Shortage makes rubber-based industries look at Vietnam

Written by M Sarita Varma | Thiruvananthapuram | Updated: Sep 7 2013, 06:50am hrs
Faced with natural rubber (NR) crunch at Indian plantations, the countrys rubber industry is toying with the idea of expanding abroad. Indonesia and Sri Lanka, which are flush with the raw material, have already offered Indias rubber sector investment opportunities and, recently, Vietnam came up with a similar proposal for Indian rubber-based companies.

In the initial stage of discussions, we are looking at the sops that Vietnam is offering. Since rubber-based goods manufacturers are demoralised due to the countrys inverted duty structure, we have been looking for options. The availability of rubber is tempting and if there are incentives, such as land, easy licensing and tariffs, it would be the right opportunity for Indian firms to expand in Vietnam, Niraj Thakkar, president, AIRIA (All-India Rubber Industries Association) told FE.

Early last month, Indonesia had also made a similar offer.

Heavy downpour over the past two months in Kerala, the heartland of Indias rubber production, has led to a shortage in the market. Many rubber plantations in Kerala suffered damages as a result of heavy rains. Hundreds of trees were uprooted and rain guards (plastic sheets attached to rubber trees to guard against rains) were destroyed, causing latex production to fall by 50% in July and August. The fall in supply has made rubber-based industries look for long-term options in other countries.

Among tyre firms, Apollo and Ceat had earlier entered into contractual arrangements with plantations in other ANRPC (Association of Natural Rubber Producing Countries) nations for uninterrupted supply. Vietnam doesnt just seek Indian investments in the plantation sector, but also investments in rubber-based industries. At present, it consumes just 15% of the more than 9,00,000 tonne it produces.

Tyre firms, which consume 65% of Indias total NR output, have been complaining about the domestic non-availability of natural rubber. The Automotive Tyre Manufacturers Association (ATMA) is again demanding a tariff quota system for natural rubber, which was in place till 2011. Back then, 40,000 tonne of the material was permitted into India at a lower duty rate of 7.5%.

However, a delegation from the Vietnam Rubber Association (VRA) focussed its energy mainly on AIRIA members, skipping ATMA altogether this time. Though India tops the world in rubber productivity with 1,823 kg/hectare, Vietnam is fast picking up with productivity at 1,707 kg/hectare, surpassing the average productivity of ANRPC nations, chairman of the delegation, Tran Ngoc Thuan, pointed out in a presentation to AIRIA.

Vietnam finds India tempting in that we are the largest importers of Vietnam NR. In just one year, Vietnams NR exports to India leaped 82.38%, from 28,113.95 tonne to 51,273.13 tonne.

In India, because of climatic reasons, there is limited scope to expand rubber cultivation in areas like Kerala.

The rubber board, which has been promoting rubber cultivation in non-traditional areas, has made little headway. Interestingly, as rubber-consuming industries consider migrating to nations such as Vietnam and Indonesia, the Rubber Board is mulling starting rubber cultivation in other countries, such as those in Africa.