Financial Daily from THE HINDU group of publications
Sunday, Jun 23, 2002
Agri-Biz & Commodities
Govt sees hope in rising rubber prices
NEW DELHI, June 22
THE recent spurt in the prices of natural rubber (NR) in the face of the overall persistent fall in primary products prices the world over, appears to be "a bright ray of hope'' for rubber growers in countries such as India, Malaysia, Indonesia and Thailand.
Talking to Business Line here, the Additional Secretary in the Commerce Ministry in charge of plantation, Mr L.V. Saptharishi, said the emerging international price situation for NR was "heartening'' as far as the primary producers were concerned. This was since almost after a spell of five years, there was evidence of "fair and remunerative prices'' to the small rubber growers, the linchpin of plantation segment of the State economy such as Kerala.
He said one of the important factors advanced for the rise in price of NR was due to the slow but steady revival for natural rubber on the part of the automobile tyre industry and other sundry rubber-consuming industries, in countries like the US and, to some extent, Japan.
Referring to the domestic tyre industry and its associations crying hoarse over the firming up of NR prices and the failure of the authority in not lifting the ban on import of NR against advance licensing, Mr Saptharishi, put forth a different set of arguments in support of the recent spurt in NR prices and how the Government viewed it.
According to him, when market forces are supposed to resolve prices of commodity, the current spurt in prices of NR attests to the fact that when the demand for final product picks up as is being seen in the revival of world economy, there is also a definite demand for raw material. Interestingly enough, he said, the demand tend to the needs of the consuming industry and not so much to do with the supply side economics where there has been excess global supply of raw materials such as NR.
Developments at the international level were responsible for Indian NR prices firming up and it "is a matter of gratification for the Indian rubber growers that he is getting on average Rs 40 per kg for the standard RSS 4, on the same line as their counterparts in other producing countries,'' Mr Saptharishi said.
The higher prices being realised by the rubber growers would also take away the sting of the charge levelled against them that their prices were higher than the international prices as alleged by the tyre and user industry representatives, he said. When price parity prevailed in this fashion, the user industry could now decide whether to source rubber domestically or go through the import route, which would entail 30 per cent customs duty plus incidentals on the import cost, he added.
Mr Saptharishi said a far-sighted major automobile tyre manufacturing company from the South mentioned to him that this was the time when the tyre industry should play a fair game and support the indigenous rubber growers which would also help in enabling the domestic industry to observe some price discipline even if the global prices tend to go out of control due to external factors.
He said this was an opportune moment for forging "useful linkage'' between raw-material and end-user sector on a prudent way.
The Automotive Tyre Manufacturers' Association (ATMA) and other forum merely crib about domestic rubber prices going up and their words would not have any credibility since global prices were firming up, he said adding that "with the freedom now available to import, if they go in for imports, they would be the loser''.
If such a linkage was not forged before long, the Indian rubber grower would not be a loser since he was being benefited by the Government's "correct and timely export policy" of NR and a set of incentives for exports which has now come to his rescue, Mr Saptharishi said.
As a long-term strategy, the current development should help the Government, the Rubber Board and growers to go in for increased production of NR in the coming year, keeping in view domestic as well as global demand. Unlike in the past, the new situation provided an opportunity to growers to link prices to international end-user markets, which was a salutary sign. As far as quality of indigenous NR, he said, "if the rubber growers and the Rubber Board start addressing this issue simultaneously, the problem would be more than solved and efforts are under way in this regard for imparting quality upgradation, offering preferred variety, form, weight and shape'' in tune with the exacting global market requirements.
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