CASE 15 agarbnatti

INTRODUCTION
The burning of incense in religious and social
functions has been practised in India since early times.
Hindu practice of ofering prayers in temples and other
places of worship,Dhup an aromatic powder or paste is
burnt in Indian homes as a fragrant fumigant and is
reputed to possess insecticidal and antiseptic properties.
Agarbattis are obtainable in diferent colors and with
diferent perfumes.The demand in internationalmarket is
ever increasing and eported to almost to every country
in the world.
The burning time !of an agarbatti varies from "# minutes
to $ hours according to %uality and si&e.
About '#( of the agarbattis manufactured are of cheap
%uality containing only charcoal powder or low %uality
sandal wood powder with a miture of #)( of *wood gun+
powder. ,heap perfumes are used to give them a top
note. In superior varieties, essential oils, puri-ed resins,
natural -atives like amber, musk and civet are used
along with synthetic aromatics. Absolutes are use in the
costlier types.
The origin of agarbathi.making as a cottage industry can
be traced to Than/avur region of Tamil 0adu from where it
spread to the neighbouring state of 1arnataka, which
currently is the largest producer in India, and to a lesser
etent to Andhra 2radesh, 3u/arat and 4ihar. 4esides
providing employment to unskilled women and children,
in recent years, agarbathi has increasingly become a
signi-cant foreign echange earner for the country. 5nder
the liberal economic policies of the 3overnment, the
agarbathi industry has potential to epand its global
market.
Trade and marketing set up
Agarbathi industry is gradually developing a wider base.
6f the total domestic sales of 7s '." billion 8appro. 59:
";< million= in 9outh India accounted for $#(, >est $)(,
0orth "<( and ?ast "'(. Almost two.thirds of
consumption took place in rural areas 8@".A$(=.7ising
demand for the products and earning of hard currency
has led the agarbathi industry to orient itself increasingly
towards eports. Total eports have increased by A@@(,
from 7s ".# billion 8appro. 59: BA million= in ";<;.;) to
7s B billion 8appro. 59: llA million= in ";;$.;B.
Core than <)) registered and $))) unregistered units
currently eist in the country and only up to ")( of
these, mostly in 1arnataka, are engaged in eport trade.
Carket si&e
There are B)) eporters in India who together eport
Agarbatti 8or incense sticks= worth 7s.<)) crores. 6f late
multinational companies have introduced machine made
agarbatti for the India market. As a result all other
leading Indian manufacturers are using machine made
round bamboo sticks for making agarbatti
The si&e of the dhoop market is 7s A)) crore, of the total
agarbatti market of 7s ",")) crore. 9i&e of the organised
market is about B) per cent of the total market of
agarbathi .
The biggest eport market, according to the Canaging
2artner was the 59 followed by a rapidly growing demand
in DATAC countries such as 4ra&il, 2eru and Argentina.
9mall units numbering over "),))) operate in diferent
parts of the country and the industry turnover has been
estimated at over 7s. ",))) crores, providing
employment to over "A lakh people, directly and
indirectly. After liberalisation many C0,s have ventured
into this sector.
fact, many of the agarbathi manufacturers are regional
players with limited resources who cannot counter the big
companies. 6f the around A) small and medium
agarbathi manufacturers in the country,
6ne of the prime reasons for the C0,s to enter this
sector was that the agarbathi industry has been growing
at an average rate of ") per cent annum,
whereas the growth in consumer durables was either
stagnant or growth. EAgarbathi is a fast.moving product
with a good shelf life. The demand has been growing by
around A) per cent in northern, eastern and western
9tates.E
Further, the demand for agarbathi and other products had
gone up worldwide with increasing awareness on Indian
spirituality and growing popularity of aroma therapy,
especially among the youth. IndiaGs agarbathi eports
touched 7s. $)) crores.
The product was being eported to other countries like
>est Asia, Africa, ?urope and 9outheast Asia. ,hina was
emerging as a big market as well as a competitor,
7A> CAT?7IAD9 A0D 9657,?9
The ma/or raw materials used in the agarbathi industry
are bamboo, wood charcoal and processed perfumes.
Coreover, since families are contracted and agarbathi
workers in these families are mostly women, some child
labour input occurs, mainly to assist the family business.
