The Hindu : Business : Merchants seek long-term export policy on rubber

Online edition of India's National Newspaper
Tuesday, Sep 27, 2005

Business

Business

Merchants seek long-term export policy on rubber

Special Correspondent

`Speculation has become the order of the day with the entry of new players in marketing'

KOCHI: The Cochin Rubber Merchants' Association has demanded that the Government evolve a long-term export policy on rubber in consultation with all stakeholders.

Addressing the annual general meeting of the Association here on Monday, the outgoing president N. Radhakrishnan said that with the entry of many new players in the rubber marketing field, speculation has become the order of the day. "Dealers have become mere spectators as spot selling is being influenced by TOCOM Futures, Indian Futures and other speculative players in the market,'' he said.

While natural rubber imports are steadily increasing, exports are declining. The country imported 43,154 tonnes and exported 75,906 tonnes during 2003-04. But the exports during 2004-05 were only 45,855 tonnes when the imports touched 66,198 tonnes. In the current financial year, up to the third week of September, when 35,823 tonnes was imported, only 10,368 tonnes was exported.

He termed it a paradox that in spite of international prices remaining high by about Rs.15 a kg, the exports of sheet rubber are not picking up. In 2003-04 when the highest export was recorded, the average international price was Rs.52.78 a kg against the average Indian price of Rs.50.40 a kg. Subsidy for export was available at that time. However, in 2004-05 the subsidy was cut by 50 per cent and was withdrawn completely by the last quarter. This policy change has affected export of sheet rubber and exports fell by 30,000 tonnes compared to the previous year. The abrupt withdrawal of subsidies led the Indian exporters to a situation of losing considerable overseas business, he said.

To make matters worse for the exporter, the Kerala Government imposed four per cent VAT (value-added tax) on the rubber purchased for exports and laid down cumbersome procedures, thereby causing undue delay in getting reimbursement of the input tax to the exporter.

Though the price difference between the international market and the domestic market is quite high at present, foreign buyers are offering very little margin for Indian exporter, considering the low prices here. The cumulative effect of all these is that the growers are getting very low prices compared to the international market.

In the past decade, Indian prices remained high for many years and were marginally lower for a few years, he noted.

The reason for the prices not picking up to international level can be attributed to the shrewd policies of large industrial units, he said.

The Union Government put a spoke in the export sector by reducing and subsequently withdrawing the subsidies in 2004-05.

This has dampened the enthusiasm of Indian exporters and the international buyers and India earned the status of an unsteady supplier, he alleged.

Due to lesser exports, stock went up from 77,293 tonnes in 2003-04 to 1,06,000 tonnes in 2004-05.

Massive duty free imports of 35,823 tonnes have been effected so far in this financial year.

All these factors adversely affected the indigenous prices vis-a-vis international rates. Since the Indian prices are remaining low, international buyers are keen on placing orders at low prices.

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