Indian rubber industry welcomes reduction in export window period to 6 months

Sai Nikesh D | The Dollar Business

Natural rubber imports by India have been much higher than the actual production-consumption gap in recent years

  Industry stakeholders have welcomed the government decision to reduce the time window of exports under the Rubber Advance License import scheme from 18 to 6 months. The United Planters' Association of Southern India (UPASI), an apex body of planters of tea, coffee, rubber, pepper and cardamom in the Southern States of India, said that the Ministry of Commerce’s announcement is a welcome step and will help stabilise sagging domestic rubber prices in the country.

] N. Dharmaraj, Vice-President, United Planters' Association of Southern India (UPASI)

Dharmaraj, Vice-President, UPASI, said in a statement, “UPASI and other Grower Federations have been requesting for a long time the need for structural changes in the import policy and are very appreciative of the Commerce Ministry's considered decision.” The Rubber Advance License import scheme allows duty-free import against exports. Earlier, the window of exports was 18 months extendable by 6 months of two durations. However, planters, hit badly by plunging prices due to a surge in imports, have long maintained that such a long duration was illogical when it is an established fact that the quality of natural rubber deteriorates after six months. “A long time window makes the monitoring mechanism cumbersome and is not in line with the spirit of the import for re-export cause. All this had added to higher than required import and retention in the domestic market,” said Dharmaraj. According to the Ministry of Commerce, while India’s natural rubber imports stood at around 3.6 lakh tonnes during FY2013-14, imports have surged to around 2.8 lakh tonnes in the first seven months of FY2014-15 (April to October), and racing towards a high of 5 lakh tonnes this fiscal year, the highest ever on record. According to UPASI, about 4 lakh tonnes of rubber was imported duty free into India between 2011 and 2013, which is around 52% of the total imported quantity of rubber into the country during these years.

] Source - Rubber Board, India

A surge in imports, much above the gap in production and consumption, show that importers had been taking an unfair advantage of the export window to hoard rubber amid low global prices, which has depressed domestic prices in India. At present, the average rubber price in India stands at around Rs.128 per kg compared to international prices of around Rs.106 per kg. Exporters have also welcomed the government decision. “Government’s latest move to reduce the export window period to six months may favour the domestic rubber prices and also can curtail soaring imports, a major rubber exporter told The Dollar Business. “This is also expected to impact favourably on prices of other variants of rubber other than natural rubber,” he added. UPASI and other stakeholders have urged the government to review outdated norms of SION (Standard Input Output Norm) and issues of inverted duty structure in Rubber goods industry to enable the robust growth of the Rubber goods manufacturing sector in the country.

This article was published on January 10, 2015.