?ssentially, agarbathi re%uires the stick, a paste based on
/igat powder 8an adhesive.like substance made from
powdered bark of the Caclilus makarantha tree=, charcoal
powder, and a series of natural products, in various
combinations, to provide the fragrance 4amboo is the
preferred species for making sticks,
the preparation of the sticks alone involved about $)
million workdays.
E7ollingE the sticks to glue on the incense paste and
incorporate charcoal powder 8the end.product of rolling is
Enon.masalaE sticks= also employs a large labour force.
The raw materials . sticks, paste and charcoal . are
provided by entrepreneurs and the rolling is done largely
at home. 7olled sticks are purchased in units of ")))
Addition of the incense, to make EmasalaE agarbarthis is
usually done in factories owned by microenterprises. The
ration of labour is approimately <)( home based to A)(
factory based. Home based labourers are linked to
factories through local business units. Finished agarbathis
are packed in paper or cardboard tubes. 5sually paper
from printing presses or cardboard is supplied to
labourers under tie.up arrangements to produce the
re%uisite packaging
,ost of agarbathis
The cost of these basic ingredients and the labour to
produce the raw agarbathis accounts for only ")( of the
cost of -nished agarbathis. Three times that cost
represents the perfumery ingredients of which two.thirds
are imported. The various blending and individual
ingredients are generally treated as Etrade secretsE.
276D5,TI60 A0D ,6095C2TI60 2ATT?709 A market
survey by the 0ational ,ouncil of Applied ?conomic
7esearch the total %uantity of agarbathi produced in the
country at "B' billion sticks, valued at around 7s. ' billion
859: ";@ million= 80,A?7 ";;)=.
The distribution of the consumption is skewed in favour of
the lower income group, which earns less than 7s A#,)))
859: '))= per year but consumes a little over two.thirds
of the production. The highest income group, with above
7s,#@,))) 859:",#')= of annual income, purchases only
$( of the production.
The consumption is also highly concentrated in rural
areas 8@"( of the total consumption=. The trend is similar
throughout the country with southern and eastern regions
reporting @B( consumption each in their rural areas.
,69T 9T75,T57? of agarbathi
There are two stages involved in the production of
agarbathi. 6ne stage involves the production of non.
perfumed 8non.masala= agarbathi, and the second entails
the production of perfumed 8masala= agarbathi. The costs
of production can also be disaggregated by these two
stages as labour costs are signi-cantly diferent in these
two stages.
0on.perfumed agarbathis are generally produced at
home through the family contract system and take up to
<)( of the total labour re%uired! its share in the total
production cost, however, is about ")( in preparing raw
agarbathis The addition of perfumes is carried out in
factories and takes about A)( of the total workdays
re%uired for the production and, along with packaging,
accounts for about @)( of the production cost. Another
A)( of the cost is incurred in marketing.
2ackaging is one ma/or variable. 4oth the input costs and
the value of the output difer from season to season and
from place to place. This is because the materials are
mostly purchased as residues from other industries.
276D5,TI60 D?TAID9 A0D 276,?99 6F CA05FA,T57?
All the ingredients in powder form are mied well in the
proper proportion with water to a semi solid paste. This
paste is applied to bamboo sticks and rolled on wooden.
planks with hands uniformly. The raw sticks re them dried
and packed in suitable bundles.
7am material re%uired
,harcoal 2owder , 3igatu , >hite chips powder ,
>hitechips powder, 9andalwood 2owder, 9andalwood
2owder, 4amboo sticks, 4amboo sticks, 1uppam Dust,
2erfumes, Diluents like D?2 etc.
9mall player in agarbathi market
traditional agarbathi manufacturers could compete with
the big players if the %uality of the product was good. In
fact many companies that entered the market
9mall units numbering over "),))) operate in diferent
parts of the country and the industry turnover has been
estimated at over 7s. ",))) crores, providing
employment to over "A lakh people, directly and
indirectly. After liberalisation many C0,s have ventured
into this sector.
MARKET POTENTIAL
Agarbattis are used by all communities in India,
India is the largest producer of agarbathis in the world.
As on today about ;) foreign countries are using our
agarbattis.
the main centers of manufacture being Cysore and
4angalore. As on today, about "))) units eist through
the 9tate of 1arnataka. Coreover, it is an eport.oriented
industry also. In fact, this is one the items considered for
boosting eports. 6wing to the low level of technology
involved in this industry, this can be taken to rural areas
without much diHculty, thus implementing the rural
industrialisation policy of 3overnment of India to a
greater etent. IndiaGs agarbathi eports touched 7s. $))
crores.
