Tyre makers welcome duty-cut move, cautiously

Written by M Sarita Varma | Thiruvananthapuram | Updated: Dec 26 2010, 05:07am hrs
Tyre companies have cautiously welcomed the Centre's decision to bring down import duty on natural rubber from 20% to 7.5% because wide difference between international prices and domestic rates has made imports virtually impossible.

If domestic price of RSS-4 of rubber is Rs 207.5 per kg, at Kottayam, the equivalent of RSS-4 cost Rs 222.3 per kg in Bangkok this week. International rubber prices have to be atleast Rs 6 per kg lower, for imports to be viable. Even at its record highs, price of onion in India is currently lower than international rates. Thursday, the government allowed imports of up to 40,000 tonne of rubber at 7.5% duty till March 31, 2011.

"It would be ungrateful to bluntly dub it "too little or too late," considering that the government has finally heard our plea," Rajiv Budhraja, director general, ATMA told FE.

Although shares of eight tyre makers gained 1.17% to 4.08% on the Bombay Stock Exchange (BSE), the companies themselves are not much confident about the effectiveness of this move. "The decision should have come one year earlier. the Chinese government had supported its tyre industry with a similar decision as early as January 2010, leaving Indian firms behind that competitive edge," Budhraja said.

Industry has imported about 143,500 tonne of natural rubber (till November) this year at 20% import tariff. Tyre firms are also apprehensive that by the time tariff-cut decision translates to action, there would be little time to negotiate new import contracts. The deadline for the low-tariff import ends in March.

Neeraj Kanwar, chairman, ATMA said tyre firms are relieved that "government has also begun to take a long term view on the tariff inconsistency of the inverted duty structure,".

The latest report by the Association of Natural Rubber Producing Countries (ANRPC) pointed out that global natural rubber supply might fall by 6.3% in fourth quarter of the current financial. Thailands rubber supply is likely to fall at 2.9% to 3.07 million tonne in 2010 from 3.16 million tonne in 2009.

Another major producer Malaysia is expecting leaf-shedding from February to May, which would shrink production to 60-70%.