Proposal to cut import duty pulls rubber down

The commerce ministry's proposal to reduce import duty on natural rubber from Thailand in a phased manner has hit prices badly in Kerala today. The price of benchmark RSS-4 dropped by Rs 1 a kg to Rs 92 following apprehensions over increase in imports. Over the last couple of days, the price of RSS-4 grade had reduced by Rs 2 a kg.

Rubber imports stood at 85,048 tonne in 2006-07 - an all time high - resulting in stocks swelling to 161,000 tonne and a price reduction in the current off season. Reducing the import duty on rubber would further aggravate the market situation, according to both growers and traders.

As part of a bipartite agreement with Thailand, the commerce ministry has put forward a proposal to reduce the duty and finally scrap it completely. According to sources at the ministry, the duty is proposed to be reduced to 10-15 per cent from the present 25 per cent. It is learnt that the agreement would be signed formally by July next.

The government of Thailand has strongly demanded scrapping the duty on rubber as part of the agreement. But since there will be strong protest from the million plus growers, the ministry is not ready to concede to the demand. But as a gesture of abandoning the duty, it may reduce it considerably and may eventually scrap it.

Thailand, the world's largest producer of natural rubber, produces around 32 lakh tonne a year and exports a major chunk of it.

Since India consumes over 800,000 tonne a year, Thailand is very keen on ensuring duty free exports to India. But the move of the government has already evoked protest in Kerala, where more that 92 per cent of the total rubber is produced. Indian Rubber Dealers Federation(IRDF) has decided to start an agitation against the move and plans to observe a day's bandh.

Various organisations of planters have also protested the move. Although the tyre industry is importing rubber duty free through the advance license scheme, allowing free imports would destroy the sector completely in India, growers said.

The tyre industry is also keen on withdrawing the duty and has pressurised the government for a long period. But the government is handcuffed due to political lobbying from states like Kerala.

Export avenues for Indian natural rubber are few as the country is not competitive globally. Though the country had seriously pushed exports from 2000, the maximum exports recorded in a year was 74,000 tonne in 2003-04. During the last financial year, total exports stood at 55,309 tonne. So, duty free import from Thailand may result in a stock pile-up and the consequent steep fall in prices.