Also want ban on exports and futures trading.
New Delhi, May 4
Under margin pressure due to the rising prices of natural rubber, the end-user industries have asked the Government for duty-free import of two lakh tonnes of rubber through a Government agency, besides a ban on exports.
The user-industry hopes that with more natural rubber earmarked for domestic use, the prices would drop or at least stabilise.
Mainly consisting of tyre companies, besides small enterprises making products like shoes and household items, the user industries have also asked for a ban on futures trading in rubber, besides a lowering of the import duty to 10 per cent from 20 per cent and an increase in the import duty for finished products.
The joint appeal of the Automotive Tyre Manufacturers' Association (ATMA), All India Rubber Industries Association (AIRIA) and Indian Cycle and Rickshaw Tyres Manufacturing Association has been sent to the Finance and Commerce Ministries. The delegation has also approached the Planning Commission after it met the Prime Minister, Dr Manmohan Singh, in February this year.
Mr Neeraj Kanwar, President, ATMA, said that the rise in prices is mainly due to the boom in the automotive sector which has led to huge rise in the demand for rubber from tyre manufacturers. Natural rubber production, however, has not gone up equally. He added that speculation in trading and high international prices of the commodity are further fuelling a price increase.
"In the last year, when rubber prices were at Rs 80-90 a kg, our margins stood at 11-12 per cent. This year, because of the high prices the EBITDA has come down drastically. To circumvent a price of Rs 170 a kg, the tyre industry would need to raise prices 20-25 per cent," he said.
He added that the Rs 19,000-crore investments of the tyre industry to expand capacity may get delayed if the margins do not improve enough to generate free cash flows.
According to Rubber Board data, average monthly natural rubber (RSS 4) prices have gone up to Rs 149.48 a kg in March, from Rs 137.72 a kg in January. It had then touched a high of Rs 167.92 a kg on April 24 - 22 per cent higher than January average prices - before falling to Rs 165.30 a kg on May 1. The price as on May 4 is Rs 159.50 a kg.
Mr T.K. Mukherjee, President, AIRIA, said that consumption in 2010-11 is projected to go up by 20 per cent, while production would only rise 5-6 per cent.
"The Rubber Board estimates the current cost of production at Rs 50 a kg against the Rs 170-a-kg retail price. The Government should do its own investigation through the Bureau of Industrial Cost and Prices," he said.
According to AIRIA data, in 2009, India was the fourth largest global producer of natural rubber at 820,000 million tonnes, after Thailand, Indonesia and Malaysia. However, in consumption it was ranked second to China in 2009 at 905,000 million tonnes.
The rubber industry, which manufactures around 35,000 different products, has a total turnover of Rs 45,000 crore and employs more than five million people. Many of these companies fall in the micro, small and medium enterprises sector and are running negative margins due to high prices of rubber and their inability to renegotiate their own selling prices, said Mr Mukherjee.
Natural rubber production, which dropped last year, has recovered and increased 15 per cent in April.
Fuelled by good summer showers in late March and early April, rubber production increased to 59,500 tonnes in April, up from 51,520 tonnes during the same period a year ago, sources in the Rubber Board said.
The relatively higher domestic production, high international prices and sufficient stocks available ensured that rubber imports were down by over 40 per cent in April. Exports also slackened in the first month of the current fiscal.
Rubber stocks were up at 2,34,740 tonnes against 1,84,140 tonnes last year.
Going by the good spell of summer showers and prognosis of a bounteous monsoon, the Rubber Board is optimistic that production will be higher this year.
Major incentive
The prevalent high domestic and global natural rubber prices have also proved to be a major incentive for the farmers to maximise the yield - a trend which the Rubber Board expects to prevail throughout 2010-11.
Last fiscal, rubber production slipped 3.8 per cent to 8,31,400 tonnes while consumption increased 6.8 per cent to 9,30,565 tonnes.
Accelerated imports which grew 119.5 per cent during 2009-10 to 1,70,679 tonnes helped bridge the demand-supply mismatch.
Exports, meanwhile, had slackened by 47.8 per cent to 24,515 tonnes.
Domestic production shortfalls coupled with firm global price trends ensured that rubber prices in the domestic market continued to reign high, with the annual closing prices hovering close to Rs 150 a kg.
The estimates for the current year forecasts production to spurt by 7.4 per cent to 8,93,000 tonnes.
Consumption to grow
Consumption is expected to grow more moderately by five per cent to 9,78,000 tonnes.
The increase in rubber consumption during 2010 was mainly due to increased demand from the tyre sector which the Rubber Board expected to continue into this year as well.
Spot rubber rules steady
Kottayam, May 4
Spot rubber finished unchanged on Tuesday. Though the sentiments had taken a hit following sharp declines on the National Multi Commodity Exchange, it managed to sustain at the prevailing levels on supply concerns. According to an analyst, the futures were moving mainly under the grip of speculators to encash the long holidays in the leading international markets. On the spot, sheet rubber closed flat at 159 a kg amidst scattered transactions.
Futures decline
RSS 4 fell sharply with the May futures falling to Rs 154.31 (159.08), June to Rs 156.99 (162.40), July to Rs 155.50 (161.61) and August to Rs 152.71 (158.83) a kg on the NMCE. RSS 3 closed weak at Rs 170.95 (174.61) a kg at Bangkok.
Spot rates were (Rs/kg): RSS-4: 159 (159); RSS-5: 156 (156); ungraded: 155 (155); ISNR 20: 150 (150) and latex 60 per cent: 102.50 (102.50).
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