Rubber SMEs confident of inverted duty correction

Over 6,000 small and medium rubber units (SMEs) operating in different clusters across the country are confident of correction in inverted duty structure in the upcoming Union Budget.

“India levies amongst the highest duties on import of raw materials and one of the lowest duties on import of finished rubber goods. Given the Modi-led government’s emphasis on domestic manufacturing, it is critical the inverted duty is corrected. We are confident the finance minister would take cognisance of the same in the Budget,” said Mohinder Gupta, president of All India Rubber Industries Association (AIRIA).

Many small rubber goods manufacturers had turned to trading of rubber goods as they were not able to compete with cheaper imports from China and other countries, resuting in a loss to exchequer along with unemployment.

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According to AIRIA, finished products were being easily imported as the import duty on rubber products is 0-10 per cent, while the duty on raw materials for the rubber industry is a high 5-70 per cent.

Not only the import duty on raw materials was higher, the duty was being levied even on those raw materials like some grades of synthetic rubbers ,which were not being produced in the country, Gupta said, adding it did augur well for the ‘Make-in-India’ initiative.

990 units closed
According to an AIRIA survey last year, of the total 2,450 rubber products manufacturing units, 40 per cent (990 units)  had shut operations in states like Punjab, Maharashtra, Kerala and Tamil Nadu in the last five years as they couldn’t face the onslaught of cheap imports.

Quoting Capexil data, AIRIA has stated the import duty on raw materials was the highest in India when compared with other rubber product manufacturing countries. For instance, import duty on natural rubber in China is 10 per cent  as against 20 per cent or Rs 30 each kg in India. On natural rubber latex, import duty is 70 per cent  in India while it is just 10 per cent in China.

Similarly, in the case of synthetic rubbers, import duty is 7.5 per cent  in China as against 10 per cent in India. India is deficient in both natural rubber and synthetic rubbers, the body said.

On the other hand, import duty on finished rubber goods is the lowest in India thereby facilitating import of cheap goods. For instance, on tubes, pipes and hoses, the import duty in China is 10 per cent and above, while in India these can be imported even as low as 6 per cent. The rubber rice de-husking rolls, widely used in rice mills across the country, can be imported duty free in India, while China levies up to 80 per cent duty on them.

As a result, import of rubber products in India had gone up almost 100 per cent from Rs 3,810 crore to Rs 7,608 crore in three years between 2009-10 and 2012-13. Of this, 80-90 per cent is avoidable as there was enough domestic capacity in place.

There is a lot of potential for the growth of rubber manufacturing industry in India as its consumption here is amongst the lowest in the world. As against a per capita consumption of 5 kg in China and the world average of 3 kg, in India the per capita rubber consumption is just 1.1 kg.

The rubber industry is labour-intensive and provides employment to over two million people. Developing a robust domestic rubber sector will help meet new government’s objective for ‘Make-in-India’, AIRIA has stated.