Users expect Rs 500cr cost savings

IN FOCUS / NATURAL RUBBER

The decision by the United Progressive Alliance (UPA) government to ease the port restrictions on rubber imports as demanded by user industries was likely to lead to savings of over Rs 500 crore.

It would help Indian units to break into the global rubber trade through outsourced manufacturing contracts, according to former president of the All India Rubber Industry Association (AIRIA) and chairman of the India Rubber Expo, Anil Sampat.

Small scale industry (SSI) units accounted for 70 per cent of units using rubber and they would be the largest gainer in the domestic sector. According to AIRIA, the footwear sector would gain the most among small industries.

Free import would reverse the phenomenon of shutdown of the SSI footwear units. The other notable gainer would be tyre companies, which were suffering from high input prices.

Mazhar Vohra, former chairman of Chemical and Allied Products Export Promotion Council (CAPEXIL) and current chairman of the CAPEXIL Rubber Panel, said, "Indian industry can now buy rubber at global prices and the removal of stringent quality inspection would mean faster clearing at ports at a lower transaction cost."

Earlier rubber could be imported only through Vizag and Kolkata ports.

According to Sampat, with the restrictions gone, China and Sri Lanka would double participation at the Rubber Expo which was the largest in Asia.

"India has sent the right signals to the global community to come and invest in the sector and the rubber industry could well grow like the software industry. It can target foreign direct investment worth $50-100 million post-restrictions," he said.

The global rubber products business was worth $100 billion last fiscal, with US sector worth $60 billion. The focus on US as a source of offshore contracts would cover all types of rubber products.

US companies were looking to cut costs. India could offer a cost advantage of roughly 20-30 per cent.

The export target for rubber goods business had been set at $1 billion against $ 0.5 billion now. Growth would come from outsourced manufacturing contracts.

India was a good base for offshoring as it offered technical know-how and cheap manpower besides being the third largest producer of natural rubber, said Sampat.

The industry would hold global roadshows to highlight India's strategic advantage in the rubber business to buyers in US, Europe and east and south-east Asia in the coming months.