- The Hindu

In Sivakasi, Tamil Nadu’s fireworks town, a dud Deepavali looms

A combination of economic factors — demonetisation and the rollout of the GST — has hit the Sivakasi fireworks industry hard. Ironically, the ‘illegal sector’, or the unlicenced arm of the business, seems to be thriving, having escaped the note ban bump by freely accepting withdrawn currency

Factories at Sivakasi, the fireworks hub of India, have cut down production by 25-30% this festive season. For this industry, which thrives during the months leading up to Deepavali, where the bulk of its sales happens, this is a cruel blow. While it was anticipated that the ban on importing firecrackers from China would lead to improved prospects for the fireworks industry in south Tamil Nadu, what has happened is quite the contrary. Factory owners claimed that there were two reasons for the unfortunate and unexpected fallout: demonetisation, which came into effect in November 2016, and the recently introduced Goods and Services Tax (GST).

“Post Deepavali, (2016) the centre announced its demonetisation programme. The money for the consignments that we dispatched for the festive season came into our coffers very late. Some of the traders settled their dues only in March/April. With consumers not having enough cash, the usual wedding orders and party orders (for New Year) were all put on hold. This was a major setback to the industry,” said P. C. A. Asaithambi, President of The Tamil Nadu Fireworks and Amorces Manufacturers Association (Tanfama). The GST rollout was another big blow, he added.

The Union government has levied a 28% GST on fireworks. Prior to this, the industry was paying 2% towards Central Sales Tax and 12.5% towards central excise duty, a total of 14.5%. The industry has now knocked on the Centre’s doors requesting to bring GST on fireworks below 5% or atleast 12%.

Tanfama’s secretary K. Mariappan said that only 50% of the usual production has been achieved so far, this year. According to him, the working capital for this industry comes primarily from bank loans and advance payments.

“Post demonetisation, the quantum of advance payments tumbled down,” he said.