The Hindu Business Line : Rubber prices increase as fears over VAT effect recede

NATURAL rubber prices have recovered from the downward pressure created by the confusion over the implementation of VAT from the next fiscal, and moved up during the week.

The benchmark RSS (ribbed smoked sheet) 4 grade closed at Rs 51.75 a kg on Friday, compared to Rs 50.50 on February 18.

Industry sources say rubber prices began to move up on rumours that the State Government would change its decision on imposing a 12.65-per cent purchase tax on the closing stock with the dealers on March 31.

"There were strong rumours in the Pala market that the Government has agreed to bring down the purchase tax on March 31 to 4 per cent. This has prompted dealers to get active again," they said.

The State Government had announced that dealers have to pay the purchase tax on the last day of the fiscal on the stock in their position as VAT would replace sales tax from the next day.

Dealers who have been demanding a reversal of this decision, began to dispose their stock saying they would incur losses due to the difference in tax rates.

The Kerala State Co-Operative Rubber Marketing Federation (Rubber Mark), a leading rubber procuring and exporting agency, said if the purchase tax was imposed on the closing stock, the federation would incur a tax burden of about Rs 32 crore since it would be holding up to 5,000 tonnes of rubber by the end of the fiscal.

The statement issued by the Rubber Mark President and the MLA of the ruling United Democratic Front, Mr T.H. Musthaffa, assured dealers that the Government might change its decision, the sources said.

This optimism among the dealers is a major reason for the price to move up, they said. "The selling pressure which was there earlier has now eased," the sources said.

Also, international prices are showing an upward trend. RSS 3 grade closed at Rs 55.86 a kg at the Bangkok market. This trend is also being reflected in the domestic market.

Our Correspondent reports from Kottayam: Physical rubber prices improved on Friday. Weekend covering purchases were strong enough to enhance the quotes while the selling from dealers diminished visibly.

According to reports, the stockpile with dealers have come down considerably following continuous selling in preceding sessions and the market appeared to be stabilising around current levels with a strong technical support at Rs 50 a kg.

The NMCE rubber futures quoted almost steady even though the overseas reports were promising. The March contract was traded at Rs 52.50 (52.60), April contract at Rs 55.85 (55.95), May at Rs 57.85 (57.89) and June contract at Rs 58.82 (58.92) per kg for RSS 4.

The spot rubber prices a kg were: RSS-4: 51.75 (51.25); RSS-5: 50.50 (50); ungraded: 49.75 (49.50); ISNR 20: 50.75 (50) and latex 60%: 37.50 (38).

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