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Govt’s decision to increase import duty on natural rubber will hurt Make in India initiative: Tyre m |
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NEW DELHI: Indian tyre manufacturers are worried about the government's decision to increase import duty on natural rubber, which they say will make them uncompetitive and cause dumping by neighbouring nations. They see the move going against the government's 'Make in India' initiative. The government increased the duty on natural rubber to 25% from 20%, making imports costlier than before, after India's natural rubber production fell to a 12-year low.
Tyre makers, who have been lobbying against the duty, say the step adds to the inverted duty structure - higher import tax on raw materials compared with finished products - that the government wants to dismantle. Finished tyres can be imported at duty as low as 0-8% under India's foreign trade agreement with Asian countries. The tax is 10% for importing finished goods from non-FTA nations.
"We were already bearing the brunt of the inverted duty structure vis-a-vis our neighbouring countries and the further increase in import duty on natural rubber will only result in making the domestic tyre industry more uncompetitive," said Neeraj Kanwar, vice chairman and managing director of Apollo TyresBSE 0.61 %. He said this would result in higher imports of tyres.
Industry sources blamed lobbying by Kerala's rubber growers for the hike in the duty. The growers, on the other hand, accuse tyre makers of promoting imports to keep rubber prices low, which they say led to the fall in rubber production.
Raghupati Singhania, chairman of the Automotive Tyre Manufacturers Association, said the government's decision would increase the threat of dumping of tyres in India.
"We had high hopes from the government that it will deliver on its promise of tax rationalisation so that India could go up on the ease of doing business (list). The decision to increase duties goes against the spirit of rational taxation and will impact more investments in the growing tyre and rubber sector," added Singhania.
In its last budget, the government had fixed inverted duty structure on 22 items. Industry executives say the higher duty could drive tyre makers to increase prices this year. They want the government to increase the duty on tyres as well to offset the advantage that importers of finished products have got because of the increase in raw-material tax.
"Then, we can be at some level playing field and people don't start dumping in India, which is happening in great proportion in the truck as well as passenger car radials," Arun K Bajoria, president of JK Tyres & Industries, said in a recent interview. The rubber consuming industry has also asked for rolling back of the hike in import duty on natural rubber.
According to ATMA, domestic natural rubber production and consumption gap has reached 3.6 lakh tonnes and so imports are inevitable. The fall in local production of natural rubber and lower international prices led to alltime high rubber imports of 4.15 lakh tonnes in 2014-15, which were 15% more than the previous fiscal year, Rubber Board data showed.
Production of natural rubber declined to a 12-year low at 6.55 lakh tonnes in 2014-15, down by 12% from the previous year.
Source : economictimes.indiatimes.com
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