Growing sales of Chinese agarbattis is not appeasing the Indian government
- The Indian government is mulling over increasing the import duty levied on round bamboo sticks or raw
agarbattisticks to slow down the imports from China.
- The surge in imports from China and
Vietnamhas started hurting India's ₹60 billion agarbatti industry.
- The surge in demand for Chinese agarbatti has forced to close down 25% of the units of Khadi and Village Industries Commission, threatening people of job loss.
This duty increase if it happens, will undo the country’s errors of the past. India had reduced the import duty on raw agarbatti sticks under Indo-Asean free trade agreement from 30% to 10% in 2011. Later, it was reduced went down to 5% in 2018. As a result, raw agarbatti imports rose by a massive 1641% to ₹54 billion in 2018.
The duty changes affected the indegenous industry which mostly comprises of MSMEs. Due to cheaper imports, they had to cut down prices to ₹48 per kg from ₹70 per kg.
This is yet another body blow to a homegrown sector, as the country itself is in the throes of a slowdown. However, the surge in demand for Chinese agarbatti resulted in the closure of 25% of the units of Khadi and Village Industries Commission. As many as 2 million people are employed by the industry.
The domestic market is concentrated around Tamil Nadu, Karnataka, Uttar Pradesh and West Bengal.
While the sector has been exporting to the Gulf, Africa and Europe, they are being beaten down by competition in the domestic market, which is key for their survival. The domestic demand is at around 1,397 tonnes a day which Chinese products are eating into.