`Move will hit growers'

Our Bureau

Kochi, March 24

The Government's decision to allow foreign direct investment in natural rubber processing and warehousing will lead to disruption of existing trader network and lower prices for the growers, the Indian Rubber Dealers Federation has said.

"If implemented, this will immensely harm the existing harmony in the rubber sector," said Mr George Valy, President of the Federation, at a press conference here today.

He said once foreign players are allowed to set up rubber processing units, domestic sheet rubber production would dwindle as farmers would then be induced to selling latex for processing technically specified rubber (TSR).

Rubber growers now get 98 per cent of the day's price for their sheets, but in the case of latex, the `farm gate' price would be significantly lower.

"When the market opens up for field latex, growers will be inclined to sell directly to processors and refrain from making sheet rubber. This will pave the way for gradual elimination of sheet rubber from the market," Mr Valy said.

Once the practice of making sheet rubber is gone, farmers will no longer have the ability to hold on to their produce and sell it when prices improve. Unlike field latex, rubber sheets can be stored for many months. Sheet rubber forms 71 per cent of India's total natural rubber output, while TSR accounts for only 11 per cent.

(This article was published in the Business Line print edition dated March 25, 2006)
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