Low international prices and lower domestic production resulting in higher imports, with no changes in the situation in sight, say industry experts
By Sai Nikesh D
Government intervention in convincing major tyre companies to purchase from local farmers in an attempt to stabilise domestic rubber prices may prove to be futile, with industry experts saying that India’s natural rubber imports are all set to reach a record 5 lakh tonnes in FY2014-15.
To address the concerns of farmers over losses due to low international prices and rising imports, around 17 tyre companies in India agreed last month to buy natural rubber from within India at international prices plus the prevalent import duty for three months. The move, mainly due to an appeal by the Kerala Chief Minister, aimed to reduce imports, and help farmers offload their stock and continue tapping.
However, such measures have failed to make any impact on imports. According to the Ministry of Commerce, while India’s natural rubber imports stood at around 3.6 lakh tonnes during FY2013-14, imports have surged to around 2.8 lakh tonnes in the first seven months of FY2014-15 (April to October).
Meanwhile, reports say that India’s natural rubber production in December has slumped by around 36%, partly due to adverse weather conditions and low yield. This is expected to fuel imports in the remaining months of the FY2014-15 and encourage importers who are largely unaffected by a slight dip in sales up to March 2015.
Going by the latest statistics, industry experts told us that India’s total natural rubber imports may climb to up to 5 lakh tonnes this fiscal year, the highest ever on record.
Experts say that there is a wide gap between Indian and international rubber despite government efforts such as higher import duty on dry forms of rubber and inclusion of natural rubber in the negative list of Free Trade Agreements (FTAs) with major natural rubber producing countries and under India-ASEAN Free Trade Agreement.
According to the Rubber Board, average natural rubber prices in India stand at around Rs.129 per kg, compared to average international prices of around Rs.107 per kg.
Experts say that global rubber production has increased in recent years, and improving yield and expanding rubber cultivation to areas such as the North East is the only solution to sustain rubber cultivation in India.
Industry representatives add that the Ministry of Commerce’s Advanced Licensing Policy, which allows imports against exports for a limited period of six months, may help contain imports.
This article was published in The Dollar Business on January 8, 2015.