Matchbox industry looking for level playing field to survive

Written by Joseph Vackayil | Chennai, March 9 | Updated: Mar 10 2008, 05:46am hrs
The only industry that has withstood the pressure of inflation, raw material price increases, wage hikes, and all other cost factors in the country for more than a decade is the humble matchbox, selling even now at 50 paise. The entry of the multi-billion crore ITC Ltd into contract manufacturing and branded marketing of matches, along with the traditional Wimco, has not changed the situation. Industry sources said the next possible stage of price increase is Re 1. They fear this wouldnt be tenable due to price undercutting.

In the market price of Rs 300 for a bundle of 600 boxes each, Rs 20-22 is tax. Evading this amount in a loss-making industry will have a tremendous impact in the retail market. This anomaly is destroying the industry, according to Sriram Ashok, director of Sundravel Match Industries, Sivakasi, and president of the All India Chamber of Match Industries.

The inflow of matches from Pakistan is another threat the industry will have to face very soon. The only answer to save the labour-intensive essential industry is a total tax waiver or a very low level of duty without exemption, S Ashok, vice-president of the Chamber and director of Asia Match Co Pvt Ltd, Sivakasi, told FE. The highly fragmented Rs 2700-crore match industry in the country now falls into three categories of tax exempted, tax paying, and tax evading groups. Evasion is worth over Rs 120 crore and the government is turning a blind eye on it, allowing a slow death of genuine tax paying companies, Ashok said.

Alternatively we request a reduction in the rate of Cenvat to 4% from 12% without any exemption. This will discourage match manufacturers from evasion, encourage more voluntary compliance, and save over 3 lakh workers in the organised sector, Sriram said.