25 per cent duty hike on rubber fails to curb imports

KOCHI : Increasing import duty on natural rubber to 25 per cent has failed to curb shipments of the commodity to India as international prices remain subdued and domestic growers have yet to intensify tapping, discouraged by low rates.

Domestic production declined 11 per centto 45,000 tonne in April from a year earlier, according to data released by the Rubber Board. Consumption improved marginally to 82,000 tonne.

The tyre industry imported 37,250 tonne - an increase of 28 per cent.

The tyre industry imports block rubber variety SMR 20 at a landed price of about Rs 120 per kg. This is costlier than block rubber ISNR-20 and cheaper than sheet rubber RSS-4, both produced domestically and generally used by the industry.

"In terms of quality, the block rubber we import is superior to not only ISNR-20 but even to RSS-4. The lower prices seem to be discouraging growers from maintaining consistent quality. Also, to cover the production-consumption gap, imports will contin ue despite a change in duty," said Rajiv Budhraja, director-general of the Automotive Tyre Manu facturers' Association.

Although the price of RSS-4 at 7 . 124 per kg is higher than internationt attractive enough for rub al rates, it's not attractive enough for rubber growers.

When the Kerala government had scrapped a 5 per cent purchase tax to encourage tyre manufacturers to buy rubber from the local market at the cost of imported rubber, growers were able to get a better price of ` . 132 per kg. The scheme was operational only until March 31, after which prices fell again.

"Most of the growers are not interested in tapping unless the prices improve to . 135-150 per kg levels, which is not likely to ` happen in the near future. So the production fall is likely to continue," said N Radhakrishnan, former president of the Cochin Rubber Merchants' Association.

Big producers such as Harrisons Malayalam continue to tap even at a loss as they have a large number of workers and a huge social cost to bear.

"There is hardly any buying by the tyre makers. With a record import of over 4 lakh tonne, the stock position may be good,'' said N Dharmaraj, vice-president of the United Planters' Association of Southern India.

The import duty on rubber was increased last month after growers complained that shipments from overseas had lowered domestic prices.

Source : economictimes.indiatimes.com