‘Govt nod to import rubber may adversely affect farmers’

‘Govt nod to import rubber may adversely affect farmers’
July 18, 2011



Kerala has expressed concern over the government’s decision to allow import of 40,000 tonnes of rubber by slashing import duty from 20% to 7.5%.

“The decision may adversely affect rubber farmers in the state,” state Finance Minister K M Mani said in Delhi. Farmers are apprehensive that there might be a fall in price of rubber with the decision. However, experts on the sector discounted the possibility of fall in price of domestic produce on account of the import.

“There is no need for panic on account of this decision,” former chairman of Rubber Board PC Syriac said. The government’s move to allow import of rubber was shelved last year due to stiff opposition from MPs from the state and had also raised the import duty to 20%. Kerala accounts for nearly 80 per cent of the area under rubber cultivation in the country.




Centre allows 40,000 tonnes rubber imports at 7.5% concessional duty



Growers disappointed as they fear move may suppress domestic prices

NEW DELHI, JULY 17:
The Centre has allowed imports of 40,000 tonnes of natural rubber at a concessional duty of 7.5 per cent for the current fiscal. This is similar to the one allowed last fiscal.

Since April 1 this year, the Customs duty on natural rubber has been fixed at 20 per cent or Rs 20 a kg, whichever is lower.

The move to allow imports at a lower duty follows demand from the user industry, particularly tyre manufacturers, to allow import of two lakh tonnes duty-free. Sources said that the Commerce Ministry had recommended allowing imports of one lakh tonnes duty-free. But the Finance Ministry, which has a final say, has treaded a cautious path in arriving at the final decision. Growers, on the other hand, are totally opposed to imports.

“The decision to allow import of only 40,000 tonnes that too at 7.5 per cent against a demand to permit two lakh tonnes is disappointing,” said an industry source, who did not wish to be identified. “It is also too little and too late,” the source said.

Last fiscal, the import duty regime was put in place in December for a similar quantity of 40,000 tonnes. This year, though, imports are allowed from this month itself.

The import will meet consumers' need for just 15 days, going by the consumption of 80,500 tonnes in June.

“The decision to allow imports at concessional duty is oppressive. It has come at the most inopportune moment as peak production season is lurking,” said Mr J.K. Thomas, former President of the United Planters' Association of Southern India. “It could suppress domestic prices,” he said.

“The decision is good though it will meet only 15 days demand. It will improve supply in the domestic market. On Saturday, rubber was not available locally. Last week, I scouted for 20 tonnes of rubber and was hardly able to get two tonnes. Rubber is not available locally despite the Rubber Board statistics saying that the carryover stocks at the end of June were 2.47 lakh tonnes,” said Mr N. Radhakrishnan, advisor to the Cochin Rubber Merchants Association.

According to traders, inferior quality sheet rubber is available at Rs 208-201 a kg. The high price for inferior quality rubber makes production unviable for small manufacturers.

“If tyre manufacturers import, then quality rubber will be available for small industries which are suffering,” said Mr Radhakrishnan.

“There is no way other than imports to improve supply,” he said.

“It is an agreed position that imports could be allowed when domestic prices are higher than global rates. That was seen only in two years.

Now, domestic and global prices are at par,” said Mr Thomas.

On Saturday, RSS-4 (ribbed smoked sheet) rubber was quoted at Rs 216 a kg. During the weekend, in the global market RSS-3, the equivalent to Indias's RSS-4, closed at Rs 210 a kg in Bangkok.

In the first quarter this fiscal, rubber imports almost doubled to 38,233 tonnes compared with 19,118 tonnes during the same period a year ago.

Production in the first quarter was 1, 75,700 tonnes, up 5.4 per cent over the same period last year. In comparison, consumption was 2.44 lakh tonnes, up nearly four per cent year-on-year.

Shares of domestic tyre companies shot up in the last week of June on rumours that the Centre would exempt natural rubber imports from customs duty for a specified quantity under a tariff rate quota regime.




Mixed reaction to reports on nod for import of rubber


Media reports on the Union government's nod for import of natural rubber (NR) at subsidised rates has evoked mixed reactions among stakeholders.

When contacted, official sources at the Rubber Board maintained that no official communication had been received from Central authorities so far on the issue. Whenever there were queries from New Delhi on the feasibility of NR imports, the Board had made recommendations against such move, they said.

According to media reports, the Union government had decided in favour of importing 40,000 tonnes of NR at the subsidised import duty rate of 7.5 per cent. This decision was made against the requests made by consumer industry, mainly tyre manufacturers. They had, in fact, asked for import of two lakh tonnes, duty free.

Industry sources pointed out that the current regime allows NR import at the rate of 20 per cent import duty or Rs. 20 a kg, whichever was lower. The 7.5 per cent duty would allow them to import at a lesser rate since the international price of NR has come down and was hovering around Rs.200 for the past one week, against the Rs. 215 a kg in the Indian market. “This would allow the industry to bring in NR on a par with Indian prices. “Add another Rs.12 for handling charges and transportation, the landed cost would be about Rs.227 a kg. However, at Rs. 215 a kg in the internal market, the landed cost would be more than Rs.230 a kg, they maintained.

According to George Valy, president, Indian Rubber Dealers' Federation (IRDF), official sources had put the carryover stock with farmers at more than 90,000 tonnes. However, during the first quarter, there was no sign of this NR stock flowing into the market. “This points to a tendency to hoard, on the part of the small farmers,” he pointed out. According to him, an initial inclination for distress sale on the part of the small framers cannot be ruled out on account of the report of the change in import tariff.

With the international prices coming down and showing signals of no immediate recovery, the new decision would have a negative impact on the NR prices internally, he said and added that the Indian prices ruling at a level lower than the international prices could not be ruled out.

Last financial year too, the Union government had allowed NR import at subsidised duty rates. However, the order in this regard was issued in February 2011 and had a validity till March 31, 2011. However, this year, it has come much earlier.

P.C. Thomas, leader of Kerala Congress (AMG) wanted the Union government to withdraw the decision as it would lead to price crash and destroy the indigenous rubber plantation industry. He

maintained that the government had not followed the procedural formalities for effecting changes in existing duty structure and as such the decision was not valid.