ATMA's 11 members account for over 90 per cent of tyre production in the country. Tyre industry consumes 65-70 per cent of the natural rubber produced in the country. The Association has asked for urgent measures to make natural rubber available to the industry by making imports easier. The gap between domestic production and consumption of natural rubber has been widening in the last few years.
“Domestic natural rubber production is projected to be 40 per cent short of domestic requirement during the current financial year. Such levels of the shortfall is a matter of grave concern for the tyre industry as the industry has lined up ambitious investments to support the economic and auto growth in the country. Needless to say, the import dependence of industry for natural rubber will further go up to meet the domestic requirement”, said Rajiv Budhraja, Director General ATMA.
The tyre industry has been bearing the brunt of heavily-taxed natural rubber imports to keep the factories running. While natural rubber import is imperative to meet the domestic demand, the policy environment is highly restrictive. Customs Duty (on natural rubber imports) is at 25 per cent, which is much higher than the rate of duty levied by any other natural rubber importing country. Moreover, natural rubber imports are permitted at only two designated ports (JNPT & Chennai). Such non-tariff barriers add to the landed cost of natural rubber and logistics time.
There are further roadblocks in accessing natural rubber. Tyre industry needs to adhere to pre-import condition for natural rubber import against (tyre) export obligation. Further export obligation period (for tyres) has been reduced from 18 months to only 6 months making it tough for the industry to access a raw material, which is in short supply domestically.
The basic customs duty on most tyre categories is 10 per cent. However, tyres can be imported under various Trade Agreements at much lesser rates of duty and under some agreements even at ‘nil’ rates of duty. Natural rubber has been kept in the negative list in most of the trade agreements with no benefits of duty concession accruing to the industry.
As an outcome, competitiveness of tyre industry for enhancing tyre exports from India (currently $1.5 billion, potential to double to $3 billion over the next 3-4 years) is adversely affected.
The industry has asked Ministry of Commerce & Industry for duty-free import of natural rubber equivalent to the projected domestic deficit as high import duty is hurting the price competitiveness of the industry.
“On priority, the industry has asked for import of NR on a tariff rate quota (TRQ) basis at ‘nil’ rate of duty to the extent of the gap between domestic production and consumption. The industry has also asked for the removal of Port Restrictions and other restrictive measures which make the field uneven for the domestic industry vis-à-vis international counterparts”, said Budhraja.