policies and implications of foreign trade in natural...

CHAPTER IV

POLICIES AND IMPLICATIONS OF

FOREIGN TRADE IN NATURAL RUBBER

4.1. Trade Related Policies Concerning Natural Rubber

4.1.1. Introduction

Trade related policies of the successive Central Governments have had

profound impact on the foreign trade in natural rubber in India. Accordingly, while

the domestic climatic conditions and global prices influence natural rubber trade,

Governmental policies pertaining to foreign trade – one of the prime factors that

can positively or adversely affect the export and import of Natural Rubber – used to

have a significant role in deciding the fortunes of this sector. This chapter provides

a review of the existing trade policies that influence the export and import of natural

rubber in India.

The natural rubber trade could undergo several radical transformations with

regard to the changes to foreign trade policies. India produces around 8,00,000

tonnes of rubber while its consumption is also on the same level. The main

consumers of natural rubber in India are tyre makers. The Indian rubber industry is

entitled to import natural rubber under the advance license scheme in lieu of

exports.

Natural rubber latex industry too is in the verge of a crisis due to rise in

prices of latex and inverted Customs Duty structure for latex. The industry wants

81

the Government to abolish Customs Duty on import of latex and, if the same is not

feasible, reduce the percentage duty.

This chapter touches upon various policies related to export and import of

Natural Rubber, familiarising with EXIM Policy – Terminologies and Payment

modes, Policies impacting the Export of Natural Rubber in India, Export Promotion

Measures, and Import Policy related to Natural Rubber and the Findings and

Suggestions.

4.2. Policies Impacting the Export of Natural Rubber in India

4.2.1. Asia Pacific Trade Agreement 1976 (Bangkok Agreement)

The Asia-Pacific Trade Agreement (APTA) is the oldest preferential trade

agreement between developing countries in the Asia-Pacific region. Its aim is to

promote economic development and co-operation through the adoption of mutually

beneficial trade liberalisation measures. APTA is open to all developing members

of the United Nations Economic and Social Commission for Asia and the Pacific,

which serves as the APTA Secretariat.

The major impact of Asia Pacific Trade Agreement is on India, China, South

Korea, Sri Lanka and Bangladesh. Tyres and inner tubes can be imported from

signatories to the Bangkok Agreement at concession rate of customs duty. Under

this agreement, the import duty fixed for all types of Natural Rubber except rubber

latex is 16 per cent and in the case of rubber latex it is 40 per cent.

82

4.2.2. Indo-Sri Lanka Free Trade Agreement

The India – Sri Lanka Free Trade Agreement (ISFTA) is made with an

overall objective to promote trade and economic relations between the two

countries and promote Foreign Direct Investment. It entered into force on 1st

March, 2000. India has implemented Zero Duty on 4150 tariff lines for exports from

Sri Lanka. As of now, 1180 tariff lines remain in the Sri Lanka’s negative list that

includes agriculture/livestock items, rubber products, paper products, iron and

steel, machinery, and electrical items. There are 429 items in the Indian negative

list, 18 which include garments, plastic products and rubber products, etc.

As per this agreement tyres can be imported at nil customs duty and natural

rubber comes under the negative list. Several other raw-materials of tyre industry

are eligible for duty concessions of varying magnitude.

Domestic price of rubber in Sri Lanka is nearly half the international price.

That makes a joint venture in rubber products an attractive proposition. There are

several rubber products which Indian enterprises can consider for production in joint

ventures in Sri Lanka such as dipped rubber products, rubber automotive

components, gaskets, fan belts and hoses etc. rubber thread and natural rubber

composites. The Sri Lankan entrepreneurs have shown interest in setting up joint

ventures with the Indian assistance in the areas like tyres and tubes, tyre retreading,

moulded and extruded rubber products, solid tyres, rubber belts etc.

83

4.2.3. SAPTA (SAARC Preferential Trading Agreement)

The Agreement on SAPTA reflected the desire of the Member States to

promote and sustain mutual trade and economic co-operation within the SAARC

region through the exchange of concessions.

The basic principles underlying SAPTA are overall reciprocity and mutuality

of advantages so as to benefit equitably all Contracting States, taking into account

their respective level of economic and industrial development, the pattern of their

external trade, domestic trade tariff policies and systems.

Negotiation of tariff reform step by step, improved and extended in

successive stages through periodic reviews; Recognition of the special needs of

the Least Developed Contracting States and agreement on concrete preferential

measures in their favour; and inclusion of all products, manufacturing articles and

commodities in their raw, semi-processed and processed forms.

