The government's efforts to cool down rising rubber prices by lowering import duty may not yield the desired results, as traders are unlikely to resort to overseas purchases due to higher prices of the commodity in international markets than domestic rates.
The government had on December 23 reduced import duty on natural rubber shipments of up to 40,000 tonnes to 7.5 per cent from 20 per cent earlier till March 31, 2011, with a view to boost domestic supply and check rising prices.
"International prices of natural rubber are still high. It is Rs 223 per kg vis-a-vis domestic prices of Rs 207 a kg. Adding 7.5 per cent import duty, the landing cost touches around Rs 240 a kg. This is not an economic proposition," Indian Rubber Dealers Federation President George Valy told PTI.
Natural rubber prices have been on the rise for the past few months due to non-stop rains in central Kerala and the Malabar region, which has hampered tapping activities.
Valy expressed hope that international prices might come down in the next few weeks, with fresh supplies from Thailand likely to make their way into the market. However, if China resorts to aggressive buying immediately after the festive season to meet demand from its booming tyre industry, the chances of a significant reduction could be bleak.
"But, in no way international prices are going to go past Rs 230 a kg," he said, adding that domestic farmers were also augmenting supplies to the market to cash in on the high prices ahead of the holiday season.
In the meantime, if international prices show signs of going up further, domestic traders may start hoarding to drive up prices at home, Valy said.
As of now, there is no sign of domestic prices coming down, he added.