Rubber cess slashed to give relief to traders

Thursday, 19 May 2016 00:00 - - {{hitsCtrl.values.hits}}

By Uditha Jayasinghe

Local rubber traders reeling under record low global prices could get a short respite after Cabinet yesterday agreed to reduce the cess levied on raw rubber exports by Rs. 11 per kilogramme. On a proposal made by Plantation Industries Minister Naveen Dissanayake, Cabinet agreed to decrease the cess levied on raw rubber exports from Rs. 15 per a kilo to Rs. 4 per kilo. Local rubber exports dipped 14.5% in 2015 from $ 889.8 million in 2014 to $ 761.2 million last year. In December 2015, prices decreased 19.8%, according to the Central Bank.

However, rubber prices recorded an 11.1% increase in 2016 January growing to $ 71.3 million from $ 64.2 million.

The cess was introduced to encourage value addition and reduce the amount of raw rubber exports from Sri Lanka. An estimated 80% of rubber is consumed by domestic industries, primarily tyre producers, while the remainder is exported. However, international rubber prices have fallen to the lowest level since 2009 on plummeting oil prices and slow demand from China.

“With the reduction of rubber in the world market, Sri Lankan prices have also reduced simultaneously. Planters including small rubber estate owners are in a difficult situation and it has been forecasted that these low prices will remain till 2020. Therefore, cess will be reduced to give relief to planters by increasing the rubber price through competition between domestic rubber goods producers and raw rubber exporters,” the cabinet paper said.

The Government, last month, said it is hoping to join an effort by other rubber producing countries to form a global floor price for rubber exports.

The possibility of a floor price, which has been under discussion by the handful of East Asian natural rubber producing countries, will be under discussion yet again at an international summit to be held in Colombo in June, according to Rubber Development Department Director General R.B. Premadasa.

Previous efforts to shore up prices by the three Southeast Asian producers – who account for more than 70% of global natural rubber output – have had little success in the face of abundant supply and weaker demand from top consumer China.

Nonetheless, rubber groups in both Malaysia and Thailand have said they will support a plan by the Indonesian Rubber Association (GAPKINDO) seeking to get producers and exporters to agree not to sell rubber below $ 1.50/kg.