NEW DELHI, June 11: The Rs 1,000-crore Modi Rubber Ltd (MRL) and international tyre major Continental AG of Germany have shelved their proposed radial tyre project.

Modi Rubber instead plans to import and market radial tyres in the domestic market. At present, MRL manufactures only cross-ply tyres but is keen to enter the radial segment as part of its long-term strategy.

Company sources said the joint venture proposal had been put in cold storage due to financial constraints and the decision of financial institutions (FIs) to stop any further lending assistance to MRL.

MRL has reported loss in the first six months ended December 1996. The company had reported a Rs 25 crore cash profit in the year ended June, 1996.MRL presently has a technical collaboration with Continental. The first phase of radial tyre was to have a capital outlay of Rs 70 crore.

Continental's equity was to come by way of plant and machinery. The plan was to start with manufacture of car radial tyres to be followed by truck radials.

The company plans to cash in on the government's recent decision to allow import of tyres. Tyre imports have been removed from the restricted list of imports and shifted to OGL with an import duty of 40 %.

MRL has already initiated talks with some foreign tyre companies for import and marketing of tyres. With the international tyre market facing a glut, there is ample idle manufacturing capacities in the tyre industry abroad.Company sources said MRL would prefer to introduce the imported radial tyres under its own brandname but was not averse to marketing some foreign brand names also. ``We are looking at various options,'' said a top executive of MRL.

The company's plan to import and market radials, however, depends on the outcome of the strong opposition by leading domestic tyre manufacturers such as JK Tyres to the government's decision to allow tyre imports.

The Automotive Tyre Manufacturers Association (ATMA) recently submitted a memorandum with the government urging reversal of the policy decision which could adversely affect the domestic manufacturers. Profit margins in tyre industry were severely affected in 1996-97 due to rise in rubber prices, cut-throat competition and general downtrend in the market, sources said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.