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Industry & Economy - Taxation


Plea for scrapping cess on natural rubber

Mohan Padmanabhan

Kolkata , June 30

THE manufacturer-exporters of rubber products would like to procure natural rubber (NR) domestically against invalidation of advance import licences (by having the quantity deleted from the licence) or issue of advance release orders by the office of the DGFT.

Talking to Business Line today from his office in Mumbai, Mr M.F. Vohra, Managing Partner, Zenith Rubber & Plastic Products, and Chairman of Capexil, Western Region, said a proposal to this effect had been lying with the Commerce Ministry for the last 4 years, for identifying an agency similar to STC, which would give an option to manufacturer-exporters to procure NR domestically. STC used to be the canalising agency for this product, and there was absolutely no problem then on NR supplies, he pointed out. Any slack in supplies of particular grades of NR will severely affect the export competitiveness, he pointed out.

Mr Vohra also suggested that the cess levied on consumption of NR (Rs 1.50 per kg on consumption) should be scrapped without anydelay. He said since the NR prices are still ruling very high, the industry should not be burdened further through this additional amount of cess, which is being used by the Rubber Board for development of rubber growing activities.

According to him, the planters now do not require such support. Given the average annual consumption of NR by the rubber goods sector at around 6.5 lakh tonnes, a tidy sum of more than Rs 100 crore is collected from the industry by the Board.

In this context, Mr Vohra said domestic prices of NR was still much higher than that in the international markets (Rs 65 per kg). He said the price of around Rs 26 a kg in April 1998 for the benchmark RSS 4 grade is now ruling at over Rs 60 per kg, mainly owing to the protection given to the planters by artificially keeping the import duty on dry rubber at 20 per cent and latex rubber at 70 per cent.

He felt NR was being wrongly classified as an agricultural commodity, whereas internationally, it is classified as an industrial commodity. Mr Vohra said "by making the raw materials more expensive, we only become uncompetitive in the global market." Mr Vohra also sought withdrawal of inspection of imported rubber. He said imported NR was being subjected to inspection by the Rubber Board even though no clear norms are laid out for inspection of sheet rubber. Describing such inspections as subjective, he said this only led to increase in transaction costs by delaying the receipt of vital raw materials at the consumption point. He felt some 30-40 raw materials are required to manufacture one rubber product and inspecting just a single item in the chain does not serve any purpose.

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