The Hindu Business Line : Reduce duty on natural rubber: ATMA

Mumbai, Nov 10 The Automotive Tyre Manufacturers Association (ATMA) has urged the government to reduce the customs duty on natural rubber – the principal raw material of tyre industry – from 20 per cent to 7.5 per cent, lower than the duty on finished product – tyre. The customs duty on tyre is 10 per cent.

In fact, tyres can be imported at lower rates under various Regional Trade Agreements. For instance, under the Asia Pacific Trade Agreement, tyres can be imported from China and South Korea at a customs duty rate of 8.6 per cent.

China and South Korea have recently sought further reduction in existing preferential rate of tariff as the regional trade agreement is coming up for a review shortly, ATMA said in its pre-Budget memorandum.

IMPORTS

Of the total tyre imports of 13.27 lakh in the 2008 fiscal, China accounted for 91 per cent at 11.91 lakh. Between April and September, China’s imports were at 12.42 lakh against the total imports of 15.30 lakh, about 82 per cent.

Large-scale import of cheaper tyres has been facilitated by a low ‘effective’ import tariff since a significant percentage of total imports are at a preferential rate of customs duty under various regional trade agreements, it said.

Dr R.P. Singhania, Chairman, ATMA, said tyre companies have earmarked a capital expenditure of Rs 12,000 crore in various greenfield and expansion projects.

“There is a need to have a direct and indirect tax structure which corrects existing distortions, removes anomalies and encourages investments & expansion,” he added.

The association has also demanded waiver of customs duty on raw materials such as styrene butadiene rubber (SBR), butyl rubber and polyester tyre cord which are not manufactured in India. Similarly, the association has asked for reduction in duty on raw materials where domestic production is in short supply.

Being a raw-material intensive product, the impact of input cost increase on tyre industry – particularly in the last 18-24 months – has been significant. Tyre is facing the challenges of demand slowdown coupled with significant increase in tyre imports.

Polyester Tyre Cord is used for the manufacture of Radial tyres. ATMA estimates that increase in radialisation level in the truck / bus tyre segment from current 5 per cent to 25 per cent, can result in annual and recurring fuel saving of over Rs 20,000 crore. “Waiver of customs duty on these raw-materials raw material will thus go a long way in accelerating the pace of radialisation in the country,” said Dr Singhania.

Anti-dumping duty has been imposed on SBR used by the tyre industry which is not even manufactured in India. ATMA has asked for rectification of this anomaly by immediate removal of anti-dumping duty on this particular grade of SBR.

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