Consumers may have to pay 2 per cent more for automotive tyres as the domestic industry, which is already reeling under high input costs, particularly that of natural rubber, will try to pass on the effect of the excise duty hike to customers.
The government yesterday raised the base excise duty on non-petroleum products from 8 per cent to 10 per cent in the next fiscal beginning April 1.
According to Rajiv Budhraja, director-general of the Automotive Tyre Manufacturers Association (ATMA), the new Budget is overall promising and balancing, but has disappointed the tyre industry, as the finance minister did not consider its long-pending demands.
The association had demanded a cut in import duty on natural rubber to 10 per cent from 20 per cent. It had argued that: “Either the import duty on natural rubber should be reduced or the duty on imported tyres should be hiked so that there is a level-playing field for the industry.” The import duty on tyres is only 10 per cent.
With prices of natural rubber ruling high and nothing in the Budget for the industry, he said there was every likelihood of a price hike.
AS Mehta, director, marketing, JK Tyres, termed the Budget as balanced and good, but said the excise duty hike would naturally escalate the prices of tyres by 2 per cent. According to him, it is only a matter of time before the rise in costs is passed on to consumers.
A further increase in prices cannot be ruled out, as the natural rubber scenario in the country is very bad, according to him. “We have to analyse how the transport industry will react to the situation. If it can absorb a second round of price increase is a crucial issue,” he added. Tyre prices were increased by 3-7 per cent in the first week of January.
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Synthetic rubber, a petroleum product, will also become dearer because of the hike in excise duty and increased input costs, and this will be another burden for the industry.
The industry consumes natural rubber and synthetic rubber in a ratio of 76:24. Prices of natural rubber have risen over 100 per cent in the last one year.
Domestic production of synthetic rubber increased 4.2 per cent in April–October 2009 to 61,393 tonnes, compared to 58,946 tonnes in the year-ago period. Imports rose to 134,125 tonnes as against 121,125 tonnes. Consumption of synthetic rubber went up 7.8 per cent in the first seven months of the current financial year.
In April-October 2009, auto tyre manufacturers consumed 10.7 per cent more synthetic rubber at 126,718 tonnes as against 114,441 tonnes in the year-ago period. However, natural rubber consumption rose 5.9 per cent from 309,405 tonnes at 327,706 tonnes.