India May Cut Rubber Import Duty as Demand for Tires Soars, Khullar Says.

India, the fourth-biggest producer of natural rubber, may allow imports of as much as 100,000 metric tons at a lower duty to meet surging demand for tires as rising incomes boost car sales, Trade Secretary Rahul Khullar said.

The finance ministry may make a decision after the end of the current session of parliament which runs to Dec. 13, Khullar said in an interview in New Delhi yesterday. The trade ministry has recommended imports at a concessional rate for a maximum of 100,000 tons and tax changes on tire imports, he said, declining to elaborate. Rubber imports are taxed at 20 percent.

Natural rubber prices in India reached a record last month on concern that the low-output season in Southeast Asia will worsen a deficit. Futures on the Tokyo Commodity Exchange reached a 30-year high of 383 yen on Nov. 11 as rain in Thailand, Indonesia and Malaysia, the top three growers, interrupted tapping and lowered production.

“Domestic production is not going to increase dramatically, demand is going through the roof because factories are being set up to make radial tires,” Khullar said. “The pressure on prices will continue tight through next year, until you resolve the availability issue.”

Bridgestone Corp. and its Indian rivals including Apollo Tyres Ltd. and MRF Ltd. are investing $3 billion in plants to meet demand that’s forecast by Automotive Tyre Manufacturers’ Association to expand 10 percent to 106 million tires in the year to March 31. Rubber makes up 42 percent of raw material costs, according to the manufacturers’ group.

Incomes, Sales

Rising incomes in the world’s second-most populous nation may help more than double annual car sales to 3 million by 2015, according to the government. Passenger-vehicle sales in India in October increased 38 percent from a year ago to a record 231,957 units, the Society of Indian Automobile Manufacturers said on Nov. 10. About 1.4 million units were sold in the April-October period, compared with 1.53 million for the whole of the last fiscal year, according to the group.

Imports in the year to March 31 may exceed 200,000 tons, from 170,048 tons a year earlier, tire makers association’s Director General Rajiv Budhraja said on Nov. 11. Natural-rubber output may drop for a second straight month in November after falling 7.6 percent to 82,000 tons in October, as rains hinder tapping in Kerala, India’s top producer, he said.

India’s imports surged 81 percent in October to 18,148 tons, according to the state-owned Rubber Board, as tire companies stepped up purchases to bridge the shortage.

Source : bloomberg.com