Automotive tyre manufacturers demand reduction of natural rubber import duty to 7.5%

Also, call for a re-look on regional trade treaties

India’s regional trade agreements are adversely impacting the domestic tyre industry as huge volumes of tyres are finding entry into India while the import of raw materials has been restricted as a direct outcome of these agreements, emphasised tyre industry in its pre-budget submission to the Finance Ministry.

The basic customs duty on tyres is at 10 per cent, however, under various trade agreements the duty on tyres ranges between zero to 8.6 per cent facilitating tyre imports into India. While tyres (finished product) can be imported into India at preferential/concessional duties under various trade agreements, natural rubber (basic raw material) falls in the negative list (having no duty concession) across most trade agreements and thereby impacting the tyre industry bothways, said the Automotive Tyre Manufacturers Association in its parleys with the ministry.

Under the Asean Free Trade Agreement, Indo-Sri Lanka, India-Singapore or India-Malaysia trade agreements, natural rubber falls in the negative list with no duty concession. On the other hand, tyres can be imported sans duty under the Indo-Sri Lanka, India-Singapore, while a six per cent duty under the Asean FTA and 8.6 per cent under the Asia-Pacific Trade Agreement.

“Low import tariffs in India have encouraged large and growing volume of tyre imports despite more than adequate domestic manufacturing capacity and substantial investments. Based on these compelling circumstances, government of India can increase the customs duty on tyres from the existing 10 per cent without contravening the WTO provisions,” said  Raghupati Singhania, vice chairman of ATMA.

The average CAGR on import during last six years is 12 per cent, according to the data of ATMA. Import value increased to Rs 2,487-crore in 2013-14 from Rs 1,227 crore in 2008-09. It showed a 48 per cent rise in 2010-11, as per the data.  

The ATMA has asked for increasing customs duty on tyres from the current 10 per cent to 20 per cent, the same rate as its principal raw-material (natural rubber). According to ATMA, in line with the capacity creation in the auto sector, tyre industry also expanded its capacity pan-India.

In the recent years, investments by tyre industry have been to the tune of Rs 20,000-crore in greenfield projects, and on major expansions.

“The industry is therefore looking to government for the scrapping of inverted-duty structure and tweaking the terms of trade agreements to make tyre industry competitive. Such policy enablers are imperative if the Indian manufacturing needs to be bolstered and for enhancing employment opportunities,” he added.  

For the last seven successive years, India has experienced a shortfall in domestic production of natural rubber and its consumption. The rubber  production-consumption gap increased to 133,400 tonne in 2013-14.The situation in the current fiscal was projected to close with a shortfall.

ATMA has therefore urged the government to consider allowing import of limited quantity of natural rubber (100,000 mt) under a tariff rate quota (TRQ) basis for the fiscal 2014-15 at a concessional rate of duty of 7.5 per cent or Rs 10 per kg, whichever is lower.  

Earlier, in December, 2010, Finance Ministry had allowed 40,000 tonnes ofimport  at 7.5 per cent  concessional duty on TRQ basis . Not only NR, significant gaps exist between domesticdemand and supply of critical raw materials such as Nylon Tyre Cord Fabric (NTCF), Rubber Chemicals, Steel Tyre Cord, Polyester Tyre Cord, PolybutadineRubber and Process Oils varying between 12 to 70 per cent.

There are severalother raw materials which have no domestic production at all including StyreneButadiene Rubber (Tyre Grade), Butyl Rubber and EPDM.

“Imports of raw materials are imperative to bridge thedemand-supply gap. Strangely, NTCF and Rubber chemicals despite deficient indomestic production have been burdened with Anti Dumping/ Safeguard Duties andimport duties are levied even on those raw materials which have no domesticproduction” said ATMA.

ATMA has asked for reduction of import duties on thoseraw material where domestic supply is deficient and complete waiver of dutieson raw materials which have no domestic production.