Availability of cheaper rubber abroad makes imports viable

Duty-bound import of natural rubber, though less attractive for importers through the Advance Licence Scheme, has been on the increase during the last few months. The much lower tariff for the commodity in the overseas markets provides a viable option for industrial users to import rubber even by remitting a 20 per cent duty.

This price situation ensures a much higher import in the coming months, likely to be in a range of 14,000-16,000 on a monthly basis, mainly by the non-tyre sector. Generally the non-tyre sector is less interested in the import of natural rubber due to the exorbitantly high import duty. The tyre sector imported 5,500 tonne in April and May this year while this was 4,800 tonne in the same period last year. According to experts it is likely that more import would occur in the coming weeks as the overseas and domestic markets have such huge gap on the price front.

The present market conditions in India and abroad paints a different picture while importing rubber from other producers. The cost of 1 kg of rubber in the local market is around Rs 110, including a 4 per cent VAT, transportation cost and other expenses, as the local prices have hovering around Rs 100 per kg for the last 10-12 weeks. But the average overseas price is almost static, in a range of Rs 82-83 for the last few weeks.

Even after paying a 20 per cent duty and incurring other expenses, the per kg cost for imported rubber would be Rs 102-103 per kg. So imported rubber is cheaper by Rs 7 per kg on an average, hence a much attractive route for bulk purchases.

This is a major reason for a smart increase in imports during April and May. During these months, according to Rubber Board estimates 24,743 tonne were imported to India against 14,341 tonne in the same period of 2008. Total import in 2008-09 were 79,927 tonne against 86,394 tonne in 2007-08. Expert see a possibility of import to cross the 100,000 tonne mark in the current financial year.