2ro-t margin of industry
As the workers are linked to the factories directly or
through contractors and their role ends at the raw
agarbatti production stage and they do not have any
interface with the market little attention has been paid in
the literature to the trade and distribution network
involving wholesalers and retailers, margins involved etc.
,ontractors have a mark.up of 7s. $ to B per "))) 8or
roughly A# to $)(= at which they supply to factories and
which presumably covers their costs of operations and
pro-ts.
>ages and ?arningsI
In general, agarbatti rollers whether home or factory
based are paid on a piece.rate basis. ?arnings vary across
states with workers in 1arnataka appearing to be
somewhat better placed in contrast to there counterparts
in 3u/arat and Andhra, the other two states for which
estimates are available.
>orkers here are paid at a rate of 7s. ; per "))) sticks
and at an average productivity of B))) sticks per full
working day manage an efective wage rate of 7s. $@ per
day.
The average worker manages to earn about 7s. "))) per
month. In 3u/arat, the rate is much lower at 7s. # per
"))) sticks and combined with lower productivity rates
yields the workers incomes in the range of 7s. $A# per
month.
In Andhra a rate of 7s. @ per kilo of masala processed
8approimately "")) to "A)) sticks= is reported.
?arnings for a family of si were reported in the range of
7s. B)) to <)) for a si day week implying an efective
wage of 7s. "A to A) per day. Further, if the product is
re/ected for %uality reasons the loss has to be borne by
the workers lowering earnings further.
Factory based workers are paid somewhat better rates for
higher %uality sticks but given the lower productivity have
the same efective wage rate.
89ourcesI 1aur 8";;;=, 1rishnamoorthy 8";;;==
Contribution of women worer! to t"e !e#tor$
>omen workers constitute ;)( of the workforce of the
industry which has an annual production value of around
7s. <.# billion.
Con%ition! of &or$
Homebased workers engaged in agarbatti making in
4angalore live and work near the factories. Agarbattis are
rolled on the pavements and lanes around homes in
urban slums. They sit on the Joor and roll the agarbattis
hunched over low tables bought out of their own
resources. Degs are stretched under these low tables. The
task is etremely ardous and repetitive. Cost workers
spend about B.# hours per day in this work combining it
with their household responsibilities to get an occasional
respite from the monotony. >hile children form a
distraction, in general homebased workers have a more
conducive work environment than their factory
counterparts who sit in rows of workbenches in dingy,
T"e Po'i#( Conte)t
Im*a#t of go+ernmenta' *o'i#ie! on t"e agarbatti
in%u!tr(
In general, the liberali&ation of the economy and
deregulation has had a positive epansionary impact on
the agarbatti industry with increased eports, revenues
and employment generation. However, certain areas of
governmental inattention or anomalous policies hold back
the progress of the industry. These are highlighted belowI
Prob'em! fa#e% b( in%u!tr(
1. The industry is on an unsustainable growth path vis.
a vis. the availability of key raw materials. The species
Maclilus makarantha, the tree source for /igat powder,
has declined considerably in 9outh India and is currently
being sourced from 5ttar 2radesh. In the absence of
targeted programmes to augment this species these
supplies too will dry up while demand for /igat is
predicted to grow by #)( over the net -ve years. A
B)( increase in the demand for bamboo and A#( for
charcoal in the same time frame is also predicted.
9upply issues with respect to these are also not being
addressed. Already the industry sources its bamboo
splints from the far away 0orth ?ast. 9hortages of raw
material could /eopardi&e the economic viability of the
industry and render thousands unemployed or
displaced by substitutes. ?forts by relevant state
governments to incorporate the raw material needs of
the industry into their forestry and social forestry
pro/ects are urgently called for.
,urrently the industry is taed at multiple levels e.g. raw
material taes on bamboo, charcoal, /igat and aromas
range between A# to ;)(, in addition to which a
purchase ta on raw agarbattis and sales ta on the
-nished produce are levied. There is need to look at the
ta structure in toto and determine if the burden of
taation is fair or whether it can be rationali&ed.
