A special sub-committee of the government is expected to meet this week to come up with a national rubber policy. The government panel is also likely to formulate measures aimed at boosting domestic demand for rubber and somehow protect farmers from the steep fall in prices. This particularly assumes significance as it coincides with the peak season for rubber, which is November-January. Analysts feel that rubber prices in the country would remain subdued for the simple reason that tyre manufacturers have already procured and created a large stock for their requirements during the off season. And that was quite understandable as international prices were much lower — and who would not have taken advantage of that?
The other reason why imports were higher was the widening gap between domestic demand and supply which was caused by a slowdown in rubber output. Kerala, which accounts for more than 90 per cent of the country’s natural rubber output received 6 per cent more rainfall than normal during the June-September monsoon season.
This slide in production coincided with optimism and positive sentiments in the Indian automobile sector. If one goes by what the Society of Indian Automobile Manufacturers (Siam) projected, car sales in the country would go up between 5 and 10 per cent this fiscal year. Mind you, tyre companies are the biggest consumers of natural rubber. As a result, tyre firms had to procure their requirements by way of imports. This was reflected in the fact that natural rubber imports in the first six months of the current fiscal year jumped nearly a quarter from a year before to 225,652 tonne. Industry analysts had initially thought that imports could further surge to a record 400,000-tonne mark in FY15, but now they believe that this could go beyond that.
And that’s not without reason. According to the state-run rubber board, India’s natural rubber production dropped 7.6 per cent to 844,000 tonne in the 2013-14 crop year which ended last March. In the first half of the year that started in April, the country’s output fell 2.3 per cent from a year ago to 337,000 tonne, while consumption rose by 3.6 per cent to 509,085 tonne. The rubber board might be forced to revise down an earlier forecast that put production at 885,000 tonne this year. Rubber board officials said that Indian natural rubber output is likely to drop over 10 per cent in FY15 from the previous crop year, hit by heavy rain in key growing regions and as farmers suspend tapping due to lower prices.
When it comes to prices, natural rubber prices have steadily drifted lower this year, continuing a trend that started three years ago. Prices have fallen by as much as 70 per cent from the peak seen in February 2011. Rubber prices are at their lowest in more than five years and adding to the farmers’ woes is lower demand from China due to slowing economic growth there. Analysts point out that a subdued European growth forecast and fall in crude prices, which are having an impact on synthetic price too, would mean rubber price would remain lower in the near future.
The proposed new national rubber policy is expected to aim at promoting smaller rubber-based product manufacturers, besides helping them in exports by giving proper incentives, as long-term measures. There are at least 50,000 small rubber-based product manufacturers in India. There are other moves also, which have already been initiated. For instance, the Kerala government has decided to use more rubberised bitumen for construction of new roads and maintenance of existing ones, which in turn promises to create additional demand for natural rubber within the state.