In 2021, the Supreme Court banned the use of harmful chemicals in crackers, an order it reiterated a couple of days ago. So in today’s Finshots, we take a look at the economic impact of banning traditional crackers on the fireworks industry and why it has been hard for them to transition to environmentally friendly crackers.

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The Story

In the early 1920s, two young cousins Shanmuga and Ayya Nadar from Sivakasi, a village in Madras (today’s Tamil Nadu) were fascinated by the idea of factories springing up in Calcutta, Bengal (today’s Kolkata). So they travelled to the faraway eastern province in search of greener pastures.

Soon they landed jobs in a matchstick factory, grasped the art and realised that they could turn their learnings into a cottage industry back home. That laid the foundation for Sivakasi’s industrial units. And since matches had a close connection with firecrackers, they threw in a few more years of experience to understand the firecracker business. Their return over a decade later marked the birth of Sivakasi’s first firecracker industry.

Cut to today, this small village, now a city is the hub for firecracker manufacturing. It makes over 90% of India’s firecrackers. Employs nearly 8 lakh people directly and indirectly and is worth ₹6,000 crores. That sure seems like a magical transformation. But all’s not well at the heart of India’s cracker industry. And you probably know a part of the reason ― pollution.

See, in 2018 the Supreme Court banned fireworks with harmful chemicals like barium salts. Barium can be toxic to human health and the environment if excessive amounts of the element leech into the air. But here’s the thing. These chemicals give fireworks their sparkle. They act as an effective oxidiser that helps crackers burn better. That way they look more attractive when they light up. They also increase their shelf life.

So, the ban on traditional firecrackers left the manufacturers in Sivakasi confused. The top court only let them make green crackers i.e. crackers with fewer pollutants. But the lack of the right guidance to meet those standards meant that their production took a beating. They could make only about 60% of their usual output since close to half of the crackers made during the time needed barium. Had there been no restrictions, business as usual would have fetched traders ₹10,000 crores in the market.

But that should have changed with the government paving the way for green crackers. It entrusted the responsibility of developing eco-friendly cracker formulations to the Council of Scientific and Industrial Research (CSIR). These could cut emissions of tiny microscopic particles and harmful gases into the air by up to 40%. Their noise levels were expected to drop too.

Unfortunately, these efforts only stopped at research. Firecracker makers were given the know-how. But they lacked the financial backing to transition completely. For context, if they were to use an alternate, less polluting chemical to barium nitrate, the material cost would double. It would also increase production time as this chemical takes longer to dry.

And that’s not all. The pandemic took a toll on the industry and traders across India reduced procuring crackers. Even when everything went back to normal, many states including Haryana, West Bengal and Tamil Nadu began restricting firecrackers. Delhi put a ban on green crackers too. States weren’t willing to roll out licenses for firecracker manufacturing. And that led to another horror show ― illegal firecracker units and the return of Chinese products.

You see, Chinese crackers dominate the global fireworks market. But they can’t be imported into the country without specific permission from the government. Yet, Chinese crackers make their way through the borders under the guise of other products. And although recent numbers aren’t available, as of 2016, they held nearly 40% of India’s firecracker market. Chinese crackers are also cheap. So traders could make more money off them. Even if these aren’t illegal Chinese products, they could be selling crackers under the garb of green crackers. Or without disclosing the harmful chemicals these crackers contain on their labels.

And people buy these crackers simply because they don’t have a way out. Most units in Sivakasi now operate at 60-70% of their capacity. They’re also trying to fold in CSIR approved additives into the cracker manufacturing process to lower dust pollution by at least 30%. As we said earlier, that could slow down production too. However since manufacturers in Sivakasi aspire to tap the global market, becoming environment-friendly could give them an edge over Chinese fireworks that cause higher levels of pollution. Put all these things together and it simply means that the current supply isn’t able to meet people’s demands. That gives illegal units even more reason to procure and sell banned items.

So what’s the way out, you ask?

Well, regulation is the word. If you look up “illegal firecracker factory blasts” on the internet, you’ll see that myriad such factories have blown up in Tamil Nadu, Karnataka, Madhya Pradesh and West Bengal in 2023 alone. And West Bengal has come up with a stop-gap solution to the problem. Its state government plans to come up with green cracker hubs in districts where illegal cracker factories are popular. Cracker traders can get licensed to sell green crackers in these zones a couple of days before the festive season. That could organise operations and divert demand away from unsafe products.

So you see how state governments have been on their own in keeping things under control. But a central regulation could help lakhs of people who depend on making these crackers for their livelihood. In a recent court hearing where cracker makers requested the Supreme Court to allow the use of barium in lower quantities, the top court asked the government to come up with a framework that could help regulate green crackers. Now, there hasn’t been a lot of chatter about this post-September. But maybe these regulations also need to factor in the financial troubles of the firecracker industry. That could really help these folks have a happy Diwali. We don’t know if this sounds like wishful thinking.

Until then…

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