Natural rubber production declines, demand-supply gap rises to 45%

The tyre manufacturers have asked the government to reduce the import duty for natural rubber to less than 10 per cent.

Consumption of natural rubber (NR) rose 12 per cent crossing 10.2 lakh tonne in the period between April 2018 to January 2019, increasing the demand and domestic supply gap to 45 per cent. Alarmed by the shortage of domestic supply, tyre manufacturers have asked the government to reduce the import duty for rubber to less than 10 per cent.

Data from Rubber Board shows that production stood at just 5.6 lakh tonne during April 2018 to January 2019, compared to 5.97 lakh tonne in the same period last year.

The production–consumption gap for the same period of previous fiscal stood at 3.16 lakh tonnes, which has increased to 4.63 lakh tonnes in the current financial year. Industry sources said domestic production was impacted due to the floods in Kerala during the first half of the financial year, and the peak season in October to January also failed to deliver the expected production, resulting in a shortage of natural rubber.

“For the first time, the NR consumption in India has crossed the mark of 10 lakh tonnes in the first ten months of a fiscal year recording an average monthly consumption of 1 lakh tonnes. The commitment of the tyre Industry to increase production footprint in the country needs to be supported by increasing the supply of raw materials otherwise it will leave domestic manufacturing uncompetitive”, said Rajiv Budhraja, director general, Automotive Tyre Manufacturers Association (ATMA).

NR consumption in India is likely to surpass the projection of 12 lakh tonne made by the Rubber Board for the year 2018-19. With domestic NR production satisfying only 55 percent of the total NR consumption in the country, the dependence on imports for consuming industry has increased by 30 per cent as compared to the previous year.

According to ATMA, natural rubber imports are imperative for tyre plants to run. However the policy environment is highly restrictive. Custom Duty (on NR Imports) is at 25 per cent, much higher than the duty levied by any other natural rubber importing countries.

There are port restrictions on imported natural rubber. Only two ports-Chennai and JNPT- are allowed to import natural rubber, which adds to costs and delays. Further, the export obligation period (for tyres) has been reduced from 18 months to only 6 months, which makes it tough for the industry. The tyre industry has urged the government to increasing domestic production of natural rubber and reducing the import duty on it to less than 10 per cent since basic import duty on tyres (finished products) is 10 per cent.