India: Natural rubber price falls steeply

Natural rubber market got into doldrums as the Kerala government’s market intervention program miserably failed. The government had announced a special scheme to procure rubber from growers and earmarked Rs 300 crore in the state’s budget.

The government also approached the central government for financial assistance, the central government’s response was not encouraging. Though the state government requested Rs 1,000 crore under the price stabilisation scheme, Union government has so far not sanctioned funds for bailing out the million plus rubber growers.

The scheme had been planned in such a manner that the procurement would be at a price tag of Rs 150/Kg. If the local price is lower than this the difference amount will be given to the farmers through banks.

Six weeks back the state government kicked off the scheme through the Rubber Producing Societies [RPS] but failed miserably. Less than 10,000 farmers had registered so far in the scheme and the large chunk are still out of the gamut. The farmers who registered with RPSs are yet to get the subsidy. In fact the scheme had no positive effect on the price line and the price is decreasing almost on a daily basis in tandem with the global market.

Today, RSS-4 grade rubber quoted Rs 111/Kg, lowest during last 12 months. According to leading traders and brokers, price would not come up in the near future as there is significant rise in the import. N Radhakrishnan, a leading broker told Business Standard, that there is absolutely no demand fromthe tyre industry as import is the cheaper option. The market is likely to be in the negative unless the government procure rubber from the growers andsupply to user industries.

Financially, government is not in a position to incur such huge loss, he added. Natural rubber is facing serious threat from synthetic rubber (SR) as global crude oil price is now on a low ebb. This makes synthetic rubber much cheaper and the usage of SR had increased substantially in recent times.

This affects the demand of NR globally and indicates that the downward trend will continue in the global market. Import increases The local users of rubber is now happy with the price trendin the international markets as RSS-4 grade fetches Rs 89 only.

Interestingly, Standard Malaysian Rubber [SMR] is having a price tag of Rs 83/Kg. More than 75% of India’s import is SMR-20 because of the price advantage. Although the import duty was hiked to 25% import is a cheaperoption for the industries. 143,614 tonnes were brought into the country during April-July period of the current financial year. While the total local production in the same period was 190,000 tonnes, 14% lower during the same period in last financial year.