The All India Rubber Industries Association (AIRIA) is formulating a productivity-linked incentive scheme (PLI) for the Government’s consideration to promote rubber goods production in the country, AIRIA President Ramesh Kejriwal has said.

The association is consulting other stakeholders too and the policy will be ready in the next 3-6 months, Kejriwal told businessline in an online interaction. 

Global buyers eye India

“The formulation of the scheme is in its early stage,” he said.

 The PLI scheme is expected to give an impetus to the rubber goods industry in India, which is now emerging as an alternative to China.

“A lot of buyers abroad are looking at the Indian market and have shifted to our products. There could be about 20-25 per cent shift from China to India,” Kejriwal said. 

The Centre should come up with a benchmark price for natural rubber to encourage farmers. “If prices are not remunerative, farmers will not grow the crop in the coming years and switch over to other crops,” he said. 

This is important since natural rubber production, which increased to a nine-year high last fiscal, has begun to increase over the last couple of years after decreasing continuously.

Demand-supply gap   

Currently, natural rubber production in the country is 7.75 lakh tonnes (lt) and demand at 12.5 lt. India has to import to meet the demand, which increased to a three-year high last fiscal, to make up the gap.

“There is still a 40 per cent gap between demand and supply,” the AIRIA president said, adding that the Centre should encourage higher area under natural rubber by providing incentives to growers. 

On natural rubber prices, the AIRIA president said they are likely to rule low over the next 2-3 months. “They will recover after that, at least between 10 per cent and 20 per cent,” he said.

Imports at last fiscal’s level

There was a free fall in natural rubber prices in 2022 due to various reasons such as the Ukraine war and the Covid regulations in China. Prices of latex declined to ₹120 a kg from ₹150. “Sheet rubber prices declined to  ₹150 from  ₹180,” Kejriwal said. 

On Thursday, RSS-4 (ribbed smoked sheet) was quoted at ₹143,50 a kg at Kottayam, the primary market. 

Once monsoon sets in, prices are likely to recover and could gain further due to demand-supply imbalance,” he said, adding that imports are likely to be around last fiscal’s level 5.46 lt.

Until last year, tyre companies were importing compounded rubber instead of natural rubber as Customs duty on the latter was 25 per cent, while compounded rubber attracted 10 per cent import duty.

Rising demand 

Compounded rubber comprises 90 per cent natural rubber and 10 per cent of carbon black and other ingredients. “The Finance Minister has plugged this during the 2023-24 Budget. Growers now think they have got a level-playing field. But it has not resulted in any rise in natural rubber prices,” the AIRIA President said. 

Low prices for natural rubber affect small and medium scale farmers as their livelihood depends on the industrial commodity.  Stating that demand for natural rubber is increasing, he said it would rise further. At the same time, the consumption of synthetic rubber was also increasing. 

“But it cannot replace natural rubber because of its high prices. And there are different areas where only natural rubber can be used. The same way synthetic rubber also has specific uses,” he said. 

Supplies from Ivory Coast 

On the industry importing natural rubber from Ivory Coast, Kejriwal said a lot of producers have begun buying the commodity from the African nation. “Its prices are more competitive than Malaysia and Thailand,” he said. 

The AIRIA president said rubber industries have begun to increase production after going through a tough period during the Covid pandemic. 

“Production is increasing slowly, including in the automobile sector. A lot of rubber products are in demand. The automobile sector is giving good orders. Overall, the demand is good,” the AIRIA President said. 

Exports of rubber goods will be 10-15 per cent higher this fiscal compared to the previous one, he said.      

Kejriwal said AIRIA will be conducting India Rubber Export in 2024, where the association expects buyers from abroad to come and hold discussions with the industry. 

“We can offer a lot of medical equipment and other such materials. Apart from that, the toy industry offers us a big opportunity,” he said .