Tyre scrips soar on rubber import duty cut

Tyre stocks today rose up to 3.3 per cent following the government’s decision to cut import duty on natural rubber. However, rubber stocks fell up to five per cent due to the threat of lower realisation over the possibility of decline in rubber prices.

Apollo Tyres closed 3.29 per cent higher at Rs 65.90 while MRF and Ceat gained 1.92 per cent and 2.86 per cent, respectively. Falco Tyres also gained two per cent at Rs 122.40. Modi Rubber declined five per cent to Rs 83.65 while TVS Srichakra fell 3.07 per cent to Rs 291.75.

Abiding by the Delhi High Court’s November 30 order and honouring the tyre industry’s demand partially, the government today allowed the industry to purchase 40,000 tonnes natural rubber at 7.5 per cent import duty until March 31, 2011. The industry had urged the government to allow import of 170,000 tonnes natural rubber at “nil” duty until the end of this financial year and levy an import duty of 7.5 per cent permanently. Import beyond 40,000 tonnes will, however, attract a duty of 20 per cent.

With a production of 455,250 tonnes and consumption of 546,050 tonnes, Indian tyre manufacturing industry is facing a shortfall of nearly 90,800 tonnes natural rubber a year.

Rajiv Budhraja, the director general of Automotive Tyre Manufacturers’ Association, said, “Import of natural rubber will not be viable at the current global price of Rs 220-225 per kg, as the commodity is currently trading at Rs 207 per kg. However, in case of widening disparity in future, traders would be willing to import.”

Budhraja had earlier said import of tyre at a reduced affective duty of 7.5 per cent under the Bangkok agreement would kill the domestic industry, which was awaiting an investment between Rs 10,000-12,000 crore in near future.

The court had recommended the Department of Revenue and the Ministry of Finance to set up a panel of experts to address the concerns and grievances of tyre manufacturers. But the recommendation of the panel to reduce import duty on natural rubber from 20 per cent to 7.5 per cent even for limited quantity of 100,000 tonnes was not executed. The government is yet to respond to the court with its observations.