Rubber farmers keep fingers crossed, despite price rise

Updated: Jan 26 2002, 05:30am hrs
For all the apparent good tidings for the small-holding rubber farmers in the last two weeks, farm and trading experts are cautious about spelling out a rosy future for rubber prices.

The price recovery led by the international prices and the headway in the efforts to raise the import tariffs of rubber are too good to be true for the long-suffering rubber sector, Punalur Rubber Marketing Co-operative Society president Joy Varghese told The Financial Express.

It is in fact the time for the two-hectare farmer to keep his fingers crossed, Cochin Rubber Dealers Association (CRDA) president N Radhakrishnan said. Although the Union commerce ministry has included seeking re-categorisation and high-bound rates for rubber in the agenda for the next round of negotiations, there is little reason to believe that rubber exporting countries are going to agree to this.

Thailand, Indonesia and Malaysia together export around 38 lakh tonnes of rubber every year. India, a rubber producer and consumer, is a star importer for these countries and they are unlikely to take any effort to raise the import wall lying down, Mr Radhakrishnan said.

Even long before the Uruguay Round, rubber had been classified as industrial product. Bound rate for this has not been fixed. For this, the basic import duty fixed by Centre is 25 per cent.

Bound rate for cash crops, generally covers around 100-150 per cent. During the six years of negotiations for Uruguay Round, neither the Rubber Board, nor Centre nor Kerala government pointed out this discrepancy in classification. It was only about a year ago that the fact that rubber and jute were warded off from the protected agriculture category had caught the eye of farm price experts in the country. As the tapping season is winding up, rubber prices have been slowly rising in tune with the international rubber prices.

Tyre manufacturers and other rubber-based industrialists, who had been invoking the OGL route through Kolkata and Vizag ports, had been lured to the local markets finally following the surge in international price of SIR-5 (Standard Indonesian Rubber), the equivalent of Indian RSS-4.

However, the increase in Indian prices is not quite in pace with that of the prices in Singapore.

While the international price went up from Rs 24 per kilo to Rs 30 per kilo in a month, in Kochi and Kottayam markets, the price difference in the same period is less. From Rs 25.50 per kilo, the price has risen to Rs 30 per kilo in a month. While rubber was selling Rs 24 per kilo in Singapore, the importer, after paying rubber cess, clearing charges and C&F charges, could finally buy it only at Rs 36 per kilo. At present, the price of imported rubber is Rs 43 per kilo, while the domestic market price is only Rs 30 per kilo.

About 20 per cent of the industrial consumption of rubber goes to the car segment of the automotive industry. The recession in demand in this sector is likely to be a roadblock to further rise in domestic prices, Mr Radhakrishnan said.

Although the projections for 2002-2003 see only a conservative increase in demand, the 2003-2004 has been projected as a golden period ahead for rubber farmers. Due to road and infrastuctural projects in the current year, truck industry, which account for nearly 70 per cent of the rubber demand in the country, is expected to enter a boom era. This is likely to reflect in rubber prices also.