Global Economy

Government in huddle as fragrance of Chinese agarbattis spreads far and wide

NEW DELHI: Although the countrywide surge in religious fervour has pushed the demand for incense sticks to new highs, cheap imports have sent India’s very own agarbatti industry almost up in smoke.

ET has learnt that a high-level meeting this week in New Delhi will chart a revival path for the indigenous industry. A proposal to hike import duties on round bamboo sticks or raw agarbatti sticks tops the agenda.

Huge reduction in import duty on raw agarbattis under the Indo-Asean free trade agreement has led bamboo sticks form China and Vietnam to flood the market through the last few years. Assessments indicate that the domestic agarbatti industry is importing round bamboo sticks and raw agarbattis (without perfume) worth nearly `800 crore per year.

Import duty was brought down from 30% to 10% in 2011 and then to 5% in 2018. This led the import of raw agarbattis surging from Rs 31 crore in 2009 to over Rs 540 crore in 2018. Import from China alone has increased from Rs 1.7 crore in 2011 to Rs 212 crore in 2018. The duty cut has skewed the trade balance in such a way that though the demand for agarbattis has shot up from 1,245 tonnes per day in 2009 to 1,397 tonnes a day in 2019, the domestic industry has run into the red. While Indian perfumers had about 2% dependency on raw agarbatti imports in 2009, it has surpassed 80% as on date, as per government data.

Micro, small and medium enterprises in the trade are grappling with the price of raw agarbattis plunging from Rs 70 per kg to Rs 48 per kg. “Over 25% of our units have closed down. While Khadi and Village Industries Commission established over 2,800 projects in 2016-17, in 2018-19 only 397 could be set up. This has obviously resulted in decreased employment opportunities at grassroots level,” KVIC chairman VK Saxena told ET, adding: “We have taken it up with the government.”

The government is weighing a two pronged approach to fight the crisis. Key to a course correction is revising the import duty. The other proposal on which work has begun is to increase India’s bamboo production. KVIC plans a mega-plantation drive for high-quality bamboo (bambusa tulda) to achieve self-sufficiency in raw material by 2022. It has begun with planting of saplings in Kanauj, Varanasi and Delhi. It will next set up agarbattimaking units near these plantations to cut down on logistics cost.


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