Rubber Board Advocates for Keeping Import Duty at 25% for Next Year Too

The Rubber Board is said to have approached the Commerce Ministry with a request to keep the current structure of import duties on natural rubber in place for the next fiscal year.

The current import duty is 25%, and keeping it at that level would aid in the control of imports. This would help to limit imports to quantities that are absolutely necessary, given the interest of domestic growers, according to highly placed sources familiar with the development.

Though there was a proposal to set the duty at a flat rate of 25%, it is believed to have been shelved due to the current gap between Rubber's production and consumption, according to the sources.

Natural Rubber Consumption Increased

According to industry sources, natural rubber consumption has raised by 4 lakh tonnes to 10.96 lakh tonnes. However, production is hovering around 7.16 lakh tonnes, necessitating the need for imports to meet industrial demands. Imports totaled 4,10,498 tonnes last year.

Production fell in 2020 as a result of the lockdown and restrictions. Despite an improvement in the first half of 2021, the sector experienced a price drop in the second half of the year. The market's resurgence following the lockdown, combined with surging demand, has increased consumption. However, the tyre industry's decision to keep production on a small scale has harmed demand.

Furthermore, the Omicron threat has begun to raise concerns about demand. If output falls further, there is a concern in the market that consuming industries will require more imports, according to the sources.

The tyre industry, on the other hand, maintained that demand has weakened across all major tyre categories, both for OE and replacement markets. The decline in demand, according to Rajiv Budhraja, Director General of the Automotive Tyre Manufacturers Association (ATMA), is due to mobility restrictions caused by Omicron, semiconductor shortages, and rising fuel prices. This has resulted in supply constraints as well as sluggish demand for the auto sector, resulting in a drop in production.

As a derived industry, the tyre sector has been impacted as well, particularly the natural rubber-intensive tyre segments such as Medium and Heavy Commercial Vehicles and Tractors.

According to ATMA, truck and bus tyre production fell by nearly 10% in November, citing the most recent data. In the case of Tractor Front and Rear tyres, production fell by 28% and 20%, respectively, in November. The downward trend in output appears to have continued in December and January as well.

"We expect a recovery only by the end of March, when the current Covid wave is expected to be over." Much will be determined by the impact of the Union Budget on the auto and tyre industries, according to Budhraja.