India?s natural rubber imports are set to slump in the fiscal year through March 2012, as a weakening rupee has made overseas purchases dearer for tyre makers, worsening a demand slowdown on persistent worries about a wobbly economy.
India, which overtook the US as the world?s second-largest natural rubber consumer last year, will likely import around 1,25,000 tonne of natural rubber in 2011-12, down nearly 30% from a year earlier, government and industry sources said on Wednesday. The imports dipped 11% to 76,116 tonne between April and August, compared with 85,058 tonne a year earlier, data by the state-run Rubber Board showed.
Earlier this year, the government cut the import tax on natural rubber to an effective 7.5% from 20% to boost supplies for tyre makers that were struggling to cope with a shortage of the raw material.
The Automotive Tyre Manufacturers? Association, members of which account for around 90% of the country?s tyre output, had initially projected a shortfall of around 2,00,000 tonne in 2011-12, expecting higher demand from the country?s booming automobiles sector.
Tyremakers account for more than 60% of the country?s natural rubber demand. India, also the world?s fourth-largest natural rubber producer, expects output to rise 4.6% to 9,02,000 tonne this fiscal, according to the Rubber Board?s forecast.
?Although international prices have softened recently, the rupee has depreciated sharply in recent months. Vehicle sales are also falling during the peak rubber producing season. So imports have been affected,? said Rajiv Budhraja, the director-general of Atma.
The rupee has depreciated by more than 8% since September as investors relied on the haven appeal of the dollar amid the financial crisis, making overseas purchases unattractive for Indian companies. Domestic natural rubber prices of the popular RSS-4 variety were ruling slightly higher at around R2,08,500 per tonne on Tuesday from R1,99,720 a tonne in key supplier Thailand for a comparable variety.
Passenger vehicle sales, including cars, vans and sport utility vehicles, fell 5.7% in August, the second fall in two-and-a-half years, as rising interest costs bite into demand, aiding a fall in imports.
A senior executive with a tyre company said adequate rubber stocks with some companies have prevented massive overseas purchases by them, especially in times of economic uncertainties. The Rubber Board forecasts stocks at 2,71,000 tonne by the end of the 2011-12 fiscal.
India was one of the few countries where consumption rose at a much faster pace in 2010-11 than output because of surging demand for automobiles, driving up prices by more than 50% from a year earlier. Earlier this year, the commerce ministry had even proposed to the revenue department of the finance ministry to allow tax-free imports of up to 1,50,000 tonne of natural rubber in 2011-12 to enable bulk users tide over a domestic shortfall.