Respected Sir,

                                                                                                                     
Greetings to you,

Trust you are doing fine,

Sub: Two different Custom Duty rates on Agarbatti Bamboo Sticks importation; We request with folded hands - it to be one single rate for the same product – EK RASTHRA EK TAX.

We are thankful to your good self for supporting “Make in India” for manufacturing of Raw Agarbatti; we (Agarbatti Industry) were doing well from 1st Sep 2019 and were gearing up our production of Raw Agarbatti domestically in a big and fastest way.

But now we understand that as per the recent Finance Budget changes done through Custom Notification No: 01/2020 – Customs read with 50/2017 – Customs and 68/2017-Customs (N.T), we are put to “Actual User Condition”, which we understand in our case will be as follows:

        A. If We Agarbatti manufacturer imports Bamboo Sticks, we need to pay 10% Custom duty and

       B. If an Agarbatti Bamboo Stick trader imports and supplies the Agarbatti Bamboo sticks to us, it will be 30%.

Dear Sir, We would like to bring the real facts as below:

1. Agarbatti business from several decades is in a formal way of operation, for the simple reason that right from the Bamboo Stick import and Raw Agarbatti Import, the foot prints can be traced. And it uses Perfumes, Chemical and Paper for packing all come from a very well formalized Channel. It is just that it is Labour Intensive and the final sale of Agarbatti is largely by dwellers whose Turnovers are below the GST registration but being a FMCG Product the distribution channel is very well disciplined.

2. About 50% of the Agarbatti manufacturing is done by illiterate, Unskilled, Rural, economically weaker and Women workers and these 50% Market share of Agarbatti business belongs to them.

3. More than 75% of the agarbatti is made by bamboo sticks purchased from Bamboo Stick Importers; literally it is almost to be precise.
More than 75% (in Market Share and 95% in Numbers) of the Total Scented Agarbatti Manufacturers in India are Small and medium Scented Agarbatti manufacturers and these 75% of the Total Scented Agarbatti Manufacturers of India do not import Agarbatti Bamboo Sticks on their own.

4. The total Bamboo Sticks imported during FY 18-19 is 29,896 tones and last 9 months of Current Year Apr to Dec 19 it is 52,114 tones (Data from Govt Commerce ministry website). This increase has given a huge employment opportunity in India because from 1st Sep 2019 Agarbatti was restricted from importation. In container terms assuming 19 tones 1 container, then about 305 Containers per month.   

5. Currently after trying since last 5 to 7 years not even 1% of the Total Agarbatti Bamboo Sticks requirement is met domestically.
 

The New Issue after the Budget 2020:

We the Small and Medium Agarbatti manufactures after the restriction on Agarbatti import we have invested on to machines and business to manufacture Raw Agarbattis. Things were going fine and smoothly, we have almost geared up.

And many Agarbatti manufacturers mostly are small and have borrowed money from banks and have invested in the machines and business anticipating that now there businesses will flourish. 

1. We most of the Agarbatti manufacturers do not have either the bandwidth, nor resources, nor financial strength to invest in Bamboo Sticks and import it. We are illiterate; Perhaps We are happy in buying the same from an Agarbatti Stick Importer (Trader).
 
2. From the import of Bamboo Sticks data above it is clear that only 305 Containers on an Average are imported per month but there are more than 10,000 Agarbatti Manufacturing units, so if we the small manufacturer of Agarbatti need to import Bamboo Sticks ourselves to compete with the 25% Market Share holders - the Bigger Agarbatti Manufacturers, then 10,000 / 305 = 33 months is needed to finish our 1 container imported. This dynamics of self import will not work with us because we purchase about 500 to 1000 kgs of Bamboo Stick per month and cannot hold inventory for 3 years, if asked to import 1 container.
 
3. There are Various sizes and diameter in Agarbatti Bamboo Sticks required and based on Customer Order we need to change in short span of time and deliver the Agarbatti, Ex: 8” * 1.2mm, 1.3mm, 1.4mm and 1.6mm and 9” * 1.2mm, 1.3mm, 1.4mm and 1.6mm and lead time to directly import will take atleast 45 days to just get the required size of Bamboo Sticks and even if say we have imported one full container of 9” * 1.3mm and Get a New Order for 8” * 1.6 mm then we need to import another container, with one container already in Inventory, Investing Rs 19 lakhs in 1st Container and then again investing 19 lakhs is not easy for small agarbatti manufacturers, we work with limited capital but give employment to several thousands of people who otherwise are not suitable for any Job.
 
4. Also an important point to note is because Bamboo Sticks are Natural item and especially Agarbatti Bamboo Stick is very thin and needs to pass high speed machines even if we Import Bamboo Sticks from same supplier overseas, every time we will get different quality, some may be suitable to us, some may not be suitable for our production and that will become a huge dead stock as we are not capable enough to sell these Bamboo Sticks but a Trader has all sort of Customers and knowledge, he will be able to sell it, but we cannot Example: Any wrong quality he will sale to Hand rolling agarbatti Manufacturers but we cannot.
 
5. Our Survival is now in question because bigger Agarbatti manufacturers a hand full of them will import the Bamboo Sticks at 10% and we 75% Market share holders will get support from the Bamboo Sticks traders for the supply of Bamboo Sticks and Traders will be charged 30% Custom duty.

6. Then our Raw Agarbatti cost will go higher than bigger hand full of Agarbatti Manufacturers by 10% and literally we will be out of the market and only few handful big agarbatti players who can import Bamboo Sticks Containers will survive.
 

7. We proudly feel a lot of happiness when we hear SABKA SATH SABKA VIKAS = But if two different rates are put, then we Manufacturers to whom Govt has tried to help by keeping us better off by putting 10% Duty and for Trader 30% Duty, actually cannot be benefitted, because we all buy from Trader only and Trader cannot use Agarbatti Bamboo Sticks for anything else, except in Agarbatti Manufacturing because the sticks are 1.3 mm and smaller in size 8” and 9” mostly, cannot be put to use in any other product

We Agarbatti Manufacturers with folded hand request:

    
1. Whatever the Custom Duty rate you decide on Agarbatti Bamboo Sticks import, please make it ONE SINGLE RATE, please do not differentiate between Manufacturer and Trader. Please help us by removing the “Actual User Condition”.
 
2. As the business was just getting stable, we prefer the Custom duty rate to be 10% for one and all including Traders – EK RASTRA EK TAX.

3. We reiterate, please help us by having SINGLE CUSTOM DUTY RATE for both Manufacturers and Traders,

With these words and a thank you, we close.