Agarbatti majors start sourcing bamboo from North East to substitute imports

Indian agarbatti (incense stick) manufacturers are increasingly heading to the North East looking to source bamboo in order to substitute imports from other Asian nations like Vietnam and China.

Two of the country’s largest players — Cycle Pure, owned by N Ranga Rao & Sons, and ITC Ltd (which owns Mangaldeep ) — have begun sourcing from growers in the region.

The North East is home to the Tulda variety of bamboo that is preferred in incense stick making. Bamboo is used as sticks to support raw agarbatties.

‘Cycle’, for instance, has committed to procure a minimum of 50 tonnes (of bamboo) a month from the Assam government, with 20-odd tonnes being procured immediately. Tie-ups with other states are being explored too.

Mangaldeep has procured 140 tonnes of bamboo sticks from the region over the last 10-12 months. It is also working with farmers in Tripura as a part of localisation of the value chain. Imports will be brought down to nil over the next 15-18 months.

“Bamboo is a raw material input for us. However, the sourcing is not structured yet and there are supply constraints. We are working with the government of Assam to ensure sourcing and provide technical knowhow. We are open to working with more state governments,” Arjun Ranga, Managing Director, Cycle Pure Agarbathies, told BusinessLine .

Import substitution

Market sources say incense sticks have almost 80 per cent penetration in India with an approximate market size of ₹7,200 crore.

Despite this, raw battis (bamboo sticks coated with agarbatti masala) or non-fragrance sticks, were previously imported, primarily from Vietnam. Bamboo sticks used to make agarbattis are still imported.

India put raw battis under the “restricted list” in August 2019 to discourage imports. Since then imports have seen a drastic fall, say sources.

Data says imports grew from ₹31 crore in 2009 to ₹546 crore in 2019, (due to reduction of import duty in 2011 from 30 per cent to 10 per cent from 30 per cent).

Around ₹300 crore worth of bamboo sticks were imported last fiscal. More recently, import duty on bamboo sticks used to make agarbattis has been increased to 25 per cent to encourage domestic manufacturing.

“We are targeting to stop imports of bamboo sticks for our entire requirement over the next 15-18 months,” Ravi Rayavaram, CEO, Matches and Agarbatti SBU, ITC Ltd, said.

Change in definition

Restrictive rules have also come in the way of bamboo availability in India.

At least 4,000 tonnes of bamboo sticks are required every month for the industry; against this, Indian production is between 150 and 300 tonnes.

Incidentally, a previous definition saw bamboo being classified as a tree which meant forest departments had licensing control over the produce. It remained so for years, thereby preventing growth of structured bamboo plantations, either by industries or even by tribals.

In comparison, bamboo plantations are a well-structured concept in other import-dominant Asian nations.

Tie-ups

“Over the last few years, the definition of bamboo has changed from plant to grass, thereby giving a fillip to end-user industries including agarbatties. Many entrepreneurs are coming ahead to source bamboo and look at plantations too,” Arjun Ranga said.

A bamboo tree takes three to five years before it is ready to be harvested.

According to him, the company, along with Government of Assam, has identified 26 such entrepreneurs for hand-holding, sharing of technical knowhow and subsequent sourcing of raw material (bamboo). It has already begun working with four of these entrepreneurs.

Similar sourcing pacts are being looked at across the North Eastern states of Sikkim, Tripura, Mizoram and Arunachal Pradesh, besides other states like Maharashtra, Andhra Pradesh and Karnataka.

ITC, meanwhile, has tied up with the Bamboo Research and Training Centre (BRTC) in Maharashtra to manufacture Mangaldeep agarbatties. According to ITC’s Rayavaram, while the bulk of agarbatti manufacturers relied on cheaper, imported raw agarbattis, the diversified conglomerate sourced locally through small-scale manufacturers.