Trade deficit rises in non-tyre rubber products

Rubber association asks for trade protection in terms of safeguard duty

India’s Trade Agreements with Asian countries have led to ballooning of trade deficit with these countries in non-tyre rubber products. Between FY 09 and FY 11, India signed three major trade agreements with Association of South-East Asian Nations (ASEAN), Korea and Japan. Trade deficit in non-tyre rubber products with these three trading partners has gone up from Rs 651 crore in FY 09 to Rs 1725 crore in FY 13, a growth of 165%  in four years, says a study on  Ministry of Commerce data by Tata Strategic Management Group on behalf of All India Rubber Industries Association (AIRIA).

 Trade agreements have been a losing proposition for India as far as non-tyre rubber products are concerned. Small & Medium Rubber units have been at the receiving end of a barrage of cheap import of finished rubber goods  over the last few years as a result of trade agreements leading to high trade deficit. The new study supports our case for a relook at the trade agreements as the non-tyre rubber industry has been adversely affected”, said  Niraj Thakkar, President, AIRIA.

 
He said that the association asked the Government  to either include non-tyre rubber goods in negative list in these trade agreements or provide trade protection in terms of safeguard duty. In fact natural rubber, the key raw material for rubber industry is in the negative list in many such trade agreements.
 

 Rubber industry is dominated by around 6000 micro, small and medium sized manufacturing units in different clusters across the country.
 
According to AIRIA, stiff import duties on raw materials have eroded the competitiveness of rubber industry. Safeguard Duty on finished rubber products will provide a level playing field to the domestic manufacturers, particularly SMEs.

 
Quoting Capexil data, AIRIA has stated that the import duty on raw materials is highest in India when compared to neighbouring rubber product manufacturing countries.  For instance import duty on Natural Rubber in China is 10%  as against 20%  or Rs 30 per Kg in India. On Natural Rubber Latex the import duty is 70%  in India while it is just 10%  in China. Similarly in case of Synthetic Rubbers such as SBR and PBR the import duty is 7.5%  in China as against 10%  in India.
 
On the other hand, the import duty on finished rubber goods is lowest in India when compared to other rubber consuming nations facilitating import of goods to India. For instance on tubes, pipes and hoses, the import duty in China is 10% and above, in India, these can be imported even as low as 6%.  Rubber Rice De-husking Rolls, widely used in rice mills across the country, can be imported duty free in India while China employs up to 80%  duty.

 
As a result, overall import of rubber products in India has gone up 100%  from Rs 3810 crore to Rs 7608 crore in three years between 2009-10 to 2012-13.
 
The finished products can be easily imported as the import duty on rubber products is between 0 to 10%, while the duty on raw materials for rubber industry is between 5 to 70%.   

Trade Deficit in Non-tyre rubber products with ASEAN, Korea & Japan

FY09       651 Cr   
FY10       987 Cr  
FY11      1207 Cr
FY12      1735 Cr
FY13      1725 Cr

[Source – Ministry of Commerce]