The crisis in the rubber industry and the resultant price decline has prompted the United Planters Association of South India (Upasi) to seek urgent government intervention. This has forced a majority of farmers to abandon rubber farming or shift to some other inter-cropping methods. Whilst the consuming industry’s need for lower cost raw material is understandable, Upasi is concerned about rubber imports in excess of the production/consumption gap. The planters’ body wants the government to play regulator to ensure the sustainability of the rubber sector in view of its impact on small growers in Kerala.
Upasi Vice-President N Dharmaraj spoke with BusinessLine on the crisis in the rubber sector and the need for revival.
The industry imported a record 3.88 lakh tonnes (lt) in the 11 months of this year ending February, which is almost 59 per cent of our production and more than 39 per cent of consumption. The last five years statistics indicate that growers are capable of producing the quantities required by the industry, if attractive prices prevail.
The Rubber Board data also authenticate that the decline in production was clearly due to drop in tapping and abandonment of rubber farming.
Upasi’s view on the quality aspect of domestic rubber vis-a-vis imports?
Almost 74 per cent of rubber imported during the year is in the form of block rubber, which is inferior to the benchmark grade of RSS-4 produced in the country. The procurement data by tyre companies for April-December 2014 period shows that RSS-4 accounted for almost 90 per cent of the rubber procured domestically and 10 per cent of the procurement comprised of RSS-5 or lower grades.
The driving force behind rising imports is lower price of block rubber compared to domestic RSS-4 and not quality issues. RSS-4 has been the backbone of the small growers in Kerala and the North-Eastern States. It is improper to persuade the Indian smallholder to shift to a product, which takes him lower down the value chain resulting in lower value realisation.
The Government, as a regulator, needs to put in place checks and balances with specific reference to grade issues for the sustainability of the rubber value chain.
What is Upasi’s view on the inverted duty structure?
It requires a serious relook, as it is a deterrent to the growth of the rubber goods industry. The various trade agreements with ASEAN countries is the reason for this and the growers support hike in the import duty of these finished products in line with duty of raw materials.
Several governments are providing various support measures to cope with the issue of lower prices while the Indian grower is at a disadvantage vis-a-vis the South-East Asian counterparts.
On imports under Advance Licence Scheme?
With the restriction on time window of imports in place, there is a need to examine issues such as SION (input/output ratios). There should also be a strong surveillance and administrative mechanism to monitor production, sale and export of goods imported under the advance licensing norms, so that the rubber imported under this scheme does not find its way into the domestic stream.
Such misuse invariably happens through the operation of non-consuming intermediaries and it should be in the interest of consumer and producers that checks and balances are in place.