Tyre industry to import 25,000 tn natural rubber this year

Our Commodities Bureau

Kochi, Dec 9: The tyre industry in the country is set to import 25,000 tonnes natural rubber (NR) this year when rubber growers in the country are facing hardship on account of price decline. Automotive Tyre Manufacturers Association (ATMA) director-general D Ravindran, however, said that tyre companies were not responsible for the present predicament in the rubber sector.

He told mediapersons here that with the domestic price of NR ruling higher than the international price, tyre manufacturers were left with no option but to import rubber. So far the industry has imported 17,000 tonnes. While the domestic rubber met international standards, it was important that it also met the same standard as far as price was concerned. In case, rubber was available in the domestic market at the international price, the tyre industry would not go in for imports and would help save the rubber sector. With the international price around Rs 24 a kg, import after paying the duty would make the price just Rs 28 which was lesser than the domestic price. Purchase from the domestic market would mean tax, transportation, rubber cess and other expenses which would raise the price to Rs 42.
In case the government wanted to help the rubber sector, it should reintroduce STC procurement and sell the rubber to tyre manufacturers at international price and bear the loss which would be minimal, Mr Ravindran said.

The tyre industry in the country was passing through a lean phase. Compared to 1999-2000, there has been a 9,000-tonne fall in rubber consumption. Recession had hit the tyre industry hard and indications were that the situation would not improve very soon. Most of the tyre majors had cut their production by 20 per cent. Also several small tyre companies had closed down. The tyre industry had been working with low margins, though it was managing high volume of sales. Margins were down to as low as 1 to 3 per cent compared to earlier margins of 7-15 per cent.

Unlike the tyre industry abroad which used higher percentage of synthetic rubber (SR), the domestic industry used nearly 79 per cent NR and 21 per cent SR. With consumers preferring better quality, the introduction of radial tyres had led to high durability. In the field of retreading too, the new pre-cured tread rubber technology had increased the life of re-treaded tyres. This had resulted in shrinkage of the market and domestically and internationally supply had surpassed demand. Tyre companies were forced to cut cost and maintain high efficiency. Off-take of rubber had also come down. The tyre sector consumes 50 per cent of the natural rubber produced in the country. The domestic market was also facing erosion due to cheap imports from China and South Korea.

In case the Governement brought down the taxes, tyre could be sold at cheaper rates, Mr Ravindran said. Presently 50 per cent of the price was in excise duty, local state taxes, octroi, etc. The balance nearly accounted for raw material and overhead costs. It was only here that the companies could do anything.

Tyre prices had not been increased for the last five years in spite of these adverse conditions, he added.