Tyre companies honk for national rubber policy on auto-sector model

Written by fe Bureau | Thiruvananthapuram | Updated: May 7 2014, 17:14pm hrs
In the run-up to the natural rubber (NR) stakeholders' consultations at Rubber Board headquarters in Kottayam on Friday, the captains of the tyre industry have started lobbying for their proposal to seek a clear-cut national policy for rubber.

Meeting Amitabh Kant, secretary, Department of Industrial Policy & Promotion, the Automotive Tyre Manufacturers Association (ATMA) has sought a sector-specific roadmap for rubber on the lines of the auto-sector policy. "Similar to the Auto Policy, which envisions a long-term roadmap for the automobile industry, the country needs a National Rubber Policy," says Raghupati Singhania, CMD, JK Tyre, and vice-chairman of ATMA. The tyre industry delegation comprised Rajeev Anand (MD, Goodyear India and chairman of ATMA), Anant Goenka (MD, Ceat Tyres and former chairman of ATMA) and representatives from leading tyre companies.

ATMA's proposal for National Rubber Policy, which is "under consideration" by the ministry of commerce, is expected to come up at the stakeholders consultations.

For the last few years, domestic consumption of NR has outstripped its availability, the tyre industry points out. According to Rubber Board figures, the gap between domestic production and consumption widened to 1,33,400 tonne in 2013-14. The industry estimates that in the current fiscal as well, production will lag behind consumption by around 1,00,000 tonne.

According to ATMA, NR imports are imperative to plug the demand-supply mismatch and yet the industry continues to suffer from inverted duty structure.

The industry points out that trade agreements that India has signed with its neighbours have aggravated the inverted duty structure of the industry. While basic customs duty on tyres is 10%, under the agreements, the duty is actually much lower than the basic rate of customs duty. On the other hand, NR is in the negative list in these trade agreements and, therefore, not eligible for concessional treatment in duty.

For instance under the Asean FTA, tyres can be imported at a much lower 6% duty but NR is in the negative list. Under the Indo-Sri Lanka agreement, tyres can be imported at nil duty but there is no duty concession on NR. Under the India-Malaysia agreement also, radial tyres can be imported at 6% duty but NR is in the negative list.

The basic principle that policymakers need to consider is that wherever the basic raw-material (like NR) is in the negative list and not eligible for concessional treatment in duty, the finished product (i.e. tyres) should also be kept out of the purview of concessional duty. Once such a distortion is created, it is nearly impossible to make a correction as review mechanisms are slow, Singhania says. The spokesmen of tyre firms claim the industry secretary has vowed to give a fillip to manufacturing needs to lift overall GDP. Two panels will soon look at the inverted duty structure and other inconsistencies in FTAs.