Tyre makers agree to help Kerala rubber farmers

Agreement brokered by state govternmet after appeal to major firms for support, will have latter buying from the local market at 25% extra price, till end-March

The Kerala government has, in return for some waiver on payment, got 12 leading tyre companies to agree to buy natural rubber (NR) from the local market till the end of this financial year (March 31), though this is 25 per cent costlier than the global (Bangkok) price.

A little over 90 per cent of India's NR comes from Kerala, with 1.1 million cultivators in the state. Growers have been unable to match prices abroad for a long while and the result has been a surge in import and a slump in both demand and prices at home. As a result, many small and medium cultivators are contemplating quitting the business.

By the agreement worked out on Thursday, with the final meeting in the presence of the chief minister, the 12 companies will buy from local dealers, at the higher price — the Rubber Board of India will fix the daily rates, based on the one at Bangkok. There is a 20 per cent customs duty for any import and a five per cent purchase tax; the government will refund half the purchase tax to the companies. The other half will also be refunded as a claim on  the value added tax collected from the buyers. The scheme will apply only to the RSS-4 grade.

Which means the companies have agreed to pass on the equivalent customs duty benefit to the growers, till end-March. For example, Friday's Bangkok price tag was Rs 105/kg and growers will get Rs 131.25/kg, although the market price is Rs 115/kg. It was Rs 245 a kg in 2009.

Addressing the meeting, Chief Minister Oommen Chandy  said the state's economy had  been hit with NR prices so low. "Rubber is one single plantation crop that has over the years helped to  build the rural economy of Kerala. Today, the situation is such that the price has fallen below the cost of production, forcing many farmers to either stop tapping trees or to fell these," he said.

Finance Minister K M Mani said when rubber prices were high in 2009, the Kerala government had helped tyre manufacturers  by taking up the  case with the central government and got the import duty reduced from 20 per cent to 7.5 per cent."Now, it's your turn to help us. Today, you are importing more than 300,000 tonnes of NR. When we are facing trouble, you should help us," he said.

Raghupati Singhania, chariman and managing director of JK Tyre, who led the manufacturers' delegation, said: "We do have to import rubber for making high quality truck tyres. Also, the consumption of rubber is more than the domestic production. However, we have agreed to help the farmers here."

"Since rubber   has a 20 per cent import duty, the tyre manufacturers would give that to our farmers and the state government will also chip in to the extent of five per cent. So, the prices would go up by 25 per cent, starting tomorrow," said Chandy.

And, he said, they'd now ask the central government for as large a subsidy as possible for rubber tree replantation.