Four rounds of trade negotiations have been concluded under SAPTA

covering over 5000 commodities. Each round contributed to an incremental trend in

the product coverage and the deepening of tariff concessions over previous

rounds. Truck & Bus, LCV and Jeep tyres and selected raw-materials of tyre

industry can be imported into India at concessional/Nil rate of duty from signatory

countries, (viz. Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka).

Under this agreement, Natural Rubber comes under negative list.

84

4.2.4. India-South Korea (CEPA)

Under the CEPA Agreement, tariffs will be reduced or eliminated on 93 per

cent of Korea’s tariff lines and 85 per cent of India’s tariff lines. The impact will

boost bilateral trade by as much as US$3.3 billion annually.

As per this agreement tyres are in the Negative List (Excluded from Tariff

Concession). Select raw materials of tyre industry eligible for Nil/ Concessional

Customs duty from 2015 onwards. Natural Rubber as per this agreement is

excluded from tariff concession.

4.2.5. ASEAN Agreement (2009)

ASEAN Free Trade Area (AFTA) is a trade bloc agreement by the

Association of South East Asian Nations supporting local manufacturing in all

ASEAN countries. The primary goals of AFTA is to increase ASEAN's competitive

edge as a production base in the world market through the elimination, within

ASEAN, of tariffs and non-tariff barriers; and to attract more foreign direct

investment to ASEAN.

The primary mechanism for achieving the goals given above is the

Common Effective Preferential Tariff (CEPT) scheme, which established a

schedule for phased initiated in 1992 with the self-described goal to increase the

"region’s competitive advantage as a production base geared for the world market".

As per this agreement the key tyre categories tariff to be brought down to 5

per cent by 2016. Select raw materials of tyre industry eligible for Nil/

85

Concessional Customs duty from 2013 onwards. Natural Rubber as per this

agreement is excluded from tariff concession.

Ultimate Target for AFTA: Zero Tariff Rates Member countries are working

towards the total removal of import duties on all products to achieve the objective of

a free trade area. The AFTA Council has stated that the target dates to achieve this

objective would be 2015 for the six original ASEAN Member Countries and 2018 for

the new members. This step has been taken with the motive of integrating markets

and allowing free flow of goods. Total elimination of all import duties will have

maximum impact in enhancing the ASEAN region's economic competitiveness with

the rest of the world. Tariff (CEPT) Agreement for AFTA required the tariff rates

levied on certain products to be reduced to 0 per cent - 5per cent. Other non - tariff

barriers and quantitative restrictions were eliminated. On International Natural

Rubber Agreement (INRA), ASEAN urged developed countries to work closely with

the producing countries for an effective operation of INRA II.

4.2.6. International Trade Agreements and their Impact on Natural Rubber Sector

In view of the foregoing discussions, it may be pointed out that the real

impact of the various trade agreements are yet to be felt in the current scenario.

Because, in many of such agreements (particularly, Indo-Sri Lankan Free Trade

Agreement, ASEAN, and SAPTA), natural rubber is currently included in the

negative list and as such the sector is protected to a large extent from the

pressures of international competition. Consequently, as the market becomes truly

86

global and the protective provisions (like Non-Tariff Barriers or NTBs) become less

effective, the natural rubber sector has to face significantly higher competitive

pressures.

4.2.7. World Trade Organization

The general agreement on Tariff and Trade (GATT) envisages open

markets, non-discrimination and global competition in international trade for the

national welfare of all countries. It is responsible for administering multi lateral

agreements negotiated by its members. Since India signatory to the WTO, the

country is bound to honour its commitment with the organisation.

Natural Rubber is one among many items of commodities under the

influence of WTO agreement. Relevant provisions in the WTO agreement leading

to liberalisation in the Indian rubber sector are noted below.

4.2.7.1. Status of Natural Rubber in the WTO Agreement

As per the WTO agreement, Natural Rubber is not an agricultural product

but a non-agricultural commodity used as an industrial raw material. Therefore,

Natural Rubber will come under the purview of provisions related to the non-

agricultural product of WTO Agreement.

4.2.7.2. Provisions of Bound Rates under WTO Agreement

Immediately after transformation of GATT to WTO, each country offered to

WTO the import duty rates for various items it want to fix. Through negotiations with

member countries of WTO, the rates were finalised for each product. The rate so fixed

87

by each member country with WTO is termed as Bound Rate. For those products

which have no bond rate, it should have been fixed before 31st March 2001.

4.2.7.3. Quantitative Restrictions Specific (QRS)

Limits were reflected on the natural rubber only on 1st April 2001, when the

Government lifted restrictions on the final list of 715 items. As a result natural

rubber has been shifted from Negative List of restricted items to the Open General

Licence list since 1st April 2001. This is the first time that Natural Rubber is

considered as an item of free import. Now any quantity of Natural Rubber can be

imported at any time by any person after paying a specified rate of import duty.

