Rubber growers and the tyre industry have been on a collision course over the slump in prices and on the move to impose import duties. Volatility in rubber prices, of late, has put the sector in a spot, making it unviable for growers. However, the Automotive Tyre Manufacturers Association (ATMA) is of the view that the sector has immense potential for growth and rubber deserves to be placed in the priority sector, with the Centre’s ‘Make in India’ initiative.
Raghupati Singhania, Chairman, ATMA, says that India’s rich rubber value chain comprising one million planters and well spread-out and established tyre and rubber industries can contribute significantly to the economy if an enabling policy framework is in place for rubber consuming and producing interests. He was responding to a questionnaire sent byBusinessLine.
Edited excerpts:
The tyre industry is blamed for suppressing natural rubber prices through large scale imports?
It is not true. Notwithstanding the alleged high volume of imports, the fact that the domestic prices have continued to rule much higher than international prices throughout the year indicates that imports are imperative to bridge the widening gap between domestic rubber availability and its growing consumption.
During the current fiscal, domestic consumption is poised to overtake the figure of one million tonnes, while production is likely to be less than seven lakh tonnes. So, there is a huge gap which can be bridged only through imports.
The quality of domestic rubber is another issue that the tyre industry has to contend with. The auto industry and motorists have come to expect a lot from tyres.
The tyre industry has also taken a great leap forward in terms of manufacturing technologically superior tyres, especially new generation truck and bus radials which require high quality of rubber as a critical raw material. The quality of rubber, therefore, is paramount.
But planters have put the blame squarely on the industry?
There is a perception that the tyre sector is against the interests of the plantation sector. That’s entirely untrue and highly unfortunate.
The tyre industry is all for a vibrant and healthy plantation sector. From time to time, the industry has proved its commitment to a healthy domestic plantation sector and has participated enthusiastically in the rubber quality improvement programme of the Rubber Board.
In an unprecedented move, unheard of anywhere in the world, tyre companies in India came forward to help planters by domestically sourcing rubber at prices much higher than that of rubber available internationally at the behest of the Kerala Chief Minister.
The Chief Minister has gone on record appreciating this gesture of the tyre industry.
I believe the misconception that the tyre industry is against planters’ interest should now be laid to rest once and for all. Both are, and will continue to be, inter-dependent.
But there are reports that tyre companies are now staying away from domestic procurement of rubber?
Yes, of late, there has been a drop in daily buying of sheet rubber and that is due to a slowdown in demand for tyres. The recovery in truck and bus tyre segment which accounts for majority of sheet rubber usage is not along expected lines.
Also, cheaply imported tyres have been meeting a significant part of tyre demand leading to less pick up of sheet rubber by the domestic tyre industry.
Ever since the domestic rubber sourcing has become operational, the industry has bought over 35,000 tonnes of sheet rubber (RSS-4) which compares favourably with the figures for the corresponding period in the previous year.
Linked to this is the concern expressed by the Chief Minister and media reports that the intended benefit of domestic buying is not being passed on to the growers. Growers have been getting much less than what the industry has been paying.
We will urge the Kerala government to plug the loopholes in the system so that intended benefit could be passed on to the growers.
But bringing down duties would have opened floodgates of rubber imports which planters are contesting?
Inverted duty could also have been corrected by increasing import duties on tyres and bringing it at a par with natural rubber.
Currently, amongst major rubber and tyre producing countries, India levies one of the highest duties on import of rubber and one of the lowest on tyres and other finished rubber products.
Import duty on rubber is 20 per cent while tyres can be imported at a rate of 5 per cent or even at nil rate of duty under various trade agreements.
If the rationale is to have value addition taking place within the country, the duty on import of finished products should be as much, if not more, than that on raw materials.
India’s trade agreements, however, encourage import of finished rubber goods and that has led to a barrage of imports of cheap tyres.
What has been the volume of tyre imports to India?
Notwithstanding the domestic tyre manufacturing capacities and proven capabilities, a significant demand is being met by imports.
For instance, new capacities in truck and bus radials have been created by Indian tyre manufacturers at an outlay of over ₹15,000 crore in the last couple of years.
However, the industry is beset with lower capacity utilisation and low capital productivity in view of surging imports of undervalued and dumped tyres. The tyre industry being highly capital and labour-intensive, imports are not only threatening to make new investments in capacities idle but also cause loss of employment.
In case of the truck and bus radial segment, imported tyres have come to account for over 30 per cent of the total domestic market.
This is causing huge injury to domestic tyre manufacturers who have put up significant capacity in modern radial truck and bus tyre plants and are facing the brunt of the continuing slowdown in demand from the domestic commercial vehicle segment for the last 2-3 years.
What then is the way forward for the rubber sector?
There is an attempt to deflect the debate on real issues as far as the rubber sector is concerned.
The rubber sector should not be brought down to the level of pitting producing interests against consuming interests. The potential of the entire value chain needs to be objectively assessed and optimised.
Plantation sector has its own issues, so does the manufacturing sector. The tyre industry needs rubber – qualitatively much better rubber and at internationally competitive prices – since it has to compete with other countries where quality rubber is available at lower prices.
Similarly, no one can oppose competitive returns for the planters but that should not be at the cost of weakening the manufacturing industry as there is a suggestion to increase import duty on rubber or restricting rubber imports on one pretext or another.
The government should come forward to device ways and means of strengthening the plantations sector through support for new methods, practices and processes and quality improvement exercise, etc so that the plantation sector is better equipped to face the downturn.
– The Hindu
