India: Rubber planters fear price fall after GST implementation

KOCHI, SEPTEMBER 13:

Growers of natural rubberseem to be concerned about the likely decline in prices in the short-term due to diminishing demand from micro and small industries after the implementation of GST.

Sources pointed out that the price of RSS and ISNR – the main raw material for the industry – has come down, with RSS IV dropping to lower levels from an average ₹145/kg in April.

This being the reference grade, prices of all other grades and forms of rubber have also come down. Besides, rubber imports still continue despite the low prices of the commodity impacting domestic demand.

Consumption by micro and small-scale industries in the non-tyre sector has declined due to the non-registration of the units under GST. The non-tyre segment consists of industries that produce goods out of latex grades – balloons, gloves and condoms.

Vinod Simon, the past president of the All India Rubber Industries Association, told BusinessLine that business in the non-tyre sector since July has slowed down. It may continue for one or two quarters until the uncertaintyclears. “This will the impact the prices. But this will be a temporary phenomenon and the cycle will bounce back,” he said.

‘Restrict imports’

Officials at the Association of Planters of Kerala point out that the rubber sector is entering a high cropping season, and local material will be available in abundance. To improve prices, the officials suggested suitable policies to restrict imports.

Some input materials – such as plastic shells for tapping, fungicides, sheet rollers and other processing equipments – have gone into a bracket of higher taxation, which has adversely affected growers, who must pay more for production. This needs to be reviewed and corrected, the officials said.

GST recognises unregistered buyers, but buying and trading mandates having a licence to deal in rubber, according to the Rubber Act. A large segment of the business in North and West India, mostly micro industries, do not have a licence and deal with very small volumes of rubber. These business units are not able to operate under the new environment.

Ruling out any immediate price fall, George Valy, the President of Kottayam Rubber Dealers Federation, said that the supply in the market is tight due to a decline in production. Afternoon rains in the growing areas and Onam vacations have impacted tapping in a big way, he said.

However, the tyre sector may not face such issues. Manufacturing companies have the liberty to import as global prices of rubber continue to be low.