The tyre industry has been severely hit by rise in input costs and even a price hike by 25% has not helped it tide over the losses, according to PK Ruia, chairman of the Ruia Group that runs Dunlop India Ltd, Falcon Tyres and Monotona Tyres.

After the 81 st annual general meeting of Dunlop India, Ruia told reporters that with the rubber prices going up from Rs 90 per tonne to Rs 140 per tonne and other input costs also escalating, production cost has gone up by more than 60% in the last four months.

Just 15 days back, Falcon Tyres, which is an OEM (original equipment manufacturer) supplier to Bajaj Automobiles Ltd, increased the price of tyres used in two- and three-wheelers by 15-25% for various ranges.

“Price of two- and three-wheeler tyres for the replacement market has also been increased by 14%, even then many a products have to be sold below the production cost,” said Ruia.

“How many times can you go to the market and revise prices,” he said.

After a recession, the two- and three-wheeler segment has witnessed growth once again since the last month and demand has gone up. But with the government stopping forward booking of rubber, it has become pretty difficult for the tyre industry to zero down on a price.

However, the OEM contractors are responding favourably and are even ready to pay more for tyres with restropective effect. Bajaj had agreed to buy Falcon tyres at a price increased by 15% in July and has further committed a rate increased by an additional 8% on the current prices in September.

But Falcon would require another 20-25% rise in prices to make marginal profit, said Ruia.

Around 45% of Falcon’s production is for OEM supplies and 55% is for the replacement market.

The Sahaganj unit of Dunlop India is running at 50 tonne per day capacity even as the target was to reach 130 tonne per day by the end of 2007-08.

Ruia said: “Whenever we have tried to ramp up our production in Sahaganj there has been a problem. I don’t know whether it is a genuine technical problem or a created one. But we don’t have any evidence in hand about problems being purposely created.”

Dunlop India is planning to increase its off the road (OTR) tyre capacity by an additional 100 tonne at its Sahaganj unit and has also firmed up plans to set up a 50 tonne truck tyre and OTR tyre manufacturing plant at Guwahati at an investment of Rs 450 crore.

The company also plans to set up a 10mw co-generation plant at Sahaganj at a cost of around Rs 500-600 crore by the end of 2009-2010.

Dunlop is also planning to source radial truck tyres and OTRs from east Asia to serve the Indian market, Ruia said.