Government cuts import duty on natural rubber to 7.5%

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Government cuts import duty on natural rubber to 7.5%
Government has cut import duty on natural rubber shipments of up to 40,000tonnes to
7.5% from 20% earlier till March 31, 2011, with a view to boost domestic supply and
check rising natural rubber prices. With the cut in the import duty to 7.5%, the government
has finally agreed to the long-standing demand of tyre manufactures to rationalise the
import duty disproportion between tyres and natural rubber. Under the earlier structure,
natural rubber attracted customs duty of 20% against 10% duty on the finished product
(tyres), leading to an inverted duty structure. Natural rubber imports beyond March 31,
2011, will attract a duty of 20% or `20/kg, whichever is lower.
Natural rubber prices have been on the rise for the past few months due to lower
production following the drought last year and increase in demand from tyre makers.
Moreover, erratic rainfall in central Kerala and the Malabar region has hampered tapping
activities, putting further pressure on prices.
We believe the government's efforts to cool down rising rubber prices by lowering import
duty may not yield the desired results as international prices of natural rubber are higher
compared to domestic rates. While the domestic price of RSS-4 of rubber is `207.5/kg in
Kottayam, it costs `222.3/kg in Bangkok, making the imports unviable. We expect rubber
prices to remain at high levels in the short term, impacting the profitability of tyre
manufacturers.