Rubber industry demands cut in raw materials duty

The rubber industry has sought lower import duty on raw materials such as butyl rubber and hi-tech synthetic rubbers, while it wants the duty on finished products to be kept high. A pre-Budget plea by the All India Rubber Industries Association (AIRIA), has asked for reduction in customs duty on natural rubber (NR) from the current 20 per cent or Rs 20 a kg to 7.5 per cent or Rs 10 a kg, whichever is lower. NR is the major raw material for Indian rubber industries, accounting for 35-45 per cent of raw material cost.
At the current international price of Rs 160 a kg of NR, the import duty of Rs 20 works out to around 12.5 per cent, much higher than the import duty on finished rubber products at 10 per cent, leading to an inverted duty structure.
“China has just reduced the import duty on NR from a maximum of 1,600 yuan currently to a maximum of 1,200 yuan effective January. At the current international price of around 25,000 yuan tonne, the import duty comes to just about five per cent. The Indian industry needs a level playing field to be competitive,” said Niraj Thakkar, president of AIRIA.
In view of the high rate of import duty, ranging from 20-70 per cent, on most raw materials, the cost of finished goods made from such imported raw materials is higher than the landed cost of such imported finished goods. This leads to imports of finished goods from neighbouring countries, causing injury to domestic producers, Thakkar added.
AIRIA estimates the demand-supply gap in NR at over 150,000 tonnes in the next ffinancial year. The industry body has sought permission for duty-free import of 100,000 tonnes to bridge this gap. It has also asked for allowing NR import under the Asean free trade agreement on reduced customs duty, in line with the concessional tariff on finished products. This is a pre-condition for providing a level-playing field for local rubber-based units.
There are more than 6,000 units in India, most of which are facing a crisis situation due to increase in raw material cost and import of cheap products from countries such as China.
The surge in cheap imported rubber products from China and other countries is an area of concern for the Indian rubber industry. With over 35,000 rubber products, it is difficult to prove the dumping charges and most of the manufacturers being small, they do not have the resources to initiate anti-dumping proceedings in accordance with the law.
On the other hand, levy of anti-dumping duties on carbon black and rubber chemicals, major raw materials for the industry, has made Indian rubber products expensive, compared to imported finished products.
AIRIA said the import of even raw materials is subjected to high rate of customs duty, making it difficult for the industry to survive and to compete against import of finished products. Therefore, AIRIA has asked for waiver of customs duty on raw materials not manufactured domestically such as butyl rubber and other hi-tech synthetic rubbers.
The industry body has also asked for reduction of customs duty on raw materials where domestic production lags consumption, like raw materials such as poly buetadine rubber, nylon tyre cord fabric and steel tyre cord, among others.
Import duty on latex continues to be a staggering 70 per cent and has been only recently capped at Rs 49 per kg. However, latex being a wet form of NR, the duties should be comparable to natural rubber.
The high customs duty structure on raw materials has gravely affected the industry and in many cases, it has led to lower capacity utilisation or even closure of units manufacturing rubber products.
According to available reports, as many as 294 units manufacturing rubber products have shut shops over the past five years. Moreover, the number of rubber product manufacturers who have shut down production is the highest in the category that consume lower quantity of rubber (less than 100 tonnes).