Tyre makers seek customs waiver

The Automotive Tyre Manufacturers’ Association (ATMA) has sought a waiver in customs duty on raw material, which is in short supply to meet the domestic demand besides demanding a reduction in duty on natural rubber.

Onkar S Kanwar, chairman and managing director, Apollo Tyres Limited met finance ministry officials last week on behalf of ATMA. As part of its pre-budget memorandum, the industry association has asked for a cut in the customs duty on natural rubber to 10 per cent from the current levels of 20 per cent. Alternatively, the duty on the import of tyres could be raised to 20 per cent to protect the industry from cheaper Chinese imports. Imports from China and Korea that comprise nearly 80 per cent of all imports, draw an 8.6 per cent duty under the Asia Pacific Trade Agreement.

Moreover, the ATMA has also sought a waiver of customs duty on raw materials which are not manufactured domestically. These include butyl rubber, polyester tyre cord, styrene butadiene rubber (tyre grade) and chlorobutyl or bromo butyl rubber.

While SBR currently draws a 10 per cent duty, the other categories of raw material attract a five per cent duty.

Analysts pointed out that the tyre industry was a raw-material intensive industry,accounting for nearly 62 per cent of the production cost. The shortfall between production and domestic demand for key raw materials ranges from 17 per cent to 60 per cent.

The increase in raw-material prices in the second half of last fiscal has led to a net profitability getting adversely affected.

“The net profit as a percentage of net sales of the top five tyre companies has fallen to 0.96 per cent in 2008-09 as against 4.84 per cent in 2007-08,” Kanwar said.

Natural rubber prices during the last three months has risen about 40 per cent from Rs 70 per kg during early March to Rs 100 per kg presently.

The price of domestic natural rubber is comparatively higher by Rs 15-20 per kg compared to the corresponding international price. An increase of Re 1 per kg results in an additional annual financial burden of Rs 50 crore for the tyre sector, claimed the ATMA.

Taking a hit by the slump in demand for commercial vehicles, truck and bus tyres have recorded a 2 per cent decline in sales in 2008-09. The passenger vehicles segment has been able to register a flat 1 per cent growth in volumes. Truck and bus tyres account for over 60 per cent of the entire industry turnover.

“On the export front, the truck and bus segment was down 20 per cent last fiscal. Even passenger car tyre exports registered a 10 per cent dip.” Rajiv Budhraja, director general of ATMA informed. On top of that, Indian exporters would now have to directly compete for the smaller size of the market with its Chinese counterparts. “China now has excess capacity. Its exports to the US are down around 50-60 per cent, and they are now ready to quote cheaper prices,” Budhraja explained. k