Indian rubber user industry in a dilemma over imports

CHENNAI: The natural rubber user industry finds itself in a dilemma to import 40,000 tonnes of the commodity before 31 March at a concessional Customs duty of 7.5 per cent.

 “Prices in the global market are higher than the domestic price by at least Rs 25 a kg. This is a tricky issue as far as imports are concerned,” said Rajiv Budhraja, Director-General of the Automotive Tyre Manufacturers’ Association, on the sidelines of the India Rubber Expo 2011.

Last month, the Centre gave its nod for the import of 40,000 tonnes of rubber under the tariff rate quota at concessional duty as part of its plan to keep a lid on rising domestic prices. The normal duty for rubber imports is 20 per cent. The Directorate-General of Foreign Trade issued guidelines for import and it will mainly depend on the consumption during 2008-09 by each unit. The usage has to be certified by the Rubber Board. The registration for imports began on Tuesday and will end on 24 January.

Last week prices for ribbed smoked sheet (RSS) 4 grade rubber hit a record Rs 227 a kg. In contrast, the comparable RSS 3 grade in the global market ended at Rs 252.08 a kg.

 “Price apart, the problem will be finding rubber in February. From February to April, it is wintering season,” said Budhraja.

Wintering season is generally a period of low production. Rubber prices globally heat up on rising demand and lower supply. Rubber production was up a meagre five per cent at 10.7 million tonnes in 2010.

In India, projections for production during the current fiscal have been pruned to 8.51 lakh tonnes from initial estimates of 8.93 lakh tonnes as output was affected during September-October, said Toms Joseph, Deputy Director (Economic Research) of the Rubber Board, during a session on Rubber Outlook at the expo. The rise in crude oil prices is also influencing the rise in natural rubber prices. This is because synthetic rubber, the substitute for natural rubber, is derived from petroleum products.