Tyre industry welcomes govt move to slash tariff on rubber

Tyre-makers in India have cautiously welcomed the government's decision to slash the import duty on natural rubber from 20 per cent to 7.5 per cent, but do not expect their bottom-lines to improve in the near future.

Earlier in May, tyre manufacturers had dragged the government to court, accusing it of having a discriminatory import duty structure. While natural rubber imports attracted a duty of 20 per cent, finished products such as tyres were charged just 10 per cent duty. The domestic tyre industry had protested against the inverted duty pyramid, but to no avail.

However, after the filing of the case, the government considered the industry's plea and decided to slash customs duty on natural rubber to 7.5 per cent. However, there are certain caveats: the concession is only for goods up to an aggregate of 40,000 metric tonnes of total imports during the remaining three months of the current fiscal ending March 31, 2011.

According to Rajiv Budhraja, director-general, Automotive Tyre Manufactures Association (ATM), this is a positive step from the government. ''However, we are still concerned over the alarming prices of natural rubber, which are at historic highs,'' he added.

India's natural rubber production fell by 5.4 per cent in November to 88,500 tonnes – as compared to year-ago figures – caused partly because of heavy rains in some key producing regions. The Rubber Board, however, notes that the cumulative production during the April-November period was up by 2.9 per cent to 546,150 tonnes.

Natural rubber imports in November were up by about 50 per cent to 10,750 tonnes. India imported 143,000 tonnes of natural rubber during the April-November 2010 period, slightly higher than imports in the same period in the previous fiscal.

There is also disparity in the price of domestic and international rubber prices. Natural rubber is being sold at Rs.207 to Rs.208 a kg in India, while international prices have shot up to Rs225. The tyre industry claims that international prices should be lower by at least Rs.6 a kg for imports to become viable.