Speaking to The Financial Express, the chairman, Rubber Board, KJ Mathew stated that with production levels exceeding consumption figures, the government must review the situation and should ask STC to procure an additional 20,000 tonne of rubber and help the industry get rid of the existing over supply position.

Taking note of the fact that the current prices of rubber were ruling below the benchmark price of Rs 34.05 per kg, Mathew informed that the board has already represented to the commerce ministry that the prices can be propped up only by STC procuring rubber at the benchmark prices, as its policy of procuring rubber at the market rate did not make substantial impact on the market.

This issue was alsodiscussed at length in the last meeting of the Rubber Board. A member of the board said that the board is also of the view that the price support operation should not be discontinued and that STC should procure rubber at benchmark price as and when the market falls below the benchmark price.

However, it is significant to point out here that there has been a reported resistance from the cabinet committee on prices which is against the procurement of rubber by STC at the benchmark prices and the committee favours procurement of rubber at market prices only.

Mathew, is however, confident on the recovery of prices of rubber in the future as the industry is picking up and the automobile industry is also showing signs of recovery. As per the Rubber Board estimates, the total production of rubber for the year 1999-2000 is projected at 6,27,000 tonne. This when seen along with the carry forward stock of 1,87,965 tonne from last year, puts the total supply of rubber at around 8,15,000 tonne.

On the demand side,even after taking into account exports of 12,000 tonne and consumption of 6,23,000 tonne, the total demand would stand at 6,35,000 tonne during 1999-2000. This leaves a huge surplus of almost 1,80,000 tonne.

Even after allowing the stock reserve equivalent to two months consumption requirement at 1,04,000 tonne, a surplus of 76,000 tonne of rubber would still exist. It may be recalled that consequent to the imposition of ban on import of natural rubber by the advance license holders, STC was instructed to procure and supply all grades of rubber required by the manufacturers of the advance license. However, STC has reported that the manufacturers have not approached them with firm orders. This was mainly due to the slowdown in industrial production and the situation is expected to improve once the industrial growth picks up. The STC, during the second phase of procurement, against the targeted 20,000 tonne, has procured 12,706 tonne at the end of May 1999.

From this, they have sold 8,984 tonne tomanufacturers against Advance License. Out of the rubber procured in the first phase, 2,310 tonne was released to Advance License holders and about 36 tonne was exported. The Rubber Board feels that the support from STC should continue and that whenever prices dip below the benchmark price, the corporation should procure rubber at the benchmark prices.