Rubber Exports Causing Indian Tyre Manufacturers Angst

Voices of concern amongst India’s tyre industry have been raised in response to the national Rubber Board’s perceived encouragement of rubber exports. A three per cent decrease in domestic natural rubber production before the end of the current fiscal year (March 31, 2008) has been projected, and it is this, along with dramatically higher rubber exports, that is creating a sense of unease. Natural rubber exports almost doubled in January to 7,522 tonnes, compared with 3,886 tonnes in December 2007, on the back of lower domestic prices.

Currently the price for India sourced rubber is about £0.10 a kilogram lower than prevailing world prices, and experts believe that if current global prices continue their upward journey a total of more than 40,000 tonnes of rubber may be exported from India during the current financial year. Given that India’s tyre industry consumes 55 per cent of local natural rubber supplies, and difficulties already exist in meeting domestic demand, the industry’s concern over additional exports is understandable.

“Production of natural rubber in the fiscal 2007/08 is expected to go down by three per cent, while consumption would grow by five per cent,” commented Rajiv Buddhiraja, director-general of the Automotive Tyre Manufacturers Association. “Of this, consumption by the tyre industry is expected to increase by 6.6 per cent and non-tyre consumption by three per cent. In such a scenario, we would like the Government to encourage domestic consumption as against exports.”

According to Buddhiraja, the Rubber Board has set a target to export 46,000 tonnes during the current fiscal year and has so far exported 30,000 tonnes of natural rubber, with plans to export 16,000 tonnes during February and March. Should adequate supplies of locally sourced natural rubber not remain available, tyre manufacturers have little choice but to import the commodity, a transaction that attracts an import duty of 20 per cent. As natural rubber prices already account for 42 per cent of the overall cost of producing a tyre, a higher rate of imports will naturally impact upon margins.

“The duty on raw material at 20 per cent being higher than the import of tyres at 10 per cent is a huge concern. With the rubber growers resorting to exports, we would like the government to allow the duty-free import of rubber,” said Buddhiraja

According to India’s Rubber Board, nationwide reserves of natural rubber are likely to decrease by 20 per cent between the end of January and the end of March. Export demand is primarily coming from South Korea, China and Singapore, reported one rubber dealer, who added that the average daily amount purchased has increased from around 100 tonnes in November to 250 tonnes.