The Hindu Business Line : For rubber growers, it will be unforgettable

For, the year would go down in the history of Indian rubber trade as one of the best for the grower in terms of price, though consuming industries such as tyre makers would love to forget it.

The benchmark ribbed, smoked sheet (RSS) 4 grade touched the record Rs 70 per kg thrice during the year. Then, in the last fortnight of the year, it smashed the record and kept soaring to new highs, touching Rs 72 this week.

The RSS-4 grade quoted in the region of Rs 50-60 per kg during January-April. In May, the prices crossed Rs 60 and only rarely did they come down to below that mark thereafter.

The reasons that pushed up rubber prices in the domestic market vary from surging international prices, heavy monsoon that affected tapping and growing demand for the commodity from tyre companies, especially in China.

Industry experts say that production has generally been lower than expected so far, while consumption kept up with projections.

During the April-September period, production grew by a meagre two per cent.

This kept stocks precariously low in many months, at levels sufficient for just about a month's consumption, adding to panic in the market and subsequent price flare up.

Contrary to expectations, rubber exports bounced back towards the last quarter of 2005, helped by widening disparity between Indian and international prices. Consequently,imports thinned down .

VAT comes into force: The year also saw rubber trading moving to the Value Added Tax (VAT) regime with Kerala switching to VAT from April 1.

Under VAT, natural rubber has only four per cent purchase tax instead of the previous 12.65 per cent.

This drastic cut in purchase tax somewhat cushioned the impact of soaring prices on consuming industries.

VAT has also addressed to a great extent the problem of inter-State smuggling of rubber. VAT also had its share of controversies as rubber exporters allege that they are yet to get the tax refunds amounting to around Rs 10 crore they are eligible under the VAT rules.

In the run-up to the VAT regime, prices fell sharply because of the State Government's decision to impose a 12.65 per cent tax on the closing stock as on March 31.

Traders frantically disposed of their stock, while consumers put off their procurement to April to benefit from the lower tax regime.

But the Government later dropped the plan to levy the 12.65-per cent tax and announced that only a four per cent tax would be imposed on the closing stocks.