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.
Source : thehindubusinessline.com