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India’s trade agreements with Asian countries have led to ballooning of trade deficit with these countries in non-tyre rubber products.
Trade deficit with Asean, Korea and Japan has gone up 165 per cent between 2009 and 2011, according to a study of the Ministry of Commerce data.
COMMERCE DATA
The study was conducted by Tata Strategic Management Group on behalf of the All-India Rubber Industries Association (AIRIA).
India had signed three major trade agreements with these partner-countries as a result of which the trade deficit in non-tyre rubber products rose from Rs 651 crore to Rs 1,725 crore.
They include free trade and comprehensive economic partnership agreements.
“Trade agreements have been a losing proposition for India as far as non-tyre rubber products are concerned,” said Niraj Thakkar, President, AIRIA.
NEED FOR RELOOK
Trade deficit in segments such as rubber products where India is self-sufficient in meeting the demand needs to be contained, he added.
“The new study supports our case for a relook at the trade agreements as the non-tyre rubber industry has been adversely affected”, Thakkar added.
Small and medium rubber units have been at the receiving end of a barrage of cheap import of finished rubber goods leading to high trade deficit.
Rubber industry is dominated by around 6,000 micro, small and medium-sized manufacturing units in different clusters across the country.
The Government must either include non-tyre rubber goods in the Negative List or provide trade protection in terms of a safeguard duty.
LEVEL PLAY
Safeguard duty on finished rubber products will provide a level-playing field to the domestic manufacturers, particularly small and medium ones.
Stiff import duties on raw materials have eroded the competitiveness of the industry, Thakkar said.
The association recalled that natural rubber, the key raw material for rubber industry, is in the Negative List in many such trade agreements.
Capexil data shows that the import duty on raw materials is highest in India when compared to neighbouring rubber product manufacturing countries. India is deficit in both natural rubber and synthetic rubbers.
INVERTED DUTY
On the other hand, the import duty on finished rubber goods is lowest in India when compared to other rubber consuming nations facilitating import of goods to India.
As a result, overall import of rubber products in India has gone up 100 per cent from Rs 3810 crore to Rs 7608 crore in three years from 2009-10 to 2012-13.
The finished products can be easily imported as the import duty on rubber products is between 0- to 10 per cent while the duty on raw materials is between five- to 70 per cent.
“Not only is import duty on raw materials higher, but it is levied also on raw materials which are not produced in the country.
“If the idea is domestic value addition, this anomaly of inverted duty needs to be corrected”, added Thakkar.
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