Tyre makers want correction in import duty

Written by M Sarita Varma | Thiruvananthapuram | Updated: Jun 12 2009, 04:57am hrs
The domestic tyre industry has urged the government to correct the inverted duty structure in favour of rubber to make it more competitive with others.

Even at a critical juncture when tyre exports are sliding, customs duty on its main raw material natural rubber (NR) remains 20% and that on the finished product (tyres) stays 10%, Automative Tyre Manufacturers Association (ATMA) said in its pre-budget note.

The inverted duty structure issue in the country's tyre industry policy framework is a 'pain in the neck' at a time when governments all over the world are bending backwards to make industry competitive, ATMA argued.

From 1996-97, customs duty on NR is 20%, though that on tyres in 1996-97 was 50% (just 10%, at present).

The key thrust of the wish-list is that either the customs duty on NR should be down pegged to 10% or import duty of tyres jacked up to 20%.

One favourable context is that there is no bound rate of tariff for tyres. "So, we feel that tyre import duty rates can be brought on par with that of NR," Rajiv Budhiraja, director general, ATMA told FE.

A stimulus package is also top in the tyre industry demand-dossier. Onkar S Kanwar, chairman, Apollo Tyres, who made the presentation to finance ministry on behalf of ATMA early this week, argued that government support is "imperative", in the context of governments in the countries of competitors spreading out stimulus packages for revival and accelerated growth.

Since tyre-manufacture is raw-material intensive, the increase in raw-material prices in second half of last fiscal (2008-09) has led to erosion in net profitability.

According to the figures culled by industry, the net profit as a percentage of top five tyre companies has collapsed to 0.96% in 2008-09 against 4.84% in 2007-08.

The industry is on toes at NR price in the last three months surged by about 40% (from Rs 70 per kg in early March to Rs 100 per kg at present).

Domestic price is sailing Rs 15-20 per kg higher to international price. But each price jump of Re 1 per kg for NR translates to an extra annual financial burden of Rs 50 crore for tyre industry.

What irks the tyre industry is that for the first time in the last seven years, truck a bus tyre production (accounting for almost 60% of total industry turnover) has clocked a negative growth of 2% in 2008-2009.

Truck and bus tyre exports fell by 20%. Passenger car tyre exports are down by nearly 10%. Passenger car segment had been showing double digit growth for last one decade. This has shown flat growth (just 1%) in last financial.