Tyres: Level the playing field

For a while now the tyre industry has beencaught between a rock and a hard place. The price of natural rubber - a keyingredient that accounts for about 42 per cent of the industry's raw materialcost - has been consistently rising over the years. The average price of themost commonly used natural rubber - the RSS-4 variety - was Rs 50,400 per tonnein 2003-04 and has risen to around Rs 1,70,590 per tonne this fiscal. The runaway natural rubber prices have been blamed on the widening demand-supply gapfor the commodity within the country. Rubber Board estimates that there will bea 85,000 tonne gap between domestic demand and availability of natural rubberin 2010-11. Industry claims that its ability to import natural rubber to bridgethis demand-supply gap has been affected by high rate of import duty (20 percent) - thanks to the strong rubber lobby. They say it is unviable to importrubber at such duty levels.

At the same time, tyre manufacturers havenot been able to pass on the higher input costs fully to the customers due toincreasing imports. This has hurt the profit margins of most tyre manufacturersin 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 percent of the total tyre imports into the country. The industry blames the lowimport duty on tyres for the large scale imports. While the basic import dutyis 10 per cent, tyres can be imported at, say 8.6 per cent, through trade dealssuch as the Asia Pacific Trade Agreement. 

"We expect the Finance Ministry to puta stop to the unfair trade practice of dumping of tyres that have impacted theprice-competitiveness of the Indian manufacturers. Imposition of anti-dumpingduty on imports has now been long overdue," says Neeraj Kanwar, chairman,ATMA and managing director, Apollo Tyres.

Among other things, the industry has alsosought changes to the duty structure where the end product (tyres) have a lowerimport duty (of 10 per cent) while the raw material has a customs duty of 20per cent. "Correction in the anomaly of the inverted duty structure islong overdue," he adds. ATMA wants the government to either reduce theimport duty on natural rubber from current 20 per cent to 7.5 per cent orincrease 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.