Rubber price crash upsets export, import plans of farmers, tyremakers

M Sarita Varma

Thiruvananthapuram, Dec 2: Grey cells have started working double-shift in rubber trading centres in the country with the ‘unofficial price’ of ribbed smoked sheet (RSS-4) collapsing to Rs 26 per kilo last week. This is roughly equivalent to the international rubber price, puncturing in a single masterstroke the mega-export plans of farmers and ongoing imports of tyremen.

Despite the Rs 3 per kilo export incentive from the Kerala government plus the Rs 3.5 per kilo incentive from the Union commerce ministry, India’s RSS-4 (official price: Rs 32.09 per kilo) is yet to grab an attractive price-edge in the international market.

And for the tyre-manufacturers, gloating over an import-led victory over the farmers during their stock-taking season, the imports are suddenly no more viable. Rubber industry, including the tyre manufacturers and small scale rubber units, have claimed to have imported 20,000 tonnes this season.

An importing tyre-maker would have to pay at least Rs 36 per kilo as last point price, from the Singapore price of Rs 26 plus 30 per cent tariff plus Rs 2 for clearing and forwarding. On the contrary, an exporter of Indian RSS-4 could avail the export incentives of Rs 7.50 per kilo only based on the official price of Rs 32.09, while the actual market price is hovering at Rs 26 per kilo. “It’s a bitter-sweet situation”.

The bitterness is that at least 20,000 tonnes of rubber will have to go from the country to defuse the crisis and yet export doors are not opening. The sweetness is the knowledge that the tyre industry can no longer flex its muscles showing off its import option,” Mr Jacob Thomas, former Upasi chairman told The Financial Express.

The panic wave has rolled out a week of hectic parleys at all ends of the rubber business, calling for swift strategy revision from every side. Rubber Board, expected to take care of ten lakh rubber farmers in the country, has been chairing brainstorming sessions of pricing, marketing and production experts with latex producers and traders to force the market to accept the Centre’s minimum support price (MSP). Kerala government, responsible for seven lakh of the rubber farmer population, has been pitching hoarse for a bulk-export order for bitumenised rubber roads from the recently NR-starved Malaysian government.

Mr Jacob Thomas said, “Both Rubber Board and the Kerala government have been concerned by the unprecedented price crash in NR. The state government has even set up a Plantation Sub-committee to put forward crisis management measures. The only hope of rubber farmers now is that the governmental support to prop up rubber exports would be enhanced.”

Even as the newly formed small-farmer-outfit Infarm is going ahead with its export plans, the latest polarisation evolving from the last week’s crisis is the getting together of 40 latex processing units, Association of Planters of Kerala (APK) and the Kerala state-owned plantations like the Plantation Corporation of Kerala (PCK) and Rehabilitation Plantations to form an exporting consortium.

Trading sources pointed out that while private organisations could clinch mega-export orders by undercutting the Centre-determined MSP and get away with it through cosmetic over-invoicing, state government plantations and state agencies involved in procuring and exporting rubber had to stick to MSP.

Out of the 1,60,000 tonnes of NR stocks from farms this season, the industry has laid its hands on only 30,000 tonnes, Cochin Rubber Dealers Association President N Radhakrishnan said. The dealers have stocks of about 3,000 tonnes. This means that the farmers are still saddled with about 1,00,000 tonnes.

Even the 30,000 tonnes that the farmers offloaded was done at over-invoicing at the Centre’s MSP and selling at the grovelling market price. Mr Radhakrishnan said “More than any concrete beginnings of action, what is happening all round are desperate parleys for exports. Everybody is bursting with idea for exports, but the fact remains that few deals have been made so far.”