Rubber prices may look up on govt move to hike import duty .

KOCHI: Natural rubber prices, which fell to the lowest in the last four years, seem to be on a rebound following the government decision to hike the import duty to 20% or Rs 30 per kg from the earlier Rs 20 per kg. The RSS-4 variety, used by tyre makers, jumped nearly 3% to Rs 160 per kg on Monday.

The growers had been clamouring for an increase in the import duty of natural rubber with imports skyrocketing to an all-time high. At the end of November, when production showed a 11% fall imports went up 53%. Rubber growers had feared that rubber prices may fall below cost of production if the situation continued and even the Rubber Board had recommended a temporary ban on imports. However, the tyre industry has been strongly opposing the move.

"The hike in import duty will boost the confidence of growers who have been frustrated due to low prices,'' said a prominent dealer. Rubber prices could move to Rs 170-180 per kg range in the coming weeks. Active tapping may not continue in February which is an offseason in both national and international markets. Terming the government decision as a retrograde step, the All India Rubber Industries Association (AIRIA) and Automotive Tyre Manufacturers Association (ATMA) said it was in total contravention to the government's stated position of increasing manufacturing competitiveness in the rubber sector.

"The tyre industry is witnessing a lower offtake of tyres due to the slowdown in the auto sector, the increase in import duty of a principal raw material will make it tougher for the industry to manage the challenging environment,'' said ATMA Vice-chairman Dr Raghupati Singhania.

According to AIRIA, while the duty on import of natural rubber is now 20% or Rs 30 per kg, finished rubber goods can be imported with duty ranging from 2.5% to 10%. "Given the fact that rubber consumers are already suffering from inverted duty structure, there is hardly any rationale for increasing import duty on rubber,'' pointed out AIRIA President Niraj Thakkar.

The All India Tyre Dealers Federation has said that the tyre trade and consumers cannot grudge the government action in hiking import duty as the natural rubber prices had fallen steeply to Rs 150 per kg after touching Rs 240 per kg in the past.

The federation convenor, SP Singh, said tyre dealers have been pleading before the government that it should intervene to direct domestic tyre manufacturers to roll back tyre prices in tune with the fall in rubber prices.

Source : economictimes.indiatimes.com