Sunday, December 26, 2010

Indian government cuts import duty on rubber to 7.5%

The Indian government has reduced the import duty on natural rubber to 7.5% from 20%, reports the Economic Times.  The duty cut will be implemented for shipments up to 40,000 tonnes till 31 March 2011, to boost domestic supply and put a check on rocketing rubber prices that touched record INR207 (US$4.5, 27 December 2010) per kg.

It has also been reported that the natural rubber import beyond 31 March 2010 will attract a duty of 20% or INR20 (US$0.4) per kg, whichever is lower. “The government has addressed the long-standing request of the industry. This should have happened long back when prices in domestic market were higher than international market,” said Rajiv Budhraja, director general of New-Delhi (India)-based Automotive Tyre Manufacturers’ Association.

The Indian tire industry had been seeking a cut in the 20% customs duty on natural rubber, which is double that for tire imports. Looking at the price position, rubber and availability of rubber and the increased demand for tires, it would be interesting to see how much benefit the duty cut will provide to the tire industry in the short term. “Domestic prices will remain stable despite duty cut as they are lower than international market,” told George Valy, president of The Indian Rubber Dealers Federation to Reuters. Valy further added,  that “Indian tire makers will start imports once international prices fall below domestic level. Then they will benefit from lower duty.”

However, availability is one of the largest constraints in India which would certainly help in bringing in more rubber.  The limit of 40,000 tonnes of imports up till March 2010 seems too little and would be consumed by the industry before that. India is expected to produce around 850,000 tonnes of natural rubber in 2010-11, down 4.8% from an earlier estimate, after heavy unseasonal rains affected tapping. The country consumes nearly one million tonnes of rubber annually, split roughly halfway between the tire and non-tire industries.