ATMA seeks duty-free rubber import on supply crunch

Written by M Sarita Varma | Thiruvananthapuram, Jul 30 | Updated: Jul 31 2008, 05:56am hrs
Despite the narrowing gap between demand and supply, the tyre industry is facing a huge supply crunch. This has forced the Automotive Tyre Manufacturers' Association (ATMA) to ask for duty-free import of 1 lakh tonne of rubber.

The production and consumption gap was 49% during April-July 2007. Following higher production of natural rubber this year, the gap has shrunk to 22%, leaving the user industry raising their brows at the possible hoarding of stocks at dealer-points.

"Production schedules of tyre companies would be upset if the present supply crunch continues," Rajiv Budhraja, Director-General, ATMA told FE. According to ATMA, the current domestic price of natural rubber was at Rs 134 per kilogram, which is 51% higher than the average price prevailing in September 2007. The country's rubber production during April-July 2008 was 2,36,750 tonne. Last year, due to viral fever creating a labour shortage in plantations, the production during the same period was only 1,83,220 tonne.

It is sheet rubber that's in short supply. The tyre industry uses up 57% of natural rubber produced in the country. Most of these are in RSS-4 grade sheets. The natural rubber price volatility too is building tensions in the industry. ATMA says that the competitiveness of the Indian industry will be blunted if the price go up now.

According to the Rubber Board, tapping had been in peak momentum thanks to the optimum climate of alternating rain and sun. While the number of tapping days in June during 2007 was less than eight, in June 2008, at least 20 days of tapping was achieved.

In its projection for the entire 2008-09 fiscal, the Rubber Board has pegged the natural rubber output at 8.75 lakh tonne and consumption at 8.99 lakh tonne during 2008-09.

What made availability tricky was that consumption too had improved from 272,810 tonne during April-June last year to 287,525 tonne in the Q1 of the current year. Tyre companies, however, fear hoarding. ATMA argues that as the current domestic prices are ruling a trifle above international prices, there is logic beyond domestic scarcity in allowing duty-free import of 1 lakh tonne of rubber. Prices had been largely volatile, often shifting the import-export balance off kilter. Where 14,732 tonne were exported during April-June 2007, growers had managed 23,091 tonne export in the same period in 2008. But then, imports too are growing. In 2007 April-May imports were only 7,245 tonne. This year the imports during April-May are sailing a notch above natural rubber exports at 23,139 tonne.