Financial Daily from THE HINDU group of publications
Thursday, Feb 03, 2005
Agri-Biz & Commodities
Block rubber production languishing
Vipin V. Nair
Kochi , Feb. 2
DESPITE being the fourth largest natural rubber producer in the world, production of technically specified rubber (TSR) has been remarkably low in the country. And nobody is sure how to boost the output.
Growers, processors and consumers all agree that block rubber production has to be increased in line with global trends.
But they have to put together in the right way the building blocks of price, raw material and quality and usage.
Tyre manufacturers, who consume 52 per cent of the rubber production, say TSR, or block rubber, produced in the country lacks consistency in quality and hence they resort to its import.
Processors, on the other hand, argue that tyre makers are trumping up this excuse to import more of the commodity to keep domestic prices under pressure.
"There should be consistency in technical specifications. This aspect, at present, is lacking. In a general vein, TSR produced in India is not up to world standard... " says the Automotive Tyre Manufacturers Association (ATMA).
ATMA says tyre makers would continue to prefer importing TSR because of the cost advantage and acceptable quality, unless the present price differential in the world market between sheet rubber and TSR changes.
But, according to Mr Baiju Radhakrishnan, Managing Director of Kerala State Agro Co-Op Ltd (Agreenco), Indian-made block rubber meets most of the quality parameters.
"This argument (about inconsistent quality) comes up with when we try to sell in the domestic market," he says, while pointing out that Agreenco has been exporting 300-400 tonnes of TSR a month for the last one-and-a-half years.
Agreenco recently set up a TSR processing factory with a daily production capacity of 12-tonnes.
It invested Rs 2.8 crore in the factory.
The main reason for the quality issues of Indian TSR is the raw material used for its production: scrap rubber.
"It is the lack of quality of raw material used for manufacture of TSR which is the prime reason for inconsistency in technical specifications," ATMA said. Scrap rubber (the residue after the latex is collected from rubber trees) is often contaminated with sand and other foreign particles.
As against this, latex is used to process the TSR in other countries.
"We concede that there are quality problems," says Prof. K K Abraham, President of the Pala Marketing Society, a leading rubber co-operative.
Prof Abraham says that it is the use of scrap rubber that also hinders the large-scale production of TSR.
"We have only 1.5 lakh tonnes of scrap rubber available in India as compared with our rubber production of around 7.5 lakh tonnes," he said. So there is dire shortage of raw material often felt by block rubber processing units.
While Indonesia's entire rubber output is in the form of block rubber, in Thailand it is 90 per cent.
But in India, it constitutes a meagre 13 per cent of the total rubber production.
Experts say enthusing growers to switch from sheet to block rubber is an uphill task.
"We will have to wait for a long time," says Prof Abraham. He cites the example of Indonesia where farmers were encouraged to supply latex for block rubber production through subsidies.
Mr Radhakrishnan says providing subsidies to farmers may not be possible in today's circumstances. "We should have done it in the past."
However, latex fetches a lower price for farmers and unless the price difference with a sheet rubber is bridged, they may continue to be averse to supplying the latex.
Another side of the issue is that if latex is used in place of the scrap rubber, cost of TSR production will go up.
Tyre industry may not be willing to pay a higher price for block rubber than the prevailing rates.
Also, tyre companies are not using TSR in the production of all categories of tyres, as they prefer the sheet rubber the most in India.
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