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The Rubber industry, dominated by around 6,000 micro, small and medium-sized manufacturing units in different clusters spread across the country, is pinning its hopes on a correction in the inverted duty structure in the next Union Budget.
“Inverted duty structure has been the bane of the rubber sector in India and has stifled the growth of this vital sector of manufacturing. We hope the new government, with its avowed agenda of a revival of manufacturing sector, will address this anomaly in the budget,” said Niraj Thakkar, President, All India Rubber Industries Association (AIRIA).
In its pre-budget submission to the Ministry of Finance, AIRIA has stated that finished products can easily be imported as import duty on rubber products is in the range of 0 to 10 per cent, while the duty on raw materials for the rubber industry is between 5 per cent and 70 per cent.
Not only is the import duty on raw materials higher, but so also is the duty levied even on raw materials not produced in the country. If the idea is domestic value addition, this anomaly needs to be corrected, added Thakkar.
According to AIRIA, stiff import duties on raw materials have eroded competitiveness of the rubber industry. On the other hand, lower taxation and export incentivisation policies of countries like China have helped manufacturers there to flood the Indian market with cheaper products. The rubber sector has therefore asked for a Safeguard Duty on finished rubber products so that the domestic manufacturers, particularly SMEs, get a level-playing field.
Quoting Capexil data, AIRIA has stated that the import duty on raw materials is the highest in India when compared to the neighbouring rubber products manufacturing countries. For instance, import duty on natural rubber in China is 10 per cent as against 20 per cent or Rs 30 per kg in India. On NR latex, the import duty is 70 per cent in India while it is just 10 per cent in China. Similarly, in case of synthetic rubbers like SBR and PBR, the import duty is 7.5 per cent in China as against 10 per cent in India. India is deficit in both natural rubber and synthetic rubbers.
On the other hand, the import duty on finished rubber goods is the lowest in India compared to other rubber-consuming nations, facilitating the import of cheaper goods to India. For instance, on tubes, pipes and hoses, the import duty in China is 10 per cent and above, in India, these can be imported for even as low as 6 per cent. Rubber rice de-husking rolls, widely used in rice mills across the country, can be imported duty free while China imposes up to 80 per cent duty on the same.
As a result, the import of rubber products in India has gone up almost 100 per cent from Rs 3,810 crore to Rs 7,608 crore in three years, from 2009-10 to 2012-13. “A significant number of manufacturers are turning to trading in rubber goods, leading to a loss to the exchequer and also loss of domestic jobs," he said.
According to AIRIA, India has the capability to manufacture quality rubber products which are globally accepted as is evident in the export of Indian rubber products to some of the discerning and quality-conscious markets in the world. A safeguard duty on the import of finished rubber products will also ensure that rubber entrepreneurs continue to manufacture rubber products.
Further, AIRIA has stated that the drawback duty of at least 5 per cent should be fixed on the reclaim rubber instead of 2 per cent at present. Reclaim rubber plays a vital part in environment conservation as discarded tyres and other rubber products are crushed and regenerated.
According to AIRIA, there is an urgent need to upgrade the technology in large number of Rubber SMEs. With a view to improve productivity, a Technology Upgrade Fund (TUF) to upgrade the present technology be made available to the MSME sector at a rate of 5 per cent interest. High cost of finance, inflation, volatility in raw material availability and prices has retarded the technology upgradation drive amongst Rubber MSMEs in India.
