With the exception of the Gujarat Islam Match Factory founded in 1895 in Ahmedabad, there was no commercially successful manufacture of matches in India before 1921. Stray attempts made by small capitalists, working on primitive cottage-industry basis, invariably failed for lack of capital or because of mismanagement, unsuitable location, difficulties of timber supply, and shortcomings in technical supervision.
This stale of affairs continued till 1922 when a heavy revenue duty of Rs.1.50 per gross was imposed on imported matches. Under the shelter of this duty, a number of factories grew up and manufacture of matches on a commercial scale became successful.
Before the First World War, the large Indian market was supplied by Japan, Sweden, and other European countries. In 1912-13, out of the total imports of 15.12 million gross, about half i.e. 7.29 million, was supplied by Japan alone.
This ratio was maintained during the war years as well. After the war, however, there started a struggle for supremacy in the Indian market between Japan and Sweden which was now represented by the Swedish Match Company a powerful combine of international ramifications.
The year 1923-24 saw Japan loosing much of the ground. Simultaneously, the Swedish Match company started its own factories in India thus “jumping over the tariff wall” created by the duty of 1922. By 1926-27, 50% of the Indian demand for matches was met by imports from Sweden, only 6% from Japan and the remaining 44% was supplied jointly by the Swedish Match company in India and the Indian manufacturers.
Japan having been thus eliminated, the Indian market now began to be dominated by the Swedish combine.
It meant that the Indian producers had now to face competition from this company both internally as well as externally, a situation “which was unique in the tariff history of India.” To safeguard their interests, the Indian manufacturers, with one voice, asked for protection. The matter was referred to the Tariff Board in October, 1926 and the Board submitted its report in 1928.
Applying the Triple Formula, the Board found that the Indian industry enjoyed important advantages in the existence of cheap and efficient labour and the possession of a large home market. As regards raw-materials, the Board’s conclusion was that “no country in which matches are made is self-sufficient in regard to all or most of the raw-materials required.”
Coming to the Second and Third conditions, the Board observed that a great expansion in the industry had taken place and that the matches manufactured of Indian wood in the most up-to-date factories, though less finished in appearance than imported ones, were, for practical purposes, ‘little superior’.
The Board found that the need for protection arose from Iwo causes, viz., that the Swedish Match company was importing matches at a price below the economic level and also that there existed then a “very marked prejudice against Indian matches.” The Board concluded that until these two handicaps were removed, the need for protection would continue.
They also concluded that the availability of cheap and equally efficient labour in India and the consequent reduction in capital costs, and the natural advantage of the Indian industry in respect of freights and other costs of transport gave India a distinct superiority in the production of matches and strengthened the hope that “India would eventually be in a position to face foreign competition without protection even if all raw-materials were imported.”
They, therefore, recommended that the existing revenue duty of Rs.1.50 per gross should be converted into a protective duty. The Board further recommended that no definite period should be fixed for protection but “that the progress of the industry should be carefully watched and fresh enquiry ordered when circumstances appeared to warrant such action.”
The Scheme of protection, as proposed by the Tariff Board, was expected to put an end to unfair competition in so far as it arose from imported matches.
As regards competition with foreign factories established in India, although the Board admitted that the resources of the Swedish company were sufficient to crush, for a time all competition from Indian firms and capture for itself the whole of the Indian market, yet it found no reason why Indian manufacturers should not compete effectively with the Swedish match factories provided more attention was paid to the quality and uniformity of the product.
The Board, therefore, by scrupulously avoiding any discrimination between the Indian producers and the Swedish Trust, defeated the very object of protection. The Swedish Trust was the largest individual manufacturer and it received the greatest amount of protection.
In pursuance of these recommendations, the Match Industry protection Act, 1928 was passed which retained the existing rate of Rs.1.50 as a protective duty. Likewise, the existing revenue duty on splints and veneers was also converted into protective duty. The rates were further revised in 1931 and 1934.
That the protective scheme adopted from 1928 onwards, on the whole, led to an enormous development of the match industry in India, is beyond doubt. Match imports declined from an average of 14.64 million gross during the I world war to a bare 1.2 million gross in 1938-39 while the annual value of these imports correspondingly came down from Rs.15.33 million during the war to Rs.2.35 million in 1938-39.
However, this growth was mainly the growth of a single manufacturing concern, the Swedish Match company. Protection, therefore, helped not Indian interests which had actually applied for it, but a foreign combine of world wide influence and power.
Operating as a rupee company under the name of the western India match company, it continued to progress unchecked. In-fact, it spread its tentacles further by controlling the supply of match manufacturing machinery through its subsidiary, the Match Manufacturing Supply Company.
This formidable monopoly unleashed a ruthless rates war with the Indian companies as a result of which, within the space of a decade, not less than 25—30 factories have had to close down, about 17 of them in Bengal alone.
The result was predictable. In 1928, when the Tariff Board examined the claim to protection, the capacity of the western India Match company was 6 million gross matches a year as against 12 million gross of other Indian companies.
In 1948, the total production of the W.I.M. company was 18 million gross a year, and the total output of 200 units owned by other companies amounted to 7.9 million gross. The independence of the country did not bring about any loosening of the stranglehold of foreign capital on the Industry. In 1951,90% of the Match Industry was controlled by foreign capital.
The industry continued to expand in the post-Independence period, its production having risen from 443.3 million boxes in 1955 to 562.4 million boxes in 1961. The target for the Third Plan was set at 42 million gross boxes.
Timber and Transport were the two major problems of the industry. Suitable wood for match manufacture is available in Kerala, Mysore and Andaman Islands but the cost of transporting this wood is rather high.