The working group drafting the National Rubber Policy met recently to look into issues relating to decline in output and consumption of natural rubber (NR). The policy will have a bearing on the R45,000-crore domestic tyre industry. Raghupati Singhania, vice-chairman, Automotive Tyre Manufacturers? Association, and chairman and MD of JK Tyre & Industries, spoke to FE?s Sandip Das on issues concerning the sector.
What are your expectations from the forthcoming National Rubber Policy?
NR represents one of the most integrated, rich and diverse value chains in India. Besides a million rubber growers, lakhs of people are employed in trading of this commodity, besides scores of small, medium and large processing and tyre manufacturing units. Unfortunately, in the absence of a policy framework, stakeholders have fou-nd themselves pitted against one another. The government would do well to address these issues in a holistic manner in the policy so that the stakeholders work together for harmonious progress.
The tyre industry is often blamed for rising prices ev-en when NR prices are low.
A certain section raises this debate every time NR prices drop. Unfortunately, the same group lends a deaf ear to the industry?s concerns when prices of inputs touch new highs. At present, NR prices have come off their peak levels. But the last few years had seen NR prices spiralling up. Prices in fact doubled in a short time before reaching a peak in 2011-12. In view of tough competition, the industry couldn?t pass on the entire increase in input prices to consumers, affecting its profitability. For several quarters, tyre firms have seen their bottomlines under pressure; some have slipped into losses as well. It should be appreciated that the industry needs to be profitable to invest funds for expansion and R&D. Now that prices of NR have come down, prices of other inputs, particularly crude based ones, have gone up. In view of auto sector slowdown, tyre volumes are also not growing at the pace at which they were growing earlier, and in certain periods the tyre industry even had to cut production.
Farmers have complained of rising NR imports (especially from Malaysia and Thailand thanks to India’s FTAs that allow concessional duties) hitting domestic prices. Your views.
Imports of NR are inevitable since India is deficient in production. The gulf between domestic output and consumption is widening. Moreover, rubber imports are required for purposes of quality, especially for manufacturing of new-generation truck and bus radial tyres, and that high grade NR is not available in India. Instead of curbing imports, supply side concerns need to be addressed. Domestic NR plantations need to be strengthened. Curbing NR supply to the industry by restricting imports will be a retrograde step. An analysis of the domestic NR price trend will show the prices have increased by compounded annual growth rate of 6% over six years, which is higher than other agri-commodities. Domestic NR prices are still ruling 20% higher than international prices.
How do you expect the domestic tyre industry to evo-lve in the next few years?
Emphasis on road development fulfils an urgent need to spur infra development. However, the sector hopes that with the government?s thrust on enhancing manufacturing competitiveness, the inverted duty structure in the tyre sector will be corrected.
