Rubber body calls for duty-free imports

The All India Rubber Industries Association (AIRIA) has said that the ongoing volatility in the rubber prices is likely to retard the growth prospects of the industry.

AIRIA president M F Vohra said while natural rubber consumption had been outstripping production, the losses in output over the last few months may lead to a supply gap of 1 lakh tonne, resulting in further spurt in prices.

"To overcome the situation, the industry needs to depend on imports. But import duty of 20 per cent on natural rubber and 70 per cent on rubber latex further make things difficult for the industry," Vohra said.

AIRIA noted that the government has fixed duty on raw materials lower than the duty on finished products; the reverse, however, has been happening in the case of imports of natural rubber and rubber latex.

Where the duties on finished rubber products have been brought down to 10 per cent, duties on natural rubber and latex remained unaltered at 20 per cent and 70 per cent respectively.

This inverted duty structure on natural rubber and latex has been allowed to continue throughout the year.

While the government formed the Hoda Committee to correct this inverted duty structure, no decision on duty reduction had been taken as yet, AIRIA said.

Considering the heavy shortage of natural rubber, the industry has called for duty-free import of 1 lakh tonnes of natural rubber for domestic production as 49,800 tonnes of natural rubber imported under DEEC license are meant for export production and has no relevance to domestic demand.

Since futures trading in natural rubber commenced in 2003-04, prices of natural rubber have steadily gone up.

"While the rubber industry has no qualms on natural rubber prices being determined by market forces in an open market economy, the industry is averse to manipulation in prices as indulged in by a section of traders indulged in futures trading," Vohra said.

The Association had called upon the government to remove natural rubber from the commodity list for futures trading.

The Rubber Board has estimated 3.6 per cent growth in natural rubber production during 2008, while consumption growth will be to the tune of 4 per cent. By 2009, consumption is expected to grow by 4.8 per cent with output rising by just 3.6 per cent, according to reports.

A recent Rubber Research Institute of India study notes that due to widespread incidence of rubber tappers being affected by the chikungunya virus, and continuous rains making tapping difficult, 50,000 tonnes of natural rubber has been lost during the first five months of 2007-08.