The decline in natural rubber production has been a key concern for the Automotive Tyre Manufacturers Association (ATMA), with the figure hitting a 20-year low to fall below six lakh tonnes in FY16. Since availability has appeared to be a major issue in the last couple of months, the industry has conveyed its intention to go for more imports if the situation does not improve.

At the same time, ATMA has extended support to government programmes aimed at increasing the domestic industry’s production, productivity and quality as it strongly believe that a vibrant domestic rubber plantation sector is crucial to have a thriving tyre industry.

In an e-mail interaction, KM Mammen, ATMA Chairman, pointed out that the industry has conveyed its anxiety on falling domestic production as well as quality in a series of meetings with the government and the Rubber Board, even though the channels for natural rubber imports are wide open. The industry is going through a very difficult time, with a significant decline in export of truck, bus and car tyres. Edited excerpts:

Despite production taking a hit, planters say that the tyre industry is apathetic to domestic rubber growers’ concerns and opting for cheaper imports. How do you view this?

It is a rather unfortunate perception. Throughout the last two years, domestic natural rubber prices have been ruling much higher than international prices and yet the entire production has been picked up by the industry with exports being almost nil. This amply underscores the tyre industry’s allegiance to the domestic natural rubber sector.

Tyre companies are charged with importing natural rubber, but imports are essential to bridge the widening gap between domestic production and its demand. In the last fiscal year, production was just about 55 per cent of domestic consumption. The tyre industry is, therefore, compelled to look at imports to run manufacturing facilities although domestic sourcing is always preferable if quality in adequate quantities is available.

The planters’ association (UPASI) has sought a curb on imports as they are far more than the domestic deficit. What is your response?

Rubber Board figures reveal a different story. In FY16, the production-consumption gap in natural rubber has been 4.2 lakh tonnes. But the imports in the same period have been to the tune of 4.5 lakh tonnes. Where are the indiscriminate imports as alleged by the planters’ associations?

In fact, imports need to be liberalised to increase the competitiveness of the domestic industry by extending duty free to the extent of the domestic deficit. However, the Centre has continued with stiff import duties of 25 per cent.

Besides, there have been other restrictive provisions like pre-import condition, reduction in the export obligation period and port restrictions. While there are stiff duties on import of rubber as a raw material, tyres can be imported at 6 per cent or even at nil rates of duty under various trade agreements. Tyre production in India is bearing the brunt of an inverted duty structure and the absence of a level playing field.

Why has the tyre industry’s natural rubber consumption slid when the sector is doing well?

No, the tyre industry is passing through difficult times. The production of commercial vehicle (CV) tyres, which account for more than 60 per cent of the industry turnover, contracted in FY16. Farm tyre production has also come down significantly. While the auto industry, especially the CV segment, is witnessing a revival, a contraction in tyre production is certainly a matter of concern.

Imported tyres are meeting significant demand while capacity utilisation in India, which was 90 per cent two years ago, has come down to 65-70 per cent. This does not augur well for manufacturing in India. The domestic availability crunch coupled with restrictions on natural rubber imports are also affecting tyre exports.

Is the tyre industry’s emphasis on quality of domestic natural rubber just hype?

The world has come to expect a lot from the automobile ecosystem such as better products, more fuel efficiency and safety, while being environment friendly. The tyre industry, being an integral part of the auto value chain, is no exception.

Keeping with the times, tyre technology has moved ahead in the last few years. Tyres need to meet regulatory and consumer-driven challenges from enabling higher fuel efficiency to meeting the most stringent safety standards.

The quality of materials that go into tyre manufacturing therefore need to be world class.

On quality, it is pertinent to mention that while the production profile continues to be dominated by sheet rubber in India, all major rubber producing countries have shifted to block rubber for various advantages. It offers lower power usage (per unit of output), improved handling systems at tyre plants and consistent quality.

As a result, over 90 per cent of the global trade in natural rubber is dominated and driven by block rubber. India needs to align with these practices

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