The crisis pertaining to import duty hike on natural rubber (NR) may stretch further going forward as the real impact of the same would be reflected on the balance sheets of tyre makers only in the days to come. Domestic tyre manufacturers feel that the import duty hike would make them uncompetitive and hence would not lead to the anticipated result of pulling NR prices up.

India’s effective NR duty is the highest amongst all rubber producing and consuming countries. In a curious case, the NR compound imported into China attracts nil customs duty.

“The increase in import duty of NR from 20—25 per cent, will be a challenge going forward. This hike in duty is likely to result in further increase in import of cheaper tyres into the country, which can be imported at 10 per cent duty, and will hinder the growth of capacity investments by the domestic tyre industry, in addition to making them uncompetitive,” said Onkar S Kanwar, Chairman, Apollo Tyres.

The effective customs duty in major rubber producing countries are between 3-7 per cent. In Sri Lanka, the rate is 15 per cent. Except China all other consuming countries impose zero per cent duty on NR imports.

“While import duty on NR was 20 per cent, tyres as finished products could be imported at as low as 5 per cent duty under various trade agreements. Increasing the import duty on natural rubber by further 5 per cent will worsen the inverted duty scenario, increasing the threat of large scale dumping of tyres in India,” said Raghupati Singhania, Chairman, Automotive Tyre Manufacturers Association.

Increase in duties on NR will add to the cost of production in India making it tougher for MSMEs to compete both in domestic and international markets, hence exports will be impacted, said Mohinder Gupta, President, All India Rubber Industries Association.

“India has a domestic production and consumption gap level of 3.6 lakh tonne and there is no alternative but to import rubber. The decision to increase import duties will cause a severe blow to the value addition within the country. Thus Make-in-India initiative will be seriously compromised,” he added.

Source:- livemint.com