The Hindu Business Line : <I>Tyre makers to move Finance Ministry </I>

The sharp rise of natural rubber prices has left the tyre industry dazed. With the Commerce Ministry not willing to stop export of rubber, the tyre industry has turned to the Union Finance Ministry for help.

Prices of natural rubber have risen from Rs 92 a kg on May 7 (and Rs 77 a kg in January) to Rs 120 on May 31, before dropping to below Rs 110. Sources in the tyre industry attribute this to the "international cartel" and to the growing demand from China.

Taking advantage of firm international prices, rubber exports have exceeded 70,000 tonnes this year, against the Rubber Board's initial estimate of 30,000 tonnes. However, the tyre industry is unhappy with the domestic industry being starved of the key raw material. According to sources in the tyre industry, the Commerce Ministry has said that it would not be able to stop rubber exports.

Two-point argument

The industry is preparing to put a two-point argument before the Centre. First, the import duty on rubber is 20 per cent, while that on finished tyres is 12.5 per cent.

China is importing rubber from India and exporting tyres into India.

Can something be done about the duty rates? Second, a few years ago, when market prices of natural rubber were down to Rs 27 a kg, the rubber industry clamoured for, and got, a minimum price of Rs 32.

If there is a minimum price, the tyre industry argues that there should be a maximum price also.

"The scenario is scary," said a spokesman of MRF.

He said tyre companies were unable to raise their product prices frequently and any consequent unviability of the business could lead to shortage of tyres.