The Hindu Business Line : Rubber user industry hopeful of duty cuts

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Chennai Jan. 27 The rubber user industry is hopeful of a duty cut on imported rubber because "nowhere in the world does the natural rubber industry (producers) enjoy this kind of protection," says Mr T.K. Mukherjee, Vice-President, All-India Rubber Industries Association (AIRIA).

Mr Mukherjee, also the Managing Director of Phoenix Yule Ltd which manufactures conveyor belts, told Business Line that at zero duty, landed cost of imported rubber was cheaper than indigenous rubber by about Rs 10 a kg.

He said while the "peak customs duty rate" was brought down from 20 per cent to 12.5 per cent last year, rubber was one of the exceptions.

Rubber growers continue to enjoy a 20 per cent protection. "Even at 12.5 per cent duty, imported rubber is slightly cheaper, but at 20 per cent duty, it is costlier," Mr Mukherjee, who was here to take part in a Rubber Expo, said.

"Look at it any way, there is no case to keep the duty rate so high," he said.

First, the customs duty on rubber is an exceptional rate, substantially higher than the national peak rate. Second, tyre manufacturers consume 65 per cent of the commodity.

"Rubber imports should, therefore, be seen as an extension of the development of the automobile industry. You make tyres cheaper, you make cars cheaper. It is well acknowledged that the automotive industry is a big employment generator.

"Third, it is not only the affluent people who can afford to buy cars who will benefit from cheap rubber. Millions who today walk barefoot will buy rubber (hawaii) chappals if the footwear can be produced cheaper," he said.

Duty structure

Fourth, the duty structure is anomalous, with the duty on raw material higher than that on finished products — a disincentive for economic value addition in the country.

Fifth, what seems to irk the rubber user industry is the plethora of non-tariff barriers. Today, anyone who imports over 50 tonnes of rubber needs a licence from the Rubber Board.

"They say that Licence Raj is gone, but it is there only for us," says Mr Mukherjee.

Further, all imported rubber will have to be quality-certified by the Board.

Furthermore, there is Rs 1.50 per kg cess on natural rubber purchases, meant to go towards the development of the rubber industry.

Whether or not any development is happening, the rubber industry has no quarrels with the cess. But why not at least make it VAT-able, asks Mr Mukherjee.

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