Kerala extends sops to tyre firms to help rubber growers

By: |
Thiruvananthapuram | January 03, 2015 1:58 AM

Tyre firms have agreed to increase offtake of RSS-4 sheet rubber from the domestic market.

Tyre firms have agreed to  increase  offtake of  RSS-4 sheet rubber from the domestic market. This was after the Kerala government offered to forgo Rs 54-crore VAT on natural rubber (NR)  products, at a meeting of all stakeholders in the domestic rubber market this week.

The state government isready to allow 5% VAT waiver  in the period till March 2015, chief secretary EK Bharat Bhushan told the NR stakeholders at the high-level meeting  convened by the state. Extrapolating from the previous year’s statistics, this waiver would cost the state about Rs 54 crore, he said.

According to the Rubber Board, India’s April-July NR imports in 2014 were 1,33,789 tonne as compared to 90,580 tonne imported during the same period last year.

The representatives of tyre companies were agreeable to increase the offtake of rubber, in tune with price advantage.

In an earlier meeting on  December 18,  convened by CM Oommen Chandy, as many as 12 tyre companies had agreed to buy rubber from the local market with 20% customs duty and 5% purchase tax, over the international price, from local dealers. The agreement was that the Rubber Board will fix the price on a daily basis, based on Bangkok daily rates.

As per the agreement, the government will refund 50% of the purchase tax to companies. The rest will be disbursed as refund claim on VAT collected from buyers. The scheme will be applicable for purchase of RSS-4 grade only.

For importing, rubber companies will have to remit 20% duty. Based on the new agreement, 20% is collected as customs duty and 5% extra as purchase tax. This ensures 25% higher price for the local farmers.

At the stakeholders’ meeting this week, rubber dealers agreed to procure NR at  Rs 1.5 per kg below the referral price fixed by the Rubber Board.

The board spokesman said it fixes the price 20% higher than the Bangkok daily rates.

Growers have insisted that only sheet rubber and liquid latex at the farm-point should be allowed purchase tax waiver. The plea of rubber growers that 5% mark-up, above the refereral price fixed by the Rubber Board, was  turned down.

The intervention has partly helped in boosting the rubber market, says Siby Monipally, general secretary of  Indian Rubber Growers’ Association.

“The price has started going up. With availability of imported stocks dwindling in Thailand and Indonesia, buyers will have to look at the Indian market in the coming days,” he added.

Six years ago, NR cultivation had built up the rural economy, fuelling demand for consumer goods like fancy cars and high-end TVs and personal devices. Today, with NR cost falling below the cost of production, many farmers have stopped tapping the rubber trees and some have even started felling the trees, Monipally explained. This has led to 25% drop in production in October and November.

Kerala accounts for 90% of ubber plantations in the country, spread over 6.5 lakh hectares, and it engages over 1.1 million farmers.

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