For a while now the tyre industry has been caught between a rock and a hard place. The price of natural rubber - a key ingredient that accounts for about 42 per cent of the industry's raw material cost - has been consistently rising over the years. The average price of the most commonly used natural rubber - the RSS-4 variety - was Rs 50,400 per tonne in 2003-04 and has risen to around Rs 1,70,590 per tonne this fiscal. The run away natural rubber prices have been blamed on the widening demand-supply gap for the commodity within the country. Rubber Board estimates that there will be a 85,000 tonne gap between domestic demand and availability of natural rubber in 2010-11. Industry claims that its ability to import natural rubber to bridge this demand-supply gap has been affected by high rate of import duty (20 per cent) - thanks to the strong rubber lobby. They say it is unviable to import rubber at such duty levels.
At the same time, tyre manufacturers have not been able to pass on the higher input costs fully to the customers due to increasing imports. This has hurt the profit margins of most tyre manufacturers in the country. According to Automotive Tyre Manufacturers' Association (ATMA), tyre imports surged by 25 per cent to Rs 1,431.02 crores in 2009-10. China and South Korea account for over 70 per cent of the total tyre imports into the country. The industry blames the low import duty on tyres for the large scale imports. While the basic import duty is 10 per cent, tyres can be imported at, say 8.6 per cent, through trade deals such as the Asia Pacific Trade Agreement.
"We expect the Finance Ministry to put a stop to the unfair trade practice of dumping of tyres that have impacted the price-competitiveness of the Indian manufacturers. Imposition of anti-dumping duty on imports has now been long overdue," says Neeraj Kanwar, chairman, ATMA and managing director, Apollo Tyres.
Among other things, the industry has also sought changes to the duty structure where the end product (tyres) have a lower import duty (of 10 per cent) while the raw material has a customs duty of 20 per cent. "Correction in the anomaly of the inverted duty structure is long overdue," he adds. ATMA wants the government to either reduce the import duty on natural rubber from current 20 per cent to 7.5 per cent or increase the import duty of tyres from current 10 per cent to 20 per cent. "This will create a level playing field for the domestic industry," explains Kanwar.