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Varda Bhat

Mumbai, Dec. 20 Layoffs are now extending to the rubber goods industry too. Companies have slashed nearly 3,000 jobs to counter demand contraction coupled with a drastic drop in the price of raw materials, an industry association official told Business Line.

Input costs were very high a few months ago. Now, they are down, but the manufacturers are left with high cost inventories and the slow down in demand added to their woes.

“Raw materials were bought at a higher price and now that it has fallen drastically, it has lead to an increase in inventory and debts,” said Mr T. Munshi, Secretary General of All India Rubber Industries Association (AIRIA).

Rubber prices have halved to Rs 6488.60 a quintal on Friday from Rs 13002.80 a quintal barely six months ago. “As a result, selling at the current price would just mean accumulation of losses at a time when we are already running low on operational cash,” he added.

Things have only worsened with the credit squeeze on automakers which, in turn, has hit rubber consumption badly. According to Mr Omkar Kanwar, President of Indian Rubber Manufacturers Research Association and Chairman and Managing Director of Apollo Tyres, the auto industry accounts for about 50 per cent consumption of natural rubber.

“With cheap imports from China dumped here in addition to the difficult economic condition, the industry is cutting production by 15-25 per cent,” he said.

Leading tyre makers such as Ceat, MRF and Birla Tyres have already cut production and shut their plants for a few days to save their shrinking bottomline.

However, Mr S.P. Singh, Convenor of All India Tyre Dealers Federation, said that overseas manufacturers have passed the benefit to customers after the unprecedented drop in prices of raw materials.

“By using efficient and modern radial technology, the prices are lower and imported radials are not only cheap in price but also in performance compared to domestic brands.”

More Stories on : Human Resources | Rubber

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