Budget 2023. Import duty hike on compounded rubber: ‘First step to renegotiate FTA’

Rubber Board has said the increase in the duty on import of compounded rubber is the first step in renegotiating the Free Trade Agreement (FTA) with the ASEAN region. 

KN Raghavan, Executive Director, Rubber Board, was responding to the United Planters Association of Southern India’s allegation that the duty will apply only to most favoured nations and not on shipments from the ASEAN regions. KN Raghavan, Executive Director, Rubber Board, said there is no preferential rate of duty on natural rubber (NR) in FTA with ASEAN, from where most of India’s NR imports takes place. 

However, a preferential rate of duty is provided to compound rubber imported from ASEAN nations through the FTA. Natural rubber has been kept outside the concessions provided to other nations through most preferential trade agreements. The fact that compound rubber can continue to be imported at a preferential rate under prevailing FTA was pointed out by Rubber Board during stakeholders meetings. 

But the request for increasing tariff rate was pressed upon as this is a necessary first step to prevent circumvention of duty, he said. “We cannot change the preferential rates of import duty through the Budget. It can be done only through renegotiation of the FTA which is a bilateral matter. 

Further, even for renegotiation of the FTA, we need to first increase our tariff rates, which has been done now,” Raghavan said. 

Presently, around 55 per cent of India’s compound rubber imports are from ASEAN countries, while the remaining 45 per cent are from the US, Germany, South Korea, Italy, France, the UK, etc.

Import duty on compound rubber was 10 per cent till February 01, 2023. This increase (from 57,000 tonnes in 2017-18 to 114,000 tonnes in 2021-22) had given rise to the suspicion that unscrupulous persons are trying to circumvent the higher import duty of NR by importing NR under the guise of compound rubber after doing nominal mixing. The import duty on compound rubber has been increased to make it on par with NR in the Budget, he said.

Compound rubber is made through a simple mixing process which can be done using mixing units. Many mixing units in Kerala are lying idle as most manufacturers prefer to import compound rubber. This increase in duty will help to revive domestic mixing units and that will increase demand for domestic rubber also, he added.

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