2. Diferent rates of taation and difering labour law
re%uirements across states creates an anomolous
situation. For instance, 1arnataka is the only state
where the agarbatti industry falls under the purview of
the Factories Act and which conse%uently has to pay
wages somewhat in line with minimum wage
re%uirements 8wages for homeworkers have some
relationship with and move in tandem with factory
wages= and has to provide factory based workers with
social security coverage. This along with much lower
rates of sales ta in states like 4ihar and 5.2
encourages the industry to migrate to these states to
the detriment of the workersK cause. A uniform
coverage of the agarbatti industry under the Factories
Act in all states is called for.
3. 9o far the industry has received little 7 L D support
from governmental or private sources. 4ased as it is
entirely on forest based natural resources and manual,
labour.intensive, non polluting techni%ues of production
it stands to carve for itself a niche as a MgreenK industry.
However, support in developing new products
8mos%uito repellents, air freshners, aromatherapy
incense=, eploring new markets and developing more
sophisticated marketing strategies has not been
etended to the industry in any substantial measure.
3iven its huge employment generation potential this is
regretable. 6f course, these eforts must be taken in
tandem with measures to epand raw material supplies
to fructify in terms of additional employment for the
poor.
4. ,amboo ba!e% in%u!trie!
The 0orth east region of India has the maimum
concentration of bamboo in India owing to its climatic
conditions. There is no dearth of bamboo. At present
bamboo is put only to traditional use, handicrafts and
papermaking. 0ow the 3overnment of India has
announced the bamboo mission for promoting bamboo
based industries in the 0orth ?ast 7egion. Cachine
made bamboo sticks, blades, ply, etc are some
products, which has substantial potential.
0orth east region of India has the maimum
concentration of The bamboo in India owing to its
climatic conditions. There is no dearth of bamboo. At
present bamboo is put only to traditional use,
0ow the 3overnment of India has announced the
bamboo mission for promoting bamboo based industries
in the 0orth ?ast 7egion. Cachine made bamboo sticks,
blades, ply, etc are some products, which has
substantial potential.
There are B)) eporters in India who together eport
Agarbatti 8or incense sticks= worth 7s.<)) crores. 6f
late multinational companies have introduced machine
made agarbatti for the India market. As a result all
other leading Indian manufacturers are using machine
made round bamboo sticks for making agarbatti. It is
estimated that the present re%uirement of round
bamboo sticks is A))) tonnes per month.
4amboo is found etensively in 0agaland. It occurs as a
predominant plant in parts of the districts of Dimapur,
2eren, Con and Cokokchung! it is found mied with
other forest species in all other districts. About #( of
the growing stock of bamboo of the country is in
0agaland which is about B,B<,))) hectares.
". A lack of reliable statistics on the total number of
workers in the industry and their distribution, as well as
their socio.demographic pro-le. All that is currently
available are rough estimates or orders of magnitude
not suHcient to either understand the magnitude of
problems faced by the workers or to design appropriate
legislative or policy measures to redress them.
A. Due to the homebased nature of the work there is
absolutely no data available to guage the degree of
involvement of child labour in the industry, the age of
entry of children into the work force, the number of
hours spent by them in this work or the impact on their
health and educational status.
>hile the factory based sector constitutes only A)( of
the agarbatti sector workforce given the geographic
concentration of the industry in a few pockets an
efective implementation of labour laws and minimum
wages can be epected to have some trickle down
impact on the homebased sector in terms of keeping
workers informed of the value of their work and in
keeping some sort of parity in earnings between the
sectors. The relationship between wages in the formal
and informal components of the agarbatti sector needs
to be eplored further.
,onditions of work in emerging centres of manufacture
in non traditional states such as 4ihar and 5.2 need to
be studied and compared to those in better regulated
concentrations of the industry such as those in Cysore
and Hosur in 1arnataka. ?mperical evidence is needed
to verify whether infact the industry is tending to
relocate and disperse to other areas to circumvent
labour and ta laws and how this is impacting on
eisting workers.
7eferences
,hatter/ee, C. and Cacwan, N., ";<<. 6ccupational Health
Issues of 9elf ?mployed >omenI Agarbatti and Casala
>orkers of Ahmedabad. 0ational ,ommission for 9elf
?mployed >omen >orkers.
