Suspension of import will be counter-productive: ATMA
Reacting to the natural rubber (NR) growers’ demand for imposing import curbs, the tyre industry said that the import curbs will be counter-productive and will have far reaching adverse consequences for the industry. The tyre sector is now facing the onslaught of an unprecedented slowdown in the automobile sector.
According to the Automotive Tyre Manufacturers Association (ATMA), the demand raised by NR growers also does not corroborate with the facts. An analysis of domestic and international prices shows that the domestic RSS 4 prices have ruled higher than the international prices over the last six months. Even when compared with Malaysian SMR 20 grade of rubber, which is a competing grade with RSS 4, shows that domestic NR prices are still ruling higher.
ATMA sources said that the average local price in July was Rs 184 per kg, while the international price was lower by Rs 10. In August, the prices were Rs 173 and Rs 156 respectively. The local price was higher by Rs 15 per kg on an average since July. The scene has changed only during this month and the international price is now higher by Rs 6 per kg.
The Indian Rubber Growers Association (IRGA) has recently urged the government to suspend the import of rubber under the advance licence scheme. This is in the light of the recent steep fall in the prices in the local market. Siby J Monippally, president of the association, told Business Standard that the government should enhance import duty on all the goods manufactured out of NR, including tyres, to eight per cent. In 1999, when the prices dropped heavily, the government had temporarily suspended the import under the advance licence scheme.
“NR consumers have been at the receiving end of the comparatively-higher domestic NR prices for a major part of the year. Any knee jerk reaction could have disastrous consequences for the tyre industry which is already facing the prospects of low tyre demand in view of the de-growth in automobile production,” said Rajiv Budhraja, director-general, ATMA.
According to ATMA, the domestic prices have ruled higher due to the domestic demand outstripping the availability, making the imports imperative.
ATMA has put the blame on the volatility in NR prices on Futures trading. The Futures in December have dropped from Rs 167 to Rs 158 within a week, while the international prices have risen from Rs 170 to Rs 173. This volatility is not in tune with the actual demand and supply in the market.
ATMA has suggested market intervention, through the Rubber Board or any other designated agency like STC, till the prices are perceived to be in the vicinity of the international prices.
The NR-based industry in India is now in a serious crisis, following the rise in input costs, especially that of rubber. For the tyre industry, around 45 per cent of the input cost is of rubber. The steep rise in the rubber prices caused closing down of more than 550 small-scale units across the country, according to a data of the All India Rubber Industries Association (AIRIA).
According to ATMA, the tyre sector is reeling under pressure as the profitability of various companies is shrinking. Hence, suspension of the import will be a disaster to the rubber-based industry in the country, it observed.
NR imports had increased by a whopping 32.5 per cent to 153,855 tonne during the April–November period as against 115,885 tonne in the same period of the last financial year. This is mainly due to the lower price prevailed in the global market coupled with poor local production.