Economy

Inverted duty structure hits domestic rubber goods industry

V Sajeev Kumar Kochi | Updated on November 23, 2020

Levies high import duty on raw materials and low import duty on finished products

The rubber goods industry, especially the non-tyre segment, is worried over the irrational duty structure that has put several domestic manufacturing units in a precarious position.

Industry sources pointed out that the high import duty on raw materials and low import duty on finished products is hurting the domestic manufacturing industry, making it non-competitive in the international market.

For instance, sources said that natural latex liquid attracts 70 per cent import duty, while latex products invite only five per cent and gloves zero per cent under the FTA with ASEAN countries. Thus, it has led to rising imports, hitting the domestic industry badly.

The non-tyre segment generally consist of latex products as well as other rubber products such as ancillary parts, foot wear, hoses, rubberised rollers, and moulded goods. There are close to 5,000 units that manufacture rubber products in the country, and many of them are on the verge of closure.

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The reduction in export benefits for the industry by curtailing the export obligation period for advance licence to six months against 18 months has also made Indian rubber products non-competitive in the global market, the sources said.

Vinod Simon, past president of All-India Rubber Industries Association (AIRIA), told BusinessLine that India levies among the highest duties for the import of raw materials and one of the lowest duties for import of finished rubber goods.

Of the total import of finished goods, he said as much as 80-90 per cent is avoidable as domestic manufacturing units have capabilities to meet the demand. But low import duties on rubber products under FTA’s have led to indiscriminate imports.

The finished products can be easily imported as the duty on rubber products is between 0 to 10 per cent, while the duty on raw materials for rubber industry is between 5 to 70 per cent. “Unfortunately, the inverted duty structure has forced many rubber product manufacturers to turn traders of rubber goods and stop manufacturing, leading to shutting of plants and job losses,” he said.

Quoting a survey by Rubber Skill Development Council, Simon said 35 per cent of small-scale manufacturers have closed their shops because their products have become uncompetitive.

G Krishna Kumar, president of the Latex Rubber Thread Manufacturers Association (LARMA), said that currently 40 per cent of India’s rubber thread market is being met through imports. This is equivalent to more than 5000 tonnes of centrifuged latex of consumption removed from the domestic latex sources. The industry has been requesting for an upward revision of import duty on rubber products and raitonalsing the import duty on rubber. Unless it is done, more and more units will face closure, he added.

Published on November 23, 2020

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