Rubber SMEs confident of inverted duty correction

Over 6,000 Small and medium rubber units (SMEs) scattered in different clusters across the country are confident of correction in inverted duty structure in the upcoming budget presentation.

“India levies amongst the highest duties on import of raw materials and one of the lowest duties on import of finished rubber goods. Given Modi Government’s emphasis on domestic manufacturing, it is critical that the inverted duty is corrected. We are confident that the Finance Minister will take cognizance of the same in the Budget”, said Mohinder Gupta, President All India Rubber Industries Association (AIRIA).

Many small rubber goods manufacturers have turned to trading of rubber goods as small manufacturers can’t compete with cheaper goods imported from China and other countries leading to loss to exchequer and also loss of employment.

According to AIRIA the finished products can be easily imported as the import duty on rubber products is between 0 to 10 per cent, while the duty on raw materials for rubber industry is between 5 to 70 per cent.

Not only import duty on raw materials is higher, the duty is levied even on those raw materials like some grades of synthetic rubbers which are not produced in the country. That certainly doesn’t augur well for Make-in-India initiative, he added.

990 Units closed

A survey by AIRIA last year showed that from 2,450 rubber products manufacturing units supposed to be existing, 990 units (40 per cent) of the units had closed down in the states of Punjab, Maharashtra, Kerala and Tamilnadu during the last five years as they couldn’t face the onslaught of cheap imports of rubber goods.

Quoting Capexil data, AIRIA has stated that the import duty on raw materials is highest in India when compared to other rubber product manufacturing countries. For instance import duty on Natural Rubber in China is 10 per cent as against 20 per cent or Rs 30 per Kg in India. On Natural Rubber Latex the import duty is 70 per cent in India while it is just 10 per cent in China. Similarly, in case of Synthetic Rubbers the import duty is 7.5 per cent in China as against 10 per cent in India. India is deficient in both natural rubber and synthetic rubbers.

On the other hand, the import duty on finished rubber goods is lowest in India facilitating import of cheap goods to India. For instance on tubes, pipes and hoses, the import duty in China is 10 per cent and above, in India these can be imported even at as low as 6 per cent. Rubber Rice De-husking Rolls, which are widely used in rice mills across the country, can be imported duty free in India while China levies up to 80 per cent duty on the same.

As a result, imports of rubber products in India has gone up almost 100 per cent from Rs 3810 crore to Rs 7608 crore in three years between 2009-10 to 2012-13. Of that import, 80-90 per cent is avoidable as domestic capacity and capabilities exist to fulfil this demand .

There is a lot of potential for growth of rubber manufacturing industry in India as the consumption of rubber in India is amongst the lowest in the world. As against per capita consumption of 5 kgs in China and the world average of 3 kg, in India the per capita rubber consumption is just 1.1 kg. Rubber industry is also labour intensive and the industry provides employment to over two million people. Developing a robust domestic rubber sector will help meet new Government’s objective for Make-in-India by aiding the SME manufacturing sector, AIRIA has stated.

– Business Standard