Glut In Market Reins In Rubber Prices

Reduction of the purchase tax by the Kerala government from 11 per cent to six per cent has failed to provide the necessary boost to the natural rubber market which continues to suffer from lack of industrial demand.

Even though the minimum price for RSS 4 grade is Rs 32.07 per kg and that of RSS 5 Rs 30.79 per kg, the actual market prices are Rs 29.75 and 27.50 per kg, respectively. The current price for ISNR 20 is Rs 27.75 per kg.

The state government has recently announced a slew of measures to bail out the industry. Other than the cut in purchase tax, this includes a Rs 2 per kg subsidy for rubber export.

The state government has decided to export at least 20,000 tonne of rubber and the total subsidy per kg will come to Rs 5.50 including Rs 3.50 from the central government.

The state government has also announced the procurement of 20,000 tonne of rubber through the State Cooperative Rubber Marketing Federation and the State Warehousing Corporation. In a way, the government has succumbed to the pressure from the rubber producing community.

But market sources told Business Standard that these steps have so far failed to have any positive impact on the price level since industrial demand continues to lag behind due to recession, especially in the tyre manufacturing sector. This has resulted in a huge stock pile-up.

According to Rubber Board estimates, there is a 1,40,000-tonne stock in the market as on October 31. Market sources said at least 50,000 tonne should be procured from the market to tide over the present stalemate. But the government is reluctant to procure such a huge quantity as it will be an entirely loss-making affair. The central government is also in no mood to procure rubber as they did earlier.

According to growers, production is in full swing since the season had started. It is estimated that production will be almost the same as in the last season. Because of a good monsoon, tapping is in full swing and this will also have a negative impact on the market.

The traders here say that export of natural rubber is not a viable proposition as internationally prices are ruling below the Indian level. According to initial estimates, there may be a loss of at least Rs 10 per kg on export. Hence, the government will be needed to provide at least Rs 10 per kg as export subsidy.