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Vipin V. Nair

Kochi , July 16

THE widening price difference between natural rubber prices in the domestic and international markets has reached such an extent that it looks cost-effective for consumers to import rubber even under the open general license (OGL), after paying the 20 per cent import duty.

"In the past import was an option to meet any shortfall of rubber in the domestic market. But at today's prices, imports do look economical," said an official with a leading tyre manufacturer, who did not wish to be identified.

The RSS (ribbed smoked sheet) 4 grade rubber closed at Rs 67.50 a kg at Kottayam market on Friday. Compared to this, the matching RSS-3 grade rubber in Bangkok closed at Rs 58.76 ($1.274).

If a consumer imports rubber at these rates, after paying the 20 per cent import duty and costs such as freight, clearing charges, assessable value and other charges, it works out to be Rs 75.20 per kg.

As against this, the landed cost of rubber purchased from the domestic market would be Rs 77.69 per kg (after adding up the 12.65 per cent local levies and a Rs 1.50 cess per kg paid to the Rubber Board).

The inland freight rate is estimated to be Rs 2 per kg in both the cases, and hence has not factored in the calculations.

Industry sources say that the expenses incurred by way of ocean freight and other related charges would be offset by the six months' credit at Libor available to importers, thereby making imports more attractive in the present condition.

The price difference of about Rs 6 per kg exists also in the case of block rubber in the international market, which makes up for most of the rubber imported. The SMR-20 grade block rubber closed at Rs 53.67 per kg at the Kuala Lumpur market, while the ISNR-20 was traded at Rs 59.50 at Kottayam.

In the futures market also, international prices rule much lower than that in India. For the RSS-3 grade, the August futures in SICOM was traded at $1.27 per kg on Thursday, down from $1.32 a week ago. In comparison to this, the August futures at National Multi-Commodity Exchange (NMCE) for RSS-4 grade was Rs 65.58 on Thursday, which is lower by about Rs 9 from the SICOM rate for the month.

Duty paid imports under the open general license was only 500 tonnes during last fiscal, while tyre makers imported 43,154 tonnes of rubber duty free for export production. Also, international rubber prices were higher than the domestic prices since September 2003.

Prices began to move up in the country at the beginning of the current fiscal onwards as early monsoons hit Kerala, which produces over 90 per cent of natural rubber in the country.

International prices are, however, coming down now due to increased production in Malaysia, Thailand and Vietnam. Sources say China's abstention from market is also a reason for global prices to decline.

More Stories on : Rubber | Exports & Imports

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