Financial Daily from THE HINDU group of publications
Saturday, Aug 14, 2004
Agri-Biz & Commodities - Rubber
`No room for panic on rubber imports'
Vipin V. Nair
Workers packing a consignment at a sheet rubber unit in Kochi. With the Centre removing port restrictions for rubber import, growers in Kerala are a worried lot. They fear this could lead to a fall in rubber prices. K.K. Mustafah
Kochi , Aug. 13
THE Government's decision to remove port restrictions on import of natural rubber has triggered a furore in Kerala on fears of rubber prices plummeting due to higher imports. But tyre industry and traders say there is no room for panic.
Kerala, which accounts for over 90 per cent of the country's rubber production, fears that due to the removal of port restrictions, consuming industries such as tyre makers will go in for more imports, thereby influencing domestic prices.
There are also apprehensions that inferior quality rubber will make its way into the market from countries such as Vietnam.
Rubber prices fell after news spread that the Government had lifted the port restrictions, acceding to the demand of consuming industries. Till then, import of rubber was permitted only through Kolkata and Visakhapatnam ports. This restriction had come into effect in December 2001.
Tyre industry sources and dealers, however, point out that the lifting of port restrictions will not have any bearing on the domestic natural rubber prices since this measure would help companies only by way of lower transportation costs and better logistics.
"We can go in for only duty-free imports against the advance licence scheme and rules clearly mandate us that we can import only 44 kg of natural rubber against 100 kg of exports," an industry source said.
The tyre industry, which consumes 52 per cent of the 7.1-lakh rubber produced in the country, plans to import 60,000 tonnes this year, up 39 per cent over last year. Tyre export in the current fiscal is expected to be worth Rs 1,400 crore, up from Rs 1,250 crore in 2003-04.
"Nobody is going to do duty-paid imports at the current prices. The only difference the removal of port restrictions would make to tyre companies is that we will save Rs 2 per kg of rubber in terms of average transportation cost," the sources said.
For duty-paid imports under the open general license, natural rubber attracts a 20 per cent import duty.
According to Prof K.K. Abraham, President of the Kerala State Co-operative Rubber Marketing Federation Ltd (RubberMark), the decision will affect the manufacturers of technically specified rubber (TSR) seriously since 90 per cent of the rubber imported are in TSR form. "You get very cheap TSR to import at very low prices," he said.
According to Mr N. Radhakrishnan, President, Cochin Rubber Merchants Association, the hue and cry raised over lifting of port restriction is unwarranted.
The curbs were imposed at a time when domestic prices were ruling at Rs 26 a kg and over two lakh tonnes of rubber were in stock in the market, he said.
"At that time, in spite of fixing a minimum price of Rs 32 a kg and a benchmark price of Rs 34 a kg, domestic rubber prices did not improve.
So the restriction was put in place to shore up the prices by restricting more imports coming in," he said.
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