.

• The current estimate for the year will be around 9,221,658 cases.

• It will be up to the three major players of the match industry: The Mechanized Sector(The Small-Scale, Hand-Made)Middle Level Sector and the Cottage Sector meet these demands.

The Mechanized Sector

• Wimco has pioneered the manufacture of chlorates, paper, pulp, glue, and now, the raising of fast growing poplars, required for the manufacture of quality matches, thereby eliminating much of their dependence on imported raw materials.

• Government policy has, over the last three decades, placed a ceiling on Wimco’s capacity at 695,000 cases.

Contd…

• Their market share has gradually fallen to 18% in 1984 although they pay 60% more in excise taxes than the middle level handmade sector.

• Although highly automated, Wimco operations continue to be fairly labour-intensive and it is argued that they are far more wage-intensive than either of the handmade sectors.

• Workers earnings in the mechanized sector at Wimco average about Rs 35 per day.

The “Match Kings” of the Handmade Sector

• Within this sector a ‘middle level’ of small-scale match production units has emerged as the dominant production center in the country.

• Located in Tamil Nadu state this middle level is the product of the first factories begun here by the Nadar family.

• This sector accounts for 67% of the match market and it continues to be dominated by 18 closely related families, often referred to as the “Match Kings of South India”.

The Handmade Sector

• The handmade, middle sector is presently confident that the entire requirement of safety matches for the nation can be met by them in the near future.

• Since the development of a major fireworks industry in the Sivakasi region, labour is presently not as easily available as it once was.

• Moreover 30% of these middle level factories now use cardboard boxes, so these are actually semi-mechanized relying on power driven machinery to form these boxes.

The Cottage Industry

• They may be household-based but are often more efficient in their use of a wide variety of materials, produce less wastage and distribute benefits to a deeper labour pool.

• Officially cottage industries are those using manual production methods that produce less than 75,000 cases of matches per year.

• Sixty percent of these are in South India.

The Khadi and Village Industries Commission

• The KVIC cottage match industry program emphasizes technical, financial and marketing assistance.

• But the KVIC turned out to have a lot of shortfalls.• KVIC is presently engaged in reorganizing and

restructuring its cottage match activity before embarking upon any more substantial programmes.

Some of the important components of the new program included:

• Research, development and training programs, with technical extension centers to be established in six locations nationwide coordinating training programs;

• Creating an infrastructure for distribution of raw material and for marketing finished matches;

• Product diversification to include “fancy” matches; • Development of appropriate technologies for family

box making and frame filling.

Issues and Constraints

• Shortages of raw materials, particularly match quality soft woods, but also chemicals, match wax and wax paper;

• Geographical distribution of the industry in one region and resulting labour shortages;

• The monopoly of the 18 “Match Kings”; • Exploitation of women and child labour by

these monopolists;

• The failure of the cottage sector; • The introduction of new technology in the

hand made sector; • And the unique problems of the veneer and

splint making industry.

MATCHBOX INDUSTRY IN TAMILNADU

• The matchbox industry of Sivakasi in Tamil Nadu is witnessing one of its worst periods now.

• Tobacco giant ITC Ltd., which entered the market almost two years ago is posing serious threat to the traditional market players.

• ITC, with its strong distribution network throughout the country, had in its first eight months reached the target where it sold over 9 crore matchboxes a month.

• The matchbox industry is predominantly located in the southern districts of Tamil Nadu and supplies matchboxes to the entire country.

• To promote this industry, government has exempted the product from both the excise and the sales tax.

Tamil Nadu matchbox industry demands 8 percent duty cut

• The government should reduce the Cenvat to save the industry.

• potassium chloride, red sulphur, paper, board and wax - jumped manifold in the recent past but not the retail price of matchboxes.

• Sulphur price has gone up from Rs.17 per kg to Rs.32 per kg in a matter of four months. Potassium Chloride is now at Rs.40 per kg, up from Rs.28 a year ago.

• For the past several years, the industry has not been able to increase the matchbox prices. It remains fixed at fifty paisa owing to unhealthy and illegal competition.

• Large match industry manufacturers paid Cenvat at 12 percent while hand-made units were totally tax-exempt. This leads to huge tax evasion by large as well as small units.

• Out of the 90 million bundles (each bundle consists of 600 matchboxes) per year.

• Less than 18 million bundles are made by small units that are tax-exempt.

• According to industry players, the government can bring down the Cenvat to four percent so that the cost difference between the organized and law-abiding units and the small units could be lowered.

• Other option is to abolish the Cenvat and levy one percent cess across the industry.

The Main Competition To Indian Exporters

• Indian exporters were facing stiff competition from:-

• Pakistan• Africa • South America.

Few Well Known Smaller Match Boxes In the Market

•Speed•Cap•Ship•Agni•Parachute•Chavi•Toran•Vip•Umbrella•Rose Gulab•Doller•Lion Matches•Bittoo