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The industry has asked for increasing import duties on tyres to bring them at a par with natural rubber, the principal raw material so as to provide a level-playing field to the domestic manufacturing.
In its pre-budget submission, Automotive Tyre Manufacturers' Association (ATMA) has stated that the import duty on natural rubber (NR) currently is 20 per cent while tyres can be imported at a rate of 5 per cent or even nil rate of duty under various Trade Agreements. It said that under SAFTA, tyres can be brought in at 5 per cent duty from Pakistan and Sri Lanka. For other SAFTA countries there is nil duty.
"For successful implementation of Make in India campaign and to promote domestic manufacturing, it is important that import of finished products attract duties at least as much, if not more, than what is levied on raw materials", said Dr Raghupati Singhania, Chairman, ATMA.
Although tyres can be imported into India at preferential/ concessional duties under various trade agreements, the corresponding concessional duties for NR do not exist since NR falls in the negative list across most trade agreements. Tyre is perhaps the only finished product on which 'duty inversion' not only continues but has actually aggravated in recent years. This needs to be addressed and corrected on priority, states ATMA.
In line with the capacity creation in the auto sector, the tyre sector has added/expanded capacity pan India. Recent investments by Tyre Industry have been to the tune of over Rs. 26,000 crore in green field projects as also major expansions.
However, low import tariffs in India have encouraged large and growing volume of tyre imports, despite adequate domestic capacity already in place. For instance, in case of Truck & Bus radial tyres (TBR), for which new capacities have come up, imported tyres have come to account for an estimated 20 per cent of the total domestic market. Quoting data from International Trade Advisory Services (ITAS), ATMA states more than 60 per cent of TBR import is taking place from China at an average unit value of $106 which is lower than raw material price. This is causing huge injury to the domestic tyre manufacturers.
Hence, based on compelling need and circumstances, the Government of India can increase the customs duty on tyres without any corresponding action / explanation to WTO.
Further, ATMA has stated that duties on raw materials where domestic production falls short of domestic consumption need to be reduced as imports are inevitable to meet the domestic industry's requirements. Domestic production of important raw materials such as Nylon Tyre Cord Fabric, Rubber Chemicals, Steel Tyre Cord, Polyester Tyre Cord and Polybutadine Rubber (PBR) falls short of domestic consumption by 46%, 27%, 55%, 66% and 49% respectively.
Similarly, Butyl Rubber, EPDM and Styrene Butadiene Rubber (Tyre Grades) have no domestic production and imports are the only source. ATMA has asked for full exemption from customs duty on these raw materials. Hefty import duties on raw materials where India has a shortfall in production or have no domestic production at all are affecting the cost competitiveness of Indian industry, states ATMA.
