Tyre-makers seek ban on rubber futures

Press Trust of India, March 29, 2010 (New Delhi)

Hit by the steep rise in natural rubber prices, the Automotive Tyre Manufacturers Association has urged Prime Minister Manmohan Singh to ban futures trading of the commodity and allow duty-free import of at least 2,00,000 tonne of the raw material.

The industry body in a letter to the Prime Minister, also urged either reduction in import duty on natural rubber to 7.5 per cent from existing 20 per cent or doubling of customs duty on imported tyre to 20 per cent to help domestic manufacturers.

"Rubber growers are hoarding and trading more and more in speculation, and thereby increasing prices. There is also a big demand-supply gap," ATMA chairman Neeraj Kanwar said.

In his letter to Singh on March 26, Kanwar urged the PM to ban futures trading till "volatility in natural rubber prices is contained and availability situation improves". He said domestic tyre firms are having a tough time and their margins are under pressure due to rise in rubber prices.

Prices have surged by over 60 per cent in the last seven months and hovering around Rs 155 a kg at present, which was more than double the average price in March, 2009. Market reports hint that the prices may rise further to Rs 175-180 a kg in the near future.

"Along with the rising rubber prices, availability is also a matter of serious concern, and so tyre manufacturers should be allowed duty-free import of at least 2,00,000 tonne on a priority basis," he said.

In his letter, Kanwar said, "price increase of Re 1 translates into an additional financial burden of Rs 60 crore for tyre industry."

Stating that tyre manufacturers will have to pass on the additional burden to consumers in coming days, he said, "the industry would want to increase tyre prices by 20-25 per cent immediately," Kanwar said, and recalled that there was a 5 per cent hike in January, followed by 2 per cent in February.

"Another round of hike of 2 per cent will happen in April," Kanwar informed.

With cheap imports from China hurting domestic firms, the association wants to see import duty on tyres increased to 20 per cent from the present 10 per cent.

"China has already taken immediate and effective steps by abolishing customs duty on compound rubber imports and reduction in duty on natural rubber imports, thereby helping its tyre and rubber goods manufacturing industry maintain competitiveness," the letter said.

Meanwhile, the demand for tyres from the vehicle makers are gradually increasing as the domestic market has rebounded with record sales. Kanwar said under the prevailing circumstances, the tyre-makers would find it difficult to meet the demand of the booming auto industry.

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