Review higher duty for finished rubber goods and lower levy for natural rubber, says AIRIA

The All-Indian Rubber Industries Association (AIRIA) wants the Centre to change the inverted duty structure for the industry wherein import duties for finished goods are lower than the raw materials, its president Shashi Singh has said.

“Producing rubber goods domestically is costlier than importing directly. The inverted structure is affecting the finished goods in the rubber industry. If the Government cannot raise it, then it should at least ensure the duty on raw material should be the same as the finished product,” he told businessline in an online interaction.

Such a development will also spell a good time for the agriculture sector since many small farmers in Kerala and the North-East are involved in growing rubber. “It is a win-win situation for both (industry and farmers),” he said. 

Seeking level-playing field

AIRIA has submitted its request for considering a level-playing field on the duty issue but there has yet to be a response, the AIRIA president said. 

The tyre industry is the major consumer of natural rubber in the country. Tyre manufacturers have the advantage of importing rubber duty-free against the export of tyres. “The non-tyre sector is different as it does not have the bandwidth to import directly and face the heat of natural rubber prices increasing or decreasing. Even now, the price for goods manufacturers is ₹210-₹220 a kg,” said Singh.    

AIRIA has urged the Centre to introduce the productivity-linked incentive scheme for rubber goods companies. “There are certain limitations such as ₹100 crore turnover. In the non-tyre sector, only a few companies record such turnover. A majority of our 1,200 members are micro, tiny or small industries. For the PLI scheme, we have suggested to the Government to create some kind of cluster,” the AIRIA president said. 

PLI scheme

AIRIA has submitted certain proposals on the PLI scheme for the Government to consider. “Some 14-15 industries are already there with textiles being the latest. So, we expect it to come up slowly for rubber industries as well,” he said. 

Singh said natural rubber prices have dropped below ₹200 a kg currently since tyre companies have imported huge volumes. “Imports have increased by 22 per cent already this fiscal. Upto September 3,10,400 tonnes have been imported compared with 2,54,00 tonnes a year ago,” said Singh.

Natural rubber prices almost touched ₹250/kg earlier this year before dropping. Currently, ribbed smoked sheet (RSS) IV grade rubber, used primarily by industries, is ruling at ₹197 a kg. 

Tyre manufacturers have good stocks with them. They built their inventories when prices increased. After a good monsoon, tapping resumed and the availability has increased. These developments have pulled down prices and a drop in Chinese demand also aided the fall, he said. 

Supply-demand scenario

Besides, use of new technologies and synthetic rubber have compounded the decline in prices. Singh said rubber production will likely exceed 8.5 lakh tonnes this year, while demand could be a new high at 18.5 lakh tonnes.

Pointing out that during his visit to Thai rubber plantations he found farmers happy with the prices, he said the Indian government should look into this and get details on Thailand labour costs and policies. “The Government should protect the industries as well, particularly reviewing the inverted customs duty structure,” the AIRIA president said. 

Stating that natural rubber cannot be replaced totally, especially in tyres, he said certain grades of synthetic rubber can replace natural rubber to the extent of 18-20 per cent. In some conditions, synthetic rubber could prove to be better.   

2025 outlook

Rubber industries are doing well and next year (2025) will be good, particularly for tyre companies, as new cars are launched almost every day by automobile manufacturers, he said. 

However, rubber industries are concerned over fluctuating prices of raw materials such as natural rubber, synthetic rubber and chemicals like carbon black. 

On use of rubber for gloves and other medical purposes, he said the offtake has declined compared with the Covid pandemic. “During Covid, everyone was using gloves whether they were in the medical field or not. But things have changed,” said Singh. 

Rubber goods exports are faring well but compared to China, India was way behind.  On manufacturing goods that can substitute imports from China, the AIRAI president said Indian industries faced the problem of high raw material costs.