Upasi upset at rubber price crash

The United Planters Association of Southern India has said that the 50 per cent reduction in export incentive and the removal of port restriction for import of natural rubber were to blame for falling domestic prices.

Upasi would like the government to fulfil its assurance to intervene if rubber prices crashed.

It asked the government to restore port restrictions and export incentives so that the price fall was checked.

J K Thomas, chairman of the Upasi rubber committee, said natural rubber prices which rose after 2003, fell after August by 26.5 per cent.

He said, the price level peaked at Rs 67.38 per kg in July this year, following which the central government relaxed port restrictions in August. To compound the woes of growers, export incentive was slashed by 50 per cent.

As a result, rubber prices fell to Rs 49.50 a kg, he said. The domestic natural rubber price was now lower than international rubber averages by Rs 7.14 a kg. The latter had fallen during the same period by 7.8 per cent.

Import of rubber was restricted to Kolkata and Vizag ports since 2001 to check sub-standard imports flooding the market. The export incentive was introduced to enable India establish its credentials in international natural rubber market.

The rationale for these interventions still existed, especially in the context of increasing imports on one hand and lower exports on the other, the current fiscal, he stated.

Imports into India during April-August 2004 were 30,221 tonnes, compared to 20,020 tonnes during the corresponding period last year, representing an increase of 51 per cent.

Similarly, exports during April-August 2004 was only 6,922 tonnes, compared 12,802 tonnes in April-July 2003, a decline of 46 per cent.

The removal of special additional duty (SAD) of 4 per cent, in lieu of sales tax, and reduction of import duty from 25 per cent to 20 per cent, were added incentives for the consuming industry to source natural rubber from the world market, depressing domestic prices further.

He added that according to WTO, any country could have export incentive schemes until the commodities export share reached 3.25 per cent of world export.

Indian rubber's share in the world market for 2003-04 was only 1.3 per cent. This justified the continuation of the schemes, he said. He warned that setback in exports and larger imports would result in excess supply. This would hurt the 10 lakh growers and 3.5 lakh workers depending on the sector.

He urged the government to restore the incentives for now and called for a long term policy on the issues of port restriction and export incentives.