Growers, tyre makers spar over rubber short-supply

Tyre manufactures have resorted to heavy import of natural rubber in the last couple of months due to short-supply.

“We are told that carryover stocks are over two lakh tonnes. But we are not able to get the required quantity from the domestic market,” said Rajiv Budhraja, Director-General of the Automotive Tyre Manufacturers Association, a body representing nine major tyre makers in the country.

This is one of the reasons for rubber imports rising to a record high of 2.17 lakh tonnes last fiscal.

“Besides the fact that no material is available and stocks are low, growers are also holding on to their produce hoping that prices will go up after the proposed hike in import duty,” Budhraja said.

Last week, the Commerce Ministry again asked the Finance Ministry to increase the import duty on rubber to Rs 34 a kg from the current Rs 20.

CARRYOVER STOCKS

“Though the Rubber Board says over two lakh tonnes of carryover stocks are there, we don’t think there is that much stock is available. If that is true, then why should we face shortage?” wonder N. Radhakrishnan of Cochin Rubber Dealers Association.

According to Rubber Board statistics, carryover stocks by January-end were 2.96 lakh tonnes with 1.18 lakh tonnes being held by growers and another 98,000 lakh tonnes by dealers.

TECHNICALLY-SPECIFIED RUBBER

“Raising duty will affect tyre makers since every rise of Re 1 a kg in rubber will lead to an additional cost of Rs 60 crore for the industry,” said Budhraja.

But tyre dealers and growers dispute this. “Tyre manufacturers are importing technically-specified rubber (TSR) or what we call ISNR-20. It costs less and even if they pay duty, it will still be cheap,” said Radhakrishnan.

“Even when global prices were higher than domestic prices, tyre manufacturers were importing,” said a grower source on condition of anonymity.

“We are importing TSR because we don’t get the desired quantity or quality in the country,” said Budhraja, adding that 70 per cent of it was being brought into the country in the form of block rubber.

The grower source said that they were insisting on duty hike now since the peak production season would begin after monsoon ends.

“If the decision is delayed then prices will crash when the peak tapping season begins,” the source said.

GLOBAL PRICES

Currently, global prices for RSS3 are quoting around Rs 170 a kg, the same as its equivalent RSS4 in the domestic market.

“Any hike in the duty will have only psychological effect that will get over in a few days,” said Radhakrishnan.

Global prices are expected to rule lower and they are expected to be that way until next year, he said.

Why the duty will only have psychological effect is because most of the rubber imported into the country is through the open general licence route. Under this, imports are made duty-free against exports of rubber goods.

“At least 80-85 per cent of rubber is imported duty-free,” Radhakrishnan said.

But Budhraja differed saying that at least 35-40 per cent of the rubber was coming into the country after the Rs 20 a kg duty is paid.

The pressure put on the Commerce Ministry to raise the import duty is seen mainly as political by industry watchers. But the tyre makers also, on their part, have asked the Centre not raise the duty.

“In fact, the duty should be cut since tyre is being imported at a lower duty. Raw material cannot be imported at a higher Customs duty than a finished product,” said Budhraja.

Currently, tyre attracts 8.6 per cent duty for imports from countries such as China and South Korea under the preferential trade route.

In contrast, rubber is imported at a duty of 11.5 per cent.

Indian rubber in Chinese tyre

India may not be a top rubber exporting nation but the commodity is finding its way to China for making tyres.

According to Rajiv Budhraja, Director-General of Automotive Tyre Manufacturers Association, Indian rubber is being exported to Malaysia where it is processed for export to China.

In turn, the Chinese use it for making tyres that make their way into India.

In fact, Chinese tyre import is a source of worry for Indian tyre manufacturers.

India exported 15,600 tonnes of rubber during April-January last fiscal against 21,000 tonnes the previous fiscal, Rubber Board data showed.

“Almost all this has gone to Malaysia,” Budhraja said.