The tyre industry has appealed the finance minister for import of 200,000 tonnes of natural rubber (NR) in 2011-12 in order to bridge the gap between domestic consumption and production. In a pre-Budget submission to the finance minister, the Automotive Tyre Manufacturers Association (Atma) has also demanded customs duty waiver on raw materials like butyl rubber and styrene butadiene rubber (SBR), which are not produced domestically.
It has also demanded reduction in customs duty on raw materials where domestic supply is short of demand, like steel tyre cord, rubber chemicals and polyester tyre cord.
At present, butyl rubber attracts a duty of five per cent and other raw materials which are not produced in India attract a duty of 10 per cent.
Steel tyre cord total domestic production is 10,000 tonnes while its consumption is 25,000 tonnes. Nylon tyre cord production is 63,695 tonnes, while the demand is 115,000 tonnes and 35,000 tonnes of rubber chemicals are produced in the country while demand is 42,000 tonnes. So the tyre industry is in serious trouble due to the low availability of raw materials and its steep price rise.
The industry is raw material intensive and this accounts for 62 per cent of the total industry turnover and 70 per cent of the total production cost. NR accounts for 42 per cent of the total raw material cost.
The percentage increase in the price of NR during the last six months was 41 per cent and even at the record price level the industry finds it difficult to get rubber.
The current price of RSS-4 grade rubber is Rs 238 a kg. Atma also pointed out that the net profit of the tyre companies is on the decline and expected to slide further in the last quarter of the current financial year.
The net profit as a percentage of net sales has come down from 6.39 per cent in October-December period of 2009 -10 to 3.14 per cent in the same period of the current financial year. The industry has a turnover of Rs 30,000 crore with an export basket of Rs 3,600 crore.
Reuters adds: Global tyre makers bought some quantity of Indonesian rubber and demand from trading houses in Southeast Asia also stirred up trading, but main consumer China was on the sidelines although physical prices had dropped from record highs, dealers said on Thursday.
Indonesian SIR20 was traded on Thursday at 244 US cents a pound ($5.38 a kg) for May shipment. Late on Wednesday, SIR20 for April delivery changed hands at 245.00 and 246.50 cents a pound ($5.40 and $5.43 a kg), with buyers including Japan's largest tyre maker Bridgestone.