Beedi manufacturers in Tamil Nadu are moving their manufacturing activities to West Bengal due to rising wage costs, labour shortages and central and state government policies. The recent state government decision to enforce value added tax (VAT) on tobacco-related products is also affecting the industry.

The size of the Tamil Nadu beedi industry is estimated at Rs 4,000 crore. Industry representatives said so far around 50 units have moved out of the state. And business worth Rs 15-20 crore has shifted from Tamil Nadu to West Bengal, even though the industry resorts to a seven-10 per cent price increase every year to protect profit margins in the face of rising costs.
 
Manufacturers now get beedis packed in Tamil Nadu or even ship them directly from West Bengal to markets in the northern states. The industry may see more manufacturers shift production, said A Mohamed Ashraf, president, Tamil Nadu State Beedi Manufacturers Association, Vellore.

Tamil Nadu has around 75 large-scale beedimanufacturers producing 50,00,000 or more beedis a day, and some 500 small manufacturers producing 500,000-50,00,000 a day. The state produces about 50 crore beedis a day and the value of 1,000 beedis is around Rs 250, he said. About three to five lakh labourers in the state earn their livelihood from this industry.

A person can roll 1,000-1,500 beedis a day. In Tamil Nadu, the wage for rolling 1,000 beedis is about Rs 125 and it could go up to Rs 150 for 1,200 beedis. The wage in West Bengal for the same work is Rs 50-60 per labourer. Manufacturers opting for production in West Bengal gain by at least 20 per cent per 1000 beedis, said Ashraf.

Another major issue that Tamil Nadus beediindustry has been facing in the past three to four years is the shortage of labour. With the emergence of new industries including leather, automobile ancillaries and mobile handset manufacturing labourers are moving to jobs in these industries, where they earn better salaries.

With urbanisation, more children are educated and very few are following their fathers or mothers into beedi-making. Shortage of labour has affected around 20 per cent of the production in Tamil Nadu in the past three years, Ashraf added. In addition to these issues, the government of Tamil Nadu has imposed a 14.5 per cent VAT from July 12 this year on beedis. Beedis were earlier exempted from VAT, since a special excise duty was levied on them by the central government.