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India: For now, Govt will not hike import duty on rubber

NEW DELHI, APRIL 26:

The Centre has decided against increasing customs duty on natural rubber imports for now.

This stance should come as a relief for the domestic tyre manufacturers who had been urging Finance Minister P. Chidambaram to retain the current import duty structure on natural rubber imports. Currently, import duty on natural rubber is pegged at 20 per cent or Rs 20 a kg, whichever is lower.

Since the second half of December 2012 and early January this year, the pitch was getting louder for review of import duty on natural rubber. Pressure was also mounted on the Finance Ministry to hike the specific duty component of import duty on natural rubber.

The Government was faced with the opposing demands made by the growers and domestic tyre manufacturers.

“Representations were received by the Government seeking enhancement of customs duty on natural rubber. Some representations also asked for reduction in duty on natural rubber. The matter was examined and it has been decided not to make any change in the duty on natural rubber at present,” Namo Narain Meena, Minister of State for Finance, said in a written reply in the Lok Sabha on Friday.

Rajiv Budhiraja, Director-General of Automotive Tyre Manufacturers’ Association, welcomed the Government’s decision.

“The decision is pragmatic and balanced,” he said, pointing out that the prevailing domestic natural rubber prices were higher than international prices.

The proposal for natural rubber duty hike was mooted at a time when domestic rubber prices were lower than international by Rs 18-20 a kg.

At the current domestic-international price equation, the situation has not only changed but reversed, with domestic prices higher than international. Hence, the key concern of domestic natural rubber growers has ceased to exist, Budhiraja said.

Also, there are issues of shortfall in domestic availability, imperatives of import for reasons of quality of natural rubber required by the tyre sector and continuing tightness in domestic natural rubber supplies due to lean season, Budhiraja said.

The last few months saw some hectic parleys between certain Members of Parliament owing allegiance to Kerala and the different departments of the Central Government. A delegation of MPs from the ruling Congress-led United Democratic Front in Kerala had called on Prime Minister Manmohan Singh seeking a hike in import duty.

After some meetings, the Commerce Ministry had recommended to the Finance Ministry that the specific component of import duty on natural rubber be revised to Rs 34 a kg, it is learnt.

Our Chennai Bureau reports: A trading source said that the Finance Ministry was right in not raising the duty.

“Why should the Government raise the duty when global prices are lower than domestic prices? It would make sense to raise the duty when the situation is vice-versa,” said a trader, not wishing to be identified.

The price of RSS-4 (ribbed smoked sheet) on Friday was Rs 161 a kg, while its comparable quality in the global market (RSS-3) ruled at Rs 156.72 .

The domestic price of Rs 160 is reasonable, particularly during the current season when plenty of rubber is available, the trader said.

Source: Business Line

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