Rubber sector headed for new crisis

• Since the third quarter of the financial year 2014-15 there is unprecedented price fall in rubber production in India (especially Kerala) owing to the ineffectual and adverse policies of the governments.
• In 2012, however, India was on 4th rank after Thailand, Indonesia and Malaysia. Before that India ranked third on the production table after Thailand and Indonesia.
• Centre has slashed import tariff for rubber product, which could lead the rubber crisis in Kerala.
• In a notification issued by the Central Board of Excise and Customs had provided deeper tariff concessions for goods imported under the India-Malaysia Comprehensive Economic Cooperation Agreement (IMCECA). This revised tariff would lead to a spree of imports, flooding the market with cheap goods from Malaysia.
• According to the notification, the import tariff for new and retreaded tyres for cars, buses, and lorries will be brought down to five per cent from June 30, while that for aircraft tyres and agricultural and construction machinery has been done away with.
• The other zero tariff items listed in the notification include sheath contraceptives, surgical gloves, floor coverings, erasers, hard rubber products, synthetic rubber of various types, waste and scrap rubber, camel back strips for retreading rubber, tubes, pipes and hoses, and conveyor belts.
• This tariff cut represents a danger signal for Kerala.

Analysis:

• There has been a significant fall in budgetary allocation, which put the Rubber Board in severe financial crisis, forcing it to discontinue nearly 25 different schemes they were following for promoting natural rubber during the past one year. While the approved plan outline for the Board was ` 176 cr for the year 2013-14, the Central government had released only ` 157 cr, which forced them to hold the release of the subsidy to next year. However, though the plan outline was ` 192 crore in the year 2014-15, the government had released only ` 150 crore, throwing a spanner in the works of the Board.
• On the other side, there is a steep increase in the difference between production and consumption, which has reached 3.63 lakh tonnes. Such a figure is sufficient to justify the import of rubber to the tune of 4.4 lakh tonnes in the previous year, by the companies. When the import moves in such ratio and farmers continue to abstain from production, the rubber growing sector will plunge into further crisis.
• Central government has taken a step to reduce the import duties on rubber products. This move will affect the livelihood of Kerala’s rubber farmers.
• A serious fall in the productivity per hectare of rubber Constant fall in prices of natural rubber, coupled with high labour cost has forced many of the growers (75 per cent small and marginal farmers) to keep away from tapping Further, this industry is marred by several problems such as: Conflict of interests of Rubber Growers and Tyre Companies.
• The unrestricted massive imports by larger tyre companies pushed down domestic demand; however at the same time; MSME and other small industries which depend on domestic supply of natural rubber demand for urgent measures.
• Other reasons including high input costs; bizarre duty structure, cheap imports and signing of Free Trade Agreements with countries from which import of finished rubber products to India is encouraged.

By: Vishal