High prices of natural rubber hit industry hard

Rubber units in Jalandhar are passing through a critical phase due to an unprecedented rise in natural rubber prices. A majority of small units are either closed or are resorting to layoff.

As a result, the city, which had been the hub of the rubber industry for four decades and where 300-400 units were functional, now has about 70 units.

Rubber prices are escalating as the price for RSS 4 is ruling at Rs 81 per kg at Kottayam(Kerala) and Rs 91 per kg at Delhi, against the benchmark price fixed by the Ministry of Commerce at Rs32.09 per kg. During the last three months, raw rubber prices have increased from from Rs 61.00 per kg to Rs 91 per kg at Delhi.

Sources in the industry said there was an acute shortage of natural rubber in Kerala due to growing demand, the main and the only state producing rubber in the country, as a result of which there was an unprecedented upswing in its prices. Some of them also revealed that seeing the rising prices, growers were holding back their stocks leading to a scarcity in the market. Besides that, the continual export of natural raw rubber had further aggravated the situation .

Commenting on reasons, Mukand Rai Gupta, president, Jalandhar Rubber Goods Manufacturer's Association and also chairman of Vinko Auto Industries Ltd said, "The production of natural rubber in the country is hardly sufficient to meet the requirements of domestic rubber units manufacturing fininshed rubber goods products. Under such circumstances, there is no logic in allowing exports of natural rubber at the cost of the domestic industry".

He added that online trading of natural raw rubber had further aggravated the problem. He said, "Manufacturers have to take licence from the Rubber Board, Kottayam, but so far as online trading is concerned, no such documentation is required. The investor only has to pay about 2.5 per cent as a margin money for trading."

One of the manufacturers said, "The irony is that prices are increasing unabatedly day by day jeopardising the interests of the rubber manufacturing industry, particularly units in the small scale sector." This price increase is hitting the SSI sector very hard. Under the present circumstances, they are not in position to fulfil their export obligation.

In order to counter the problem, Gupta added that the government has to temporarily suspend export of natural rubber, and import 20,000 metric tonnes of the commodity through the State Trading Corporation(STC), apart from making arrangements for distributing the same to the small scale industry at the prevailing local Kottayam prices.

Secondly, it was necessary to reduce import duty on natural or latex rubber to 0 per cent from 20 per cent,so that the prices of natural rubber in the country were stabilised and the availability of natural rubber or latex was ensured.

He further said the government should stop collection of cess duty at Rs 1.50 per kg on natural rubber, which was initially collected to increase the cultivation of rubber.

"The Government should also consider setting up a stabilisation fund for the rubber consuming industry similar to the one set up for growers, so that when prices shoot up alarmingly, like the one at the present juncture, some leeway may be provided to the rubber manufacturing industry," Gupta added.