Hanumappa, H.3., ";;@. AgarbathiI A 4amboo 4ased
Industry in India. I04A7, >orking 2aper 0o. ;
ID6, ";;;. >omen >orkersK 7ights in IndiaI Issues and
9trategies .a reference guide.
IT, Dimited had started its agarbatti division only in
9eptember A))B. Through its brand, Cangaldeep, the
company is now recognised as one of the main national
players in the market. The eight vendors of the company
O three in 4angalaore and one each in 2ondicherry 89ri
Aurobindo Ashram=, ,oimbatore, Dera 4assi, Delhi and
Tripura P have the capacity to manufacture "#) million
sticks per month. This agarbatti division had a ")) per
cent growth in the /ust concluded -scal, with a turnover
of 7s $) crore.
IT, Dtd has charted out aggressive marketing plans to
promote its entire agarbathi range in India and in the
international market as well. As for the Indian market, the
company is planning to epand its eisting number of
retailers from A#,))) to two million across the country
within a year. At present, the companyKs A#,))) retailers
cater to Caharashtra, Tamil 0adu, and 4angalore,
targeting small convenience shops, including tobacco
retailers.E
In order to create awareness about its agarbathi range,
the company is for the -rst time planning to launch new
mass media advertising campaigns which will include
radio, television and print ad campaigns during E>ith the
move, we hope to achieve a market share of around -ve
per cent in the 7s ",))).crore agarbathi market in India
within a year,E he added.
itc agarbathis catering to all the three segments. The
Q9prihaK range, targeted at the top.end of the market, is
priced at 7s A) for A) sticks in nagachampa and gugool
fragrance. Spriha is made by the Aurobindo Ashram in
2ondicherry. The company has also launched Q0ivedanK,
made by small.scale companies in 4angalore, targeted at
the middle.end of the market priced at 7s ") for A) sticks
in sandalwood fragrance. The lower.end QAshageetK
agarbathi in /asmine and rose fragrance is priced at 7s B
for ") sticks and 7s '.#) for A) sticks,E he added.
6nce the company meets up the target of epanding its
distribution network, it will foray into the international
market within a year, he said. As part of its eports
thrust, the company is also looking at the possibilities of
foraying into countries such as the 59, ?urope and 9outh.
?ast Asia to eport its entire range of agarbathis thereThe
company had recently tied.up with 9ify to sell its
agarbathis online. ECore than selling online, our idea is to
reach the 9ify subscriber base and announce our arrival,E
The 7s ",))).crore agarbathi market largely comprises
regional players. EThe biggest player in this sector is
,ycle Agarbathis, which has a -ve per cent share. IT,, on
the other hand, has a two per cent market share.
company is also looking at promotional eercises to
increase awareness about its brand, in a market where
brands really donKt matter. sponsored events such as the
9pirit of 5nity ,oncert at 7a/ahmundry in Andhra 2radesh
and have also done sales promotion activities at the
Tirupati 4rahmotsav.EThe company is also planning to
launch four new fragrances under the Ashageet and
0ivedan brands.
4ut the company hopes that the natural incense stick
8herbal agarbathis= segment will grow steadily in the
future. 9priha brand falls under this segment. This
segment currently has /ust a -ve per cent market share,
Also on the cards are plans to launch agarbathis at
diferent price points in the fragrance segment.
agarbathis are now available between 7s B and 7s "), but
we are now planning to launch small packs priced at 7s A
in order to reach the mass market,E IT, hopes to become
the 0o. " player in the market by the end of net year.
IT, Dtd has decided to leverage ?im 4ankGs services to
market abroad its Cangaldeep brand of agarbattis,
sourced entirely from cottage and small.scale sectors.
The company has signed up with the bank for eport
marketing services, to utilise its large overseas presence
to promote incense sticks with buyers, importers and
distributors abroad.
As per the agreement, ?im 4ank will help locate
business partners for IT, agarbattis, The agarbatti 945 of
IT, is currently developing fragrances and incense
oferings to be positioned as lifestyle products for the
>estern market. supplying high %uality products to mega
retail establishments abroad. The bank already has a line
of credit arrangement with the mega 9ingapore shopping
outlet. The brand is now available in countries such as
9ingapore, Calaysia, 0epal, the 5A?, 4ahrain and the 59.
He put the eport potential for agarbattis at 7s $)) crore,
with the total consumer spend in the domestic market
being 7s ",A)) crore.