The much-publicised scheme to help rubber growers, which the state government brokered with leading tyre makers in December, to ensure that the latter lifts natural rubber at 20 % above the international market price, has turned out to be a big flop. The scheme, which comes to an end on March 31 (next Tuesday), could only lift about 35,000 tonne so far. This is against the average monthly consumption of around 60,000-70,000 tonne (which includes all grades of rubber) by the industry.
Officials blamed tyre manufacturers for their failure to lift the commodity even while they continued their imports.
A main reason cited by officials was the sudden drop in prices of ‘block rubber’ to `83-86/kg from `92/kg and rise in RSS-4 grade to `140/kg levels at one point in international markets forcing tyre makers to stop buying RSS-4 grade while increasing imports of block rubber. The scheme was applicable only to RSS-4 grade rubber, which constitutes 70 % of domestic production. “Tyre and tyre products are made using a mix of ‘block rubber’ and sheet rubber. Obviously, when block rubber prices plunged to `83/kg, tyre manufacturers went for the import of block rubber,” said an official.
Industry officials said both growers and small scale traders did not benefit from the scheme while big traders may have benefited.
A senior Rubber Board official, however, said it would not be entirely true to call the entire scheme as a failure. “When the government inked the deal with tyre makers, the rubber prices were ruling at `114/kg, and there were fears that it would fall further to even less than `100/kg. The announcement by the government helped in stabilising the price,” he explained. When the government first announced the scheme, effective from December 19, 2014, the tyre makers would buy the RSS-4 grade sheet at `130/kg, which was revised from January 1 under which, the Rubber Board would announce daily reference prices only at 20 % (which is the prevailing import duty), above the Bangkok price.
Under the earlier scheme, if the price was below ` 130 per kg, even after adding 20 %, the government would pay up the remaining amount so that farmers are ensured a higher price. The scheme was revised when prices started to bounce.
Automotive Tyre Manufacturers Association (ATMA) director general Rajiv Budhiraja did not comment. India, which buys most of its natural rubber from Thailand, Malaysia, Indonesia and Vietnam, is expected to ship in about 425,000 tonnes this year ending on March 31. This is in comparison to the average total domestic production of 9 lakh tonnes/year. The only solace for the local growers is the Rubber Price Stabilisation Fund of `300 crore proposed in the state budget, where the support price is set at 150/kg.