All India Rubber Industries Association (AIRIA) has urged the government to reconsider its decision of raising import duty on natural rubber from 20% to 25%. The rubber body feels the move will affect over 5,500 rubber units in the country. In an email interview with Sandip Das, AIRIA president Mohinder Gupta speaks on the issues concerning the sector.
The import duty hike has become a bone of contention between the rubber product manufacturers and planters. What is the way forward?
We have always wanted the growth of both plantation and industrial sectors. Accordingly, we had urged the government to formulate a national rubber policy aimed at safeguarding the interests of both rubber producing and consuming sectors by providing a congenial policy environment. The government had accepted our request and set up an expert group last year to finalise the policy. The group held a series of meetings with natural rubber producers and consumers. Final report of the group is awaited. We had urged the government to formulate a rubber policy before taking measures like increasing import duties.
Why is the organisation opposed to raising import duties that the government thinks will offer relief to the plantation sector?
India already levies one of the highest duties on import of natural rubber and one of the lowest duties on import of finished rubber goods. Rubber sector continues to be at the receiving end of an inverted duty structure. As a result, the competitiveness of the rubber industry is affected and many rubber units have become unviable. Many small rubber goods manufacturers have turned to trading of rubber goods as they can’t compete with cheaper goods imported from China and other countries. The onslaught of cheaper imports of finished products despite adhering to the best of manufacturing practices, certainly doesn’t augur well for the government’s much published ‘Make-in-India’ initiative.
But planters believe the unbridled imports of natural rubber have led to a sharp drop in prices and, therefore, increasing import duties is a must. Domestic rubber prices have been ruling higher than international prices. Hence, imports can’t be blamed for drop in domestic prices which, in fact, is due to overall softness in commodities worldwide. Imports are necessary since the gap between domestic natural rubber production and consumption has grown to almost 4 lakh tonne. There is no other way but to import rubber to keep the factories running.
How should the planters’ issue be addressed?
Planters have been hit by drop in prices. They need to be supported by the government like subsidies offered in other producing countries like Thailand, Malaysia, Indonesia and Sri Lanka. Why throttle the industry by increasing import duties on critical raw material which are already as high as 20%, while the import duty on finished rubber goods is 10% or even lower up to Zero.
How big is the threat of cheaper import for the rubber industry?
Rubber manufacturing sector contributes nearly 40% of its produce for exports. With the increase in the import duty on raw materials, the cost of manufacturing goods for export will increase, thereby, rendering the industry uncompetitive in the export market. The threat of cheaper import of finished rubber products from China and other countries is real and growing. In fact, India’s trade deficit in rubber products (non-tyre) with some of the key trading partners has gone up substantially.