Rubber growers seek hike in import duty; ind opposes

Hit by surging natural rubber imports and falling domestic prices, growers have urged the Union government hike import duty and check duty-free imports.

Natural rubber growers have sought an increase in the import duty to Rs 34 per kg from the current Rs 20. The Indian Rubber Growers Association (IRGA), Indian Rubber Dealers Federation (IRDF), and various political parties, especially the Kerala Congress, are now pressing the government to increase the duty.

In Kerala, farmers and dealers have protested demanding a curb on duty-free imports. Around 8,500 dealers across Kerala and Tamil Nadu had closed operations for a day on September 30.

But industry bodies like the Automotive Tyre Manufacturers Association (ATMA) and All India Rubber Industries Association (AIRIA)  are strongly opposing this and demanding not to  increase the duty and allow duty-free import up to 200,000 tonne in the current year. They said even at higher prices, rubber was not available in local markets and suggested import was a must for the survival of rubber-based units.  

In a letter to the Minister for Commerce, IRGA urged to suspend duty-free imports for a period of six months. The letter cited, during 2012-13,  import was 287,000 tonne, where 50 per cent  was through the duty-free channel (Duty Exemption Entitlement Certificate). During the current fiscal up to September, import reached 179,292 tonne. While the September imports saw a 208 per cent rise when compared with that of the last year, in August it was up 102 per cent as against last year's. If the current trend continues, 300,000 tonne rubber is expected to reach India in this fiscal. Consequently, it would damage local demand besides leading to market crash.

During 2009-10 when the price  touched Rs 242 kg  on the request of the consuming industry, import duty was changed to 20 per cent  or Rs 20 which was lower for a period of one  year. Now the price has touched Rs 166 a kg.  The fall could be attributed to unwanted imports to manipulate the prices, beyond domestic requirement, it said.

On a  resolution passed by the Rubber Board, the commerce ministry recommended the Centre to change the import duty to 20 per cent  or Rs 34 per kg, whichever is lower two months ago. However, no action has been taken in this regard.

The government had temporarily suspended duty-free import in 1999 when there was a crash in the prices, IRGA president Siby Monippally told Business Standard.

Import is imperative : ATMA
Any hike in the NR  import duty will throttle the growth of the rubber consumption industry (tyre and non-tyre), which was already passing through a difficult phase due to a slowdown in the automobile sector. Besides, a hike in duty is unjustified as there is a shortfall between the domestic consumption and availability, making imports imperative. Moreover, domestic prices are ruling much higher than international prices, said Rajiv Budaja, director general, ATMA.

ATMA clarified that the natural rubber being imported now was in fact contracted four to eight weeks ago when production dropped drastically in the country. According to the Rubber Board, domestic production fell by  52,700 tonne during Apr-Sept, 2013, as against the same period a year ago. Industry had to take recourse to imports since domestic availability thinned out during June and July and prices went up, the board said.

Despite ruling at a premium of 25 per cent against the international prices, domestically, industry had problems including required quantity, grade. So import was inevitable for the survival of the rubber-based industries, he added.