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India: Rubber growers worried over falling prices

KOTTAYAM, FEB. 24:

A fall in rubber prices to below Rs 160 a kg from the highs of Rs 230 seen early last year has left growers worried.

“Growers are facing a crisis as there is no one to rescue us from the sort of crisis that is seen in rubber,” said Joshua Daniel, a small grower at Konni in Kerala’s Pathanamthitta district. “Political parties which had supported us earlier are nowhere in the picture now,” he said.

But his fears of political parties not supporting growers may be misplaced.

On Friday, a delegation of Members of Parliament of Kerala’s United Democratic Front met the Prime Minister seeking a higher Customs duty on natural rubber. The MPs wanted the current duty structure, which pegs the duty at 20 per cent or Rs 20 a kg whichever is lower, changed. They sought a 20 per cent Customs duty on natural rubber to discourage imports and, thereby, lift prices in the domestic market.

According to the Rubber Board statistics, natural rubber imports were 1.31 lakh tonnes (lt) during the first half of the current fiscal. Unverified data peg the imports at two lt till now. Last fiscal, a record 2.13 lt natural rubber were imported, though shipments into the country during the first half og 2011-12 fiscal were 99,000 tonnes.

“The manufacturers are deliberately trying to bring down the prices,” said Jose Chemperry, State General Secretary, Farmers Organisation United Forum. Though the prices of rubber have plunged, tyre prices remain unchanged as they are unaffected by any price fluctuation in rubber, he told Business Line.

The user industry, led by tyre manufacturers, denies these allegations. “Agreed, rubber prices have come down. But prices of other inputs have increased for us,” said a tyre industry official who did not wish to be identified. “We have nothing to do with the fall in prices. It is a global trend,” said the official. “At the same time, when rubber prices increased, we absorbed a part of it,” he said.

On Saturday, RSS (ribbed smoked sheet) 4 grade rubber, the benchmark for the industry, ruled at Rs 157 a kg at Kottayam, the primary market for the commodity. In comparison, prices at Bangkok for RSS-3, which is comparable to India’s RSS4, quoted at Rs 167 a kg.

Natural rubber accounts for about 60 per cent of raw material costs for the tyre industry.

According to an analyst, tyre manufacturers plan to import at least 30 per cent of their current consumption of over 9.5 lt

Against the estimated consumption of close to 10 lakh tonnes this year, production is expected to be around 9.75 lakh tonnes. In the first half of the fiscal, production was 5.84 lakh tonnes against 5.51 lakh tonnes during the same period a year ago.

Though heavy rain in Malaysia and dry winter in Indonesia have affected production, irregular purchases by China have led to drop in global prices.

According to Jom Jacob, former economist of the Association of Natural Rubber Producing Countries and the current Deputy Director, Rubber Board, demand prospects depend on the emerging global economic scenario.

IMF forecasts do not point to any revival of the demand and no marked recovery is expected either.

Forecasts for crude oil are bearish till the end of the year and this in turn could affect natural rubber. This is because its alternative synthetic rubber derived from crude oil will rule lower.

As a result, the natural rubber market is unlikely to gain momentum in the short-term.

Experts predict better fortune for rubber growers from 2014. Meanwhile, the UDF MPs will hold another round of meeting with the officials of the Commerce Ministry on Tuesday.

(With inputs from our Chennai Bureau).

Source: Business Line

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