The Indian tyre industry has asked the government to impose customs duty on natural rubber on a fixed basis, rather than ad valorem, on account of soaring prices of the commodity.
Under the current applicable ad valorem rate of duty, when natural rubber (NR) prices move up, consumers not only have to pay more to import NR, but also have to bear the burden of customs duty, which goes up proportionately, Automotive Tyre Manufacturers Association (ATMA) Director General Rajiv Budhraja told reporters here.
"In the event of NR prices going above a certain level, that is about Rs 90 per kg, customs duty on NR should be on a fixed basis," Budhraja said.
When the NR price was Rs 75 per kg, the 20 per cent customs duty worked out to Rs 15 per kg and when the price was increased to Rs 180 per kg, the same rate of duty (i.E. 20 per cent) worked out to Rs 36 per kg, he said.
Such a change in tariff rates was recently introduced in China to make the domestic tyre and rubber-producing interests more competitive and viable, he said.
Currently, the import duty on sheet rubber in China is 20 per cent, or 1.6 yuan per kg, whichever is less. Since NR prices are currently hovering at around 23.10 yuan per kg, the customs duty on rubber sheet imports is less than 7 per cent, he said.
Budhraja said the industry has also sought duty-free import of two lakh tonnes of NR on a priority basis to "cool off" rising NR prices as well as cut down the production-consumption deficit, which has been projected at 1.76 lakh tonnes in 2010 by the industry. This is much higher than the Rubber Board's estimates of a production-consumption deficit of 85,000 tonnes.
The board had said there will a 75,000 tonne increase in production, but the industry feels this is an over-estimation, given that an increase of this order has never been achieved in 20 years.
The industry has also pegged consumption growth at about 12-15 per cent, whereas the board's estimation is 5-6 per cent, he said.
NR prices have touched an all-time high of Rs 180 per kg, an 80 per cent increase over the average June, 2009, price of Rs 100 per kg. The industry feels 'let down' at the absence of corrective steps by government, Budhraja said. Not even symbolic action has been taken so far by the government, he added.
Budhraja and an ATMA delegation were here to parley with the government-appointed panel, headed by the Rubber Board chairman, which was formed under a recent Delhi High court order. The court had directed the Commerce Ministry and Rubber Board to consider representations made by petitioners on natural rubber pricing issues.
Besides ATMA, the petitioners include the Indian Cycle and Rickshaw Tyre manufacturers and All-India Rubber Industries Association.
The delegation met the board chairman at Kottayam today.
ATMA Raw Materials Group Convenor Kaushik Roy said the industry has been held "hostage" to extreme uncertainty in terms of pricing and availability of NR, causing production disruptions and putting the planning process in disarray.
"The industry is being directed by Original Equipment Manufacturers and transporters for price hikes, which are inevitable, as the entire price increase in NR cannot be absorbed," he said.
Most of the NR stock in the market is fresh stock. The industry does not find any evidence of the 2 lakh-tonne-plus buffer stock as stated by the Rubber Board, he said.
Tyre companies have made investments of over Rs 12,000 crore in capacity addition (greenfield projects and expansion), primarily in high technology radial truck and bus tyres, which would be seriously jeopardised if the present concerns over high NR prices and availability issues are not addressed and resolved on a priority basis, he said.
