Expressing concern over the widening gap between the domestic production of natural rubber and its consumption, the tyre industry has sought duty relief on imports of the commodty.

In its pre-budget submission to the Ministry of Finance, the Automotive Tyre Manufacturers Association (ATMA) has asked for natural rubber imports on a duty-free basis under the Tariff Rate Quota (TRQ) Scheme to the extent of domestic deficit.

“A major challenge being faced by the Indian tyre industry is the shortfall in the domestic supply of natural rubber, leaving the industry to import it to meet its growing demand. Natural rubber demand–supply gap has widened from 7,220 tonnes in FY2008-09 to 5,69,940 tonnes in FY2018-19, a CAGR of 40 per cent in the last 10 years,” said Rajiv Budhraja, Secretary General, ATMA.

According to ATMA, low-import tariffs on tyres in India have encouraged a large volume of tyre imports despite adequate domestic capacity already in place and investments made in new capacity creation.

Customs duty on tyres

ATMA has urged the Government to increase the customs duty on tyres (finished products) from existing rate of 10-15 per cent to a higher rate of 25 per cent (equivalent to the duty on natural rubber, the principal raw material). This will help address the problem of persisting duty inversion in the industry. Under free trade agreements signed by India, tyres can be imported at concessional rates, but natural rubber is in the negative list in most of these agreements. According to ATMA, natural rubber should be allowed to be imported under ASEAN /Indo-Malaysia agreements in line with concessional duty on finished products. In the tyre industry, raw materials account for over 60 per cent of production cost. The domestic capacity/production is insufficient to meet demand and yet hefty import duty to the extent of 20 per cent can be imposed on some of these raw materials, it said.

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