In March this year, when the government imposed lockdown due to coronavirus pandemic, the primary concern among most small business owners in Sivakasi, a fireworks cluster in Tamil Nadu — was their ability to supply, and not demand. For many, the equation was simple. The less number of days they work, the less they will produce; the less they produce, the lesser they will be able to supply, and the lesser money they will make.
Sivakasi’s thousand-plus units account for about 90% of all fireworks produced in the country, accounting for about Rs 2000 crore to Rs 3000 crore a year. About 80% of all sales happen during the festive season of Diwali. There have been demand headwinds every now and then. When agricultural income drops, the demand for crackers goes down. Many believe that the industry is not keeping pace with economic growth, owing to the concerns around air pollution. However, for the most part, the cluster had been supply-driven.
The lockdown and other restrictions took away two months of work. The supply this year is estimated to be about 30% less than normal. But, many in the cluster took it in their stride, waiting for Diwali season to kick in. “We thought all we had to do was to keep ourselves busy, and things will get better by Deepavali. People will buy crackers in large numbers, because it will be an occasion to have some fun in an otherwise bad year,” one fireworks manufacturer said.
But then, as Diwali approached, the bad news arrived not from the customers but rather from state governments. Five states — Delhi, Karnataka, West Bengal, Rajasthan and Odisha besides Mumbai corporation — announced a complete ban on fireworks this year. National Green Tribunals banned sales in all cities where ambient air quality was poor. In most of north India air pollution goes up during this month because of crop burning and wind patterns, and the fear is that fireworks might make it worse, harming those who have contracted Covid.
Fireworks manufacturers say that they have already shipped 80% of all their goods to distributors and retailers. If customers don’t buy, it will impact the entire chain. They are worried about the next year too, because the orders will go down if the distributors have unsold stock.
Over years, many fireworks manufacturers in Sivakasi have diversified to other businesses — predominantly matches and printing, getting some kind of buffer. However, smaller units haven’t, and they are likely to feel the pain much more than can be imagined!