Govt hikes import duty on natural rubber

When the Budget 2015 was announced, the Automotive Tyre Manufacturers Association (ATMA) kept their fingers crossed, hoping for a reduction in duty on the import of natural rubber from 20%. However, that never happened. Instead, two months later, the government has decided to increase the duty from 20% to 25% on the import of natural rubber.

Industry experts believe that this hike in duty will have an adverse effect on the Indian tyre manufacturers (who might struggle to keep their prices competitive) as well as future investments in the country. This move is believed to have provided an opportunity for neighboring nations to dump imported finished goods in India. As of today, basic customs duty on finished goods of tyres is 10%. However, under various trade agreements with some Asian countries, this duty ranges from 0-8.6%.

India's natural rubber production is at a 12-year low in 2014-15, with production reducing by 15% in comparison to 2013-14. However, demand has risen by 4% in comparison to the previous year, which resulted in higher rubber imports of 4.15 lakh tonnes in 2014-15 i.e. 15% more than the previous fiscal year.

The real beneficiaries from this move will be the local farmers who were being underpaid (up to 20%) by the tyre manufacturers for natural rubber. This led several farmers to restrict tapping and look out for other sources of livelihood, while tyre manufacturers enjoyed the benefits of importing the natural rubber.

Source: TyreTimes and The Economic Times