With natural rubber prices rising over Rs 200 per kg this week, major tyre manufacturing companies have threatened to cut down on their production to minimise losses arising out of rising input costs. Market watchers said this could have serious implication on regular tyre supply to vehicle manufacturers (OEMs), replacement market, state transport undertakings, defense and exports markets.

“We have no option but to scale down production,” Automative Tyre Manufacturers Association (ATMA) chairman Neeraj Kanwar said in a letter to finance minister Pranab Mukherjee on Thursday.

He has also urged for a meeting to resolve the crisis. Apart from high prices, Indian tyre makers are also faced with falling supplies of rubber. The association has also demanded easing of import duties on natural rubber.

He said the government has not yet acceded to the request of tyre makers to allow 1 lakh tonne of natural rubber import at a concessional duty of 7.5% as an immediate measure nor has it headed to its demand for correcting customs duty on natural rubber from 20% to Rs 20 per kg.

?At current prices, the import duty component alone amounts to around Rs 40 per kg which makes it unviable,? Rajiv Budhraja, director-general, ATMA said. Tyre firms are the largest consumer of natural rubber in the country, utilising 60% of India’s annual rubber output.

The crisis has reared up at a time when there is encouraging growth in domestic demand for tyres and the Indian tyre industry is fully geared with major expansions and green field projects to meet the demand growth in tyres, Kanwar said.

The domestic tyre makers have also quoted the instance of China to reinforce their claim for reduction in import duty. They said that in China, import duty on sheet rubber is 20% or Yuan 1600 per tonne, whichever is less.

?At current international prices of natural rubber at Yuan 30,500 per tonne, the customs duty on import of sheet rubber in China works out to 5.2 %, which is far lower and hence erodes the price competitiveness of Indian manufacturers,? tyre firms said.