Experts fear natural rubber crisis ahead

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Thiruvananthapuram, May 1: Sitting on a cloud of price complacency, natural rubber (NR) producers are heading for a second stockpiling crisis, warn experts. To avoid this, the commerce ministry will have to either reopen the export route or make imports against advance licenses duty-paid.

The mayhem in the rubber market three years ago was caused by the 1.9 lakh tonne buffer stock build-up in the country. From Rs 64 per kilo, RSS-4 prices had collapsed to Rs 28 per kilo. Latex was sold at less than Rs 20 per kilo.

N Radhakrishnan, president, Cochin Rubber Dealers Association (CRDA) cautions that this may recur by December 2006. Domestic industry buys as much as 55,000 tonne every month. On a temporary VAT-driven price fall, stock movement to industry was up by as much as 20%. RSS-4 prices have surged back last fortnight to Rs 59-60 band, but the bull run has not stopped.

In an apparent market balance perched on a price high, at present, grower organisations like United Planters Association of South India (Upasi) are not particularly clamouring for export subsidy. Industrial buyers too are happy with the steady flow of rubber stocks. “But the rate of stock absorption makes one fear that this deceptive balance is to be short-lived,” says Mr Radhakrishnan.

It is almost sure that a glut could be lurking ahead, if imports continue to enjoy a veiled subsidy in the form of duty-waivers too, says TVR Ambazhakan, a Nagercoil-based rubber grower. Exports have been effectively stopped since Centre lifted the Rs 3.5 per kilo packaging incentive for rubber exports. From 66,198 tonne in 2004-2005, industry has announced plans to import at least 60,000 tonne in 2005-2006. Rubber Board has planned to increase production.

The rubber shopping spree could be the user-industry’s homework for the June-August season, when the production is the scantiest, says CJ George, managing director, Geojit Securities and member, Ahmedabad-based National Multi-Commodity Exchange of India. Still, the number of manufacturers taking delivery through NMCDI futures route are on the ascendant, an indication of rising demand. If the buying frenzy continues till September, it would be time for the government to make some urgent policy intervention, he adds.

It was Centre’s effective strategy of export incentives that the 1.9 lakh tonne buffer stock in March 2003 was brought down to 80,000 tonne in March 2004. From 8000 tonne in 2001-2, exports were up to 70,000 tonne in 2003-2004.