Import duty cut

Indian rubber prices showed a mixed trend. After remaining steady to weak, for most of the day, futures prices edged up during the closing hours
while quotes in the ready market steady to weak, and failed to catch up. Govt. decided to cut import duty on natural rubber to 7.5 % from 20% on Thursday for
shipments up to 40,000 tonnes till Mar 31 after which the duty imposed will be either 20% or Rs.20, which ever will be lower. This decision has come at a time
when Indian rubber prices are way below the prices prevailing in the international market, as a result of which immediate impact of import duty cut on prices
prevailing in the domestic will proved to be neutral. However, it is noteworthy that the duty would be reinstated after March 31st. This is significant since, if
April prices were to rule similar to prevailing prices, which is fair to assume at present, then the import duty which is lower than that prevailing levels could still
be enjoyed during the lean season. Further, the possibility of India emerging as a dominant buyer if International prices are conducive, would keep the premium
intact, or even push International prices higher, unless supply side improves drastically. With Indian weather improving lately, helping tapping, and the
possibility of slowing down of Chinese buying ahead of Lunar year holidays in early February, may ease the supply situation a bit in the next few fortnights.