The Hindu Business Line : Rubber may not dip below Rs 50 a kg

RUBBER growers have been smiling all the way to the bank and prices have been on the roll virtually from the start of 2004, from Rs 53 per kg for RSS 4 to Rs 65 a kg currently. This price ensures the growers a profit margin of Rs 10 per kg, reckoning the cost of production as Rs 45 per kg after discounting the escalation in input costs.

Rubber price abroad rules lower than the domestic price. The tyre sector imports mostly the block rubber TSR-20 owing to the price spurt in the domestic market. It is equal to RSS 3, but priced about Rs 6 per kg lower. This has pushed down demand for the indigenous block rubber ISNR 20. Import availability will put a break on the consumers' rush to the market and also tendency of the market to go up further.

Throughout 2003 and 2004, growers obtained good return from the crop and they have undertaken cultural operations in the plantations well in time. Consequently, crop generation within trees has improved. During 2003/04, rubber production rose by 9.6 per cent to 7,11,700 tonnes compared with 6,49,450 tonnes in the previous year. Consequently, the productivity had also gone up, from 1,592 kg in 2002/03 to 1,663 kg per hectare in 2003/04. This tempo of crop improvement will continue in 2004.

Export of rubber during 2004-05 may be much lower than the 76,000 tonnes in 2003-04. The Government has not announced any export assistance for rubber during 2004/05. Even if a moderate assistance is announced, it will not be paying what the grower is. Hence domestic availability will be better, though the present carryover stock of around 50,000 tonnes as estimated by the Rubber Board covers hardly one month's consumption requirement. When import can be made without restriction even with the moderate tariff, low stock level would not pose serious problems.

The bilateral trade agreement between India and Thailand is scheduled to come into effect from September. The agreement envisages 50 per cent tariff concession on goods imported and exported. This means that customs duty on rubber will be only 10 per cent instead of the normal 20 per cent if imported from Thailand after August. The price advantage coupled with the tariff advantage may help the domestic manufacturers to import rubber even if it is outside the advance licence backlog.

Will the domestic price go down significantly during the coming peak season from September to December? There can be a downfall in price as supply exceeds the demand, but chances of it going down below Rs 50 per kg is quite remote.