Govt cracks down on illicit cracker imports

Officially, no imports of crackers from China have taken place in the last three years. But on the ground, punitive searches all across India have yielded a huge cache. In concerted raids conducted on Wednesday in 100 godowns and retail outlets in cities like Mumbai, Chennai, Bangalore and Ludhiana, crackers worth Rs 2 crore have been seized, a finance ministry statement said.

In other inspections of import cargo, many containers were intercepted in September that had fire crackers concealed in them. The directorate of revenue intelligence had seized 285 tonne of illegal crackers during the August-September period. This year, the government has been proactive against any illegal imports of crackers to protect the domestic industry that employs close to five lakh and produces crackers worth about Rs 6,000 crore. The government’s pro­mpt action was following an appeal by Prime Minister Narendra Modi that ‘Made in India’ products such as divas (earthen lamps) be used to light up instead of imported decorative lights to celebrate Diwali.

While no cracker imports have taken place officially in the last three years, local manufacturers estimate that around 30 per cent of the total fireworks and cracker market in India has been cornered by illegal imports. Around 95 per cent of all units manufacturing firecrackers in India happens to be in Tamil Nadu and state government is also conducting its own raids. At the beginning of the festive season when there is maximum demand for crackers, the directorate general of foreign trade (DGFT) has already written to the Central bureau of excise and customs (CBEC) and the department of industrial policy and promotion (DIPP) to take pre-emptive action to stop illegal imports.

An “alert circular” to maintain strict vigil against illegal imports of Chinese crackers has been sent by the directorate of revenue intelligence to chief commissioners of customs and related departments. There is no explicit ban on import of firecrackers but its imports are checked through other means. The import of foreign-made crackers can be made only on the basis of an import authorisation and the department concerned does not issue such authorisations. Licence for import is granted under Explosive Rules 2008 by the petroleum and explosives safety organisation.

“Chinese fireworks and crackers are smuggled into India. A 40 feet container, containing crackers, will be easily worth Rs 35-40 lakh. These smugglers show the imports as ‘low value goods’ like toys that are worth just about Rs 4-5 lakh and smuggle in the fireworks,” president of Tamil Nadu fireworks and amorces manufacturers’ association G Abiruben said. Apart from hurting the local industry, smuggling also leads to loss of tax revenue for governments. Fireworks sold in India attract a central excise duty of 12.5 per cent and an additional 2 per cent tax for inter-state sales.

Besides these, fireworks attract 14.5 per cent sales tax at the point of sale in the respective states. Put together, states and the Centre collect Rs 30 as tax for every Rs 100 worth of fireworks sold in the country. “We suspect that at least Rs 2,000 crore worth of Chinese fireworks have flooded the market, which has resulted in about Rs 600 crore loss in revenue for the governments,” Abiruben said.

This revenue loss figure has been arrived at following a 30 per cent drop in orders from wholesalers and dealers this year. “Closer to last Diwali and the festival season, spurious Chinese products flooded the market and because of which dealers had unsold stocks last year. Hence, they are playing it safe this year,” he said.

“For the last 45 days or so, fireworks factories in and around Sivakasi are working only three days a week, instead of six days. This is the busiest season, when the production capacity utilisation used to be at 95 per cent. Instead, this year, the factories are operating at 45-50 per cent capacity,” Abiruben said. The governments have been very proactive and acting strictly to check these illegal imports from China.

“The Chinese fireworks import menace hit the industry in a serious way only last year, when the whole of north India was flooded by these products. Hence, we had represented to the state government and the Centre and they are vigorously working to stem this rot,” he said.

“Since the imports are unlicensed, the goods are going to be stored only in unauthorised godowns. If authorities can exercise vigilance over the next few days these cannot come to the market and thereby cause financial loss to such illegal importers and force them to stay away from illegal imports from at least next year onwards,” Abiruben said.