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National, Tyre Industry

Indian Rubber Growers Association seeks further reforms from the government.

Posted: February 8, 2016 at 3:04 pm   /   by   /   comments (0)

Caught between rubber growers & tyre manufacturers, benefiting from low rubber prices owing to higher margins, The Prime Minister of India Mr. Narendra Modi’s government is leaning towards emergency help for the rubber growers.

In January 2016, Indian government banned imports of rubber to be used in goods for re-export along with initiating an anti-dumping probe into synthetic rubber imports from the European Union & South Korea. The decision however, competes with natural rubber for some uses. The government officials also placed restrictions on imports of natural rubber through India’s major ports as well. After the Indian Rubber Growers Association called on the government on 14th January 2016 for immediate government intervention in case of plunging domestic rubber prices that saw the per kilo rubber prices hit an eight year low of $1.39 per kilogram, the government intervened on the issue. The association called for an additional safeguard duty on rubber imports beyond the amount required by Indian industry, seeking to drive demand to Indian producers.

The group said that the imports of natural rubber had exceeded close to 400,000 metric tons in the first three quarters of the financial year starting in April 2015, in comparison to 442,130 metric tons during the entire FY 2014-15. The association also called for the introduction of a national rubber policy to help the natural rubber industry.

The government had earlier raised the import duty on natural rubber to 25% from 20%, and cut the export obligation period. The maximum time during which export goods are eligible for duty exemptions on inputs of imported rubber from 18 months to six months. Both measures will make imported natural rubber less attractive to manufacturers, compared with domestic rubber.

The first round of intervention was followed by a parliamentary panel report that was released in August 2015. The report confirmed a trend of falling prices for Indian rubber & a decline in rubber production. The panel immediately called for a ban on imports of natural rubber beyond the amount needed to bridge the gap between domestic production & demand.

The panel also called for a review of a trade agreement with South Korea that specifies import duties of 10% on finished tyres, compared with 25% on raw materials for local production. It said the government should restructure India’s Rubber Board, tasked with promoting the industry, reduce agricultural and plantation taxes & subsidize rubber growers through the official agricultural price stabilization fund.

Chandan Mitra, chairman of the panel stated that, “The ministry is likely to act on these suggestions soon & that the government should try to balance the interests of both including the rubber growers as well as the tyre industry.”

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