The Hindu Business Line : Rubber imports top 65,000 t on jump in tyre production

NATURAL rubber imports by tyre manufacturers during 2004-05 exceeded earlier projections by about 10 per cent to over 65,000 tonnes, industry sources have said.

Tyre makers had earlier projected imports of 60,000 tonnes for the year, up by 39 per cent over the previous fiscal. The sources attribute the increase in rubber imports to a nine per cent jump in tyre production and a 12 per cent growth in tyre exports during the year. Tyre companies can import rubber duty free under the Advanced Licence Scheme.

Under this scheme, a tyre manufacturer can import 44 kg of natural rubber against exports of 100 kg of tyres.

According to the Rubber Board, rubber imports during April-December 2004 stood at 48,936 tonnes as compared with 33,123 tonnes in the corresponding period a year ago.

Imports more than doubled in the September-December quarter to 10,127 tonnes as against 4,480 tonnes a year ago.

VAT cap: With the introduction of Value Added Tax (VAT) from April 1 in Kerala, which produces over 90 per cent of India's natural rubber, imports will become less attractive for tyre makers.

"If the international price is higher than the domestic price by more than Rs 2.50 a kg , it is not viable to import even under the advanced license scheme," tyre industry sources said.

This is because the four per cent VAT replaces the existing 12.65 per cent purchase tax, thereby significantly bringing down the landed cost of rubber in the domestic market. The landed cost includes purchase tax, a cess of Rs 1.50 a kg, inland freight and interest costs.

For instance, duty free import of one kg of rubber at Rs 56.83 in the international market on March 1 will eventually cost a tyre maker Rs 63.49 (including ocean freight, clearing charge and other expenses), while under VAT regime, one kg at Rs 53 in the domestic market will have a landed cost of only Rs 61.27.

Tyre industry sources say that in spite of a projected 15 per cent growth in tyre exports for 2005-06, which makes the tyre makers eligible for more duty-free imports, actual imports could only be around 40,000 tonnes for the year.

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