The Hindu Business Line : Higher global supplies, not imports, behind rubber price slump: Study

THE argument that imports have contributed to the depression in domestic prices of natural rubber in the post WTO (World Trade Organisation) phase fails to hold much water given that the domestic price of the RSS-4 grade has tended to be higher than the internationally traded RSS-3.

The reason for the slump could instead be attributed to rise in global supply with new low-cost producing countries like Vietnam entering the global market, says a study conduced by the WTO Cell of Kerala Government. During the period under reference (1995 to 2004), the international price has hovered below the domestic price except on three occasions in 1994-95, 2002-03 and 2003-04.

During the period from April to September this year, the average international price has been marginally higher than the average domestic price.

From 1996 to 2001, there was a slump in both the domestic and international price. With the peak-tapping season on in Kerala from November through January, it is feared that prices will fall further thanks to the increase in output and relaxation on imports.

Removal of port restrictions is expected to lead to import of inferior quality rubber into the country. Allowances have also to be made for the quantum of imports coming into the country through the advance licence route.

Due to the early onset of monsoon this year, prices of natural rubber had hardened after supplies were hit. Price of RSS-4, the most traded grade, had increased from Rs 57.79 per kg in April to Rs 65.60 per kg in July — an increase of 13.5 percent, which was the highest recorded after a gap of six years.

During April-September this year, exports amounted to 12,524 tonnes while imports added up to 38,810 tonnes. Most of these imports have been the low priced block rubber (TSR-20 grade), which is used mostly by the tyre manufacturers.

This in turn led to compression of the domestic price, which has, however, tended to reverse the trend in October. This is being attributed to the increase in demand necessitated by the fact that synthetic rubber has been getting dearer on account of rising prices of crude oil that goes into the making of the commodity.

Rubber is not an export-oriented crop. Most of it is consumed internally. It is a `sensitive commodity' in the sense that it constitutes the raw material for the tyre and automobile manufacturing that consumes more than 50 per cent of the natural rubber produced in the country.

The other consumers are mostly the small manufacturers engaged in the manufacture of rubber products. Whenever prices start to look up, the Government has sought to put restraints on exports in order to stabilise prices.

When they fell below uneconomic levels, the Government has resorted to curb imports. The policy instruments used to achieve this objective are export subsidy and port restrictions on imports.

Kerala accounts for 84 per cent of the area under rubber and 92 per cent of the total production of natural rubber in India. Of the total area, 92 per cent is represented by smallholdings with an average area of around 0.5 hectares.

There are about 10 lakh growers and 3.5 lakh workers engaged in the rubber sector, of which more than 90 per cent belongs to Kerala.

The other notable producers of natural rubber are Tamil Nadu (3.2 per cent) and Karnataka (2 per cent).

More Stories on : Rubber | Kerala | Exports & Imports

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Kerala fishermen go on indefinite strike

Kerala: Minister sympathetic but `helpless'

Higher global supplies, not imports, behind rubber price slump: Study

Rubber upholds steady trend

`Hike rubber exports' subsidy'

Tummapala sugar factory to resume crushing

US food industry targeting India

New agencies to certify metallic scrap imports

AP House panel to probe charges against dairies

Vegoil imports slow down

Carotenoid norms on crude palm oil imports may go

Panel set up to review Price Stabilisation Fund