The Hindu Business Line : Rubber exports could run into rough weather

Future tense
Exports depend on China buying consignments.
Global market volatile, difficult time for exporters to trade.
Kerala Govt delays VAT reimbursement to exporters.

Chennai , Aug 16

Rubber exports could face problems if the difference between international and domestic prices continues to narrow down, according to industry officials.

"So far, rubber exports have been good. But if the differences narrow down, then exports could slow down," said Prof K.K. Abraham, President of the Pala Rubber Marketing Co-operative Society.

Shipments

During the current fiscal, 31,000 tonnes of rubber have been exported up to July, against 10,000 tonnes during the corresponding previous period. The Pala society itself shipped some 7,000 tonnes (6,500 tonnes).

"We will lose the price advantage as the gap narrows," Prof Abraham said.

On Wednesday, RSS-4 (ribbed smoked sheet) quoted at Rs 93 a kg, while the comparable RSS-3 grade in the global market quoted at Rs 100.22.

In the futures market, September contracts are quoted at Rs 90.40, while October contracts ruled at 87.60. Both the contracts slipped compared with Monday's rates.

Prospects

"Export prospects depend on how the international market behaves. Global markets are seen down next week and here too, prices could decline. We expect the momentum on exports to slow," Prof Abraham said.

A tyre industry official said that exports depend on China buying consignments from India, but Beijing is off the market currently. "No one knows when China will enter the market. The uncertainty will reflect on exports," the official said.

According to Prof Abraham, the bulk of the exports are made to China and pickup in shipments depends on China entering the market.

Rubber is exported to China mainly through two trading firms, one based in Singapore and the other in Malaysia.

"We have been able to send rubber to China through these two firms. Through them, we have connected to Greece and Ukraine too," Prof Abraham said. Besides, export consignments are also finding their way to Colombo.

Volatile market

The tyre industry official said that the global rubber market was volatile and exporters would find it difficult to trade in these circumstances.

"Growers and dealers would be unwilling to trade when prices are volatile. Exports have to be steady."

The other factor affecting exports is delay in reimbursement of the VAT paid by exporters to the Kerala Government.

Under the VAT system, four per cent tax has to be paid for buying rubber in Kerala.

"There is plenty of amount outstanding for reimbursement. Unless one has Rs 1-2 crore, you can't export," Prof Abraham said.

"Otherwise, we could have seen small exporters entering the scene."

According to trade sources, the Kerala Government is yet to reimburse exporters fully for the VAT they paid last fiscal. "So, not a single paisa has been reimbursed this fiscal."

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