Natural rubber sector seeks govt support to stay afloat

Anticipating a depressed market in the post-Covid days, the natural rubber sector has sought supportive measures like credit line for working capital, a moratorium on existing loans, and safeguard duties to curb imports so as to protect the interest of domestic growers.

The absence of such remedial measures may spell trouble for the domestic rubber sector in the post-Coivid phase, especially in the wake of rising shipments of the commodity at lower cost from many producing countries. This may have an impact on the domestic rubber prices, sources in Association of Planters of Kerala said, adding lower crude price may push the crisis further.

The Covid-19 pandemic seems to have instilled fear among growers over the possibility of a price drop due to increased supply from other producing countries. If immediate protective measures are not taken, rubber cultivation may turn to be unsustainable and unviable. Any disruptions in the supply chain like the one happening at present make the domestic consuming industry to entirely depend on imports, which would be detrimental to national interest, the sources said.

Akshay Agarwal, Managing Director of Acumen Capital, pointed out that the extension of lockdown is negative for the natural rubber market, which is already hit by the recession in the auto sector due to the first phase of lockdown. “We expect natural rubber prices in the physical market to remain bearish in the short term”, he said, adding that rising inventories on the one side and vanishing demand from the tyre accessories market in the wake of the subdued auto sector continues to drag rubber prices.

Revival package needed

PC Cyriac, working president of Indian Farmers Movement (Infam), pointed out that the government should come up with a package for the revival of the sector. “What we need is a re-monetisation to infuse liquidity in the market,” he said. The sector is not expecting any immediate jump in tyre production because of lower demand in the auto sector. There will be fewer activities due to the lifting of restrictions in stages and this would lead to a muted demand in the industry, impacting both consumption and prices, he said.

According to George Valy, president, Kottayam Rubber Dealers Association, almost all the tyre manufacturing units have enough stock not only of rubber but also of other raw materials required for production. This would lead to a possible delay in starting domestic procurement even after the lockdown ends. The availability of finished products is also on the higher side and a restricted movement after the lockdown is likely to slow down the demand for tyres especially in the replacement market. Since there is no Rubber Board published prices now, growers are not eligible to get government subsidy for their trade transactions, he said.

However, he added that the current favourable weather with good summer showers in the growing regions would provide a good yield in the current season.

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