After finalising the process of QRS removal, the Government prepared a list

of items called ‘State Trading List’ which includes some agricultural products such

as wheat, rice, maize, coarse, cereals, copra and coconut oil with a view to

regulate their import. Those products which are placed in the state trading list can

be imported only by a designated Government agency and no private individual is

permitted to import such items. Since Natural Rubber is a non-agricultural product

under the WTO, it lost the privilege of being placed in the State Trading List for

import regulation.

4.2.8. International Natural Rubber Agreements

The first International Natural Rubber Agreement was signed in 1979 under

the auspices of UNCTAD and then renegotiated in the mid-1980s (1987

Agreement) and during 1994-1995 (1995 Agreement).

88

The 1979 Agreement had as members, seven exporting countries

accounting for about 95 per cent of world exports and 25 importing countries plus

the European Community (three-fourths of world imports at the time). The objective

of the 1979 Agreement was essentially to reduce excessive price fluctuations

around the trend in rubber market prices. Exporting countries also stressed the

need to support prices at levels considered remunerative to producers and to help

to stabilise export earnings and increase these earnings based on expanded export

volumes. Basic differences between importing and exporting countries in their

conception of the role of a commodity agreement for natural rubber led to wide

divergences in negotiations, particularly as regards price levels. Both the 1987 and

the 1995 Agreements maintained the same objective as in the 1979 Agreement.

The 1979 Agreement provided for a buffer stock of a maximum size of

5,50,000 tonnes (4,00,000 tonnes of normal buffer stock and 1,50,000 tonnes of

contingency buffer stock) as the sole instrument of market intervention for price

stabilisation (the Agreement therefore excluded export quota or production

controls).

The scheme entailed the purchase and selling of the buffer stock when

actual natural rubber quotations (the Daily Market Intervention Price (DMIP), as

defined in the Agreement) were outside upper and lower price bands in relation to a

reference price. The reference price was initially set at 210 Malaysian/Singapore

cents per kilo. The DMIP was a composite average of daily official current-month

prices on the Kuala Lumpur, London, New York and Singapore markets (RSS 1,

89

RSS 3 and TSR 20 grades of rubber; all quotations converted to f.o.b.

Malaysian/Singapore ports and expressed in a composite Malaysian/Singapore

currency). Intervention price levels (where the buffer stock manager had discretion

to act) were set at +/- 15 per cent of the reference price level. The Agreement also

established upper and lower trigger action prices at +/- 20 per cent of the reference

price, which the buffer stock manager was obliged to defend.

The buffer stock was financed by direct cash contributions by governments

(although the contingency buffer stock could be financed by cash borrowed form

commercial sources). The costs of the buffer stock were shared by importing and

exporting countries (within each group, contributions were assessed in proportion

of each member’s share in natural rubber trade). The Agreement was managed by

the International Natural Rubber organisation (INRO), headquartered in Kuala

Lumpur, Malaysia.

The main operational provisions in the 1987 and 1995 Agreements were

much the same as those of the first Agreement. There were, however, several

modifications to the provisions for the periodicity of reviews and size of revision of

price levels triggering market interventions. The reference price on entry into force

of the 1987 Agreement was set at 210.66 Malaysian/Singapore cents per kilo

(206.68 at the entry into force of the 1995 Agreement).

In 1998 the exporting Member Countries of INRO asked for an increase of

the reference price with 5 per cent in relation to the economic/ currency crisis in

South East Asia. The importing Member Countries rejected this proposal. Following

90

the withdrawal of Malaysia, Thailand and Sri Lanka, in September 1999 the Council

of INRO decided to terminate the third International Natural Rubber Agreement

(INRO was liquidated in December of the same year). It was the last "survivor" of

all stabilisation commodity agreements.

It is generally recognized that the buffer stock operations under the 1979

and 1987 Agreements succeeded in their price stabilization objective. As regards

the achievement of prices at levels considered remunerative to producers, there

was widespread criticism in the exporting countries of the low level of the reference

price (set at 210 Malaysian/Singapore cents per kilo when the first Agreement

entered into force in 1980; down at 206.68 fifteen years later).

4.2.8.1. International Tripartite Rubber Organisation

In 2001, the three most important producers viz. Indonesia, Malaysia and

Thailand, established the International Tripartite Rubber Organisation (ITRO) in

order to manage rubber production in an effort to maintain orderly market growth

and guarantee a minimum price to their domestic producers. Subsequently, with

the entry of Vietnam, ITRO's members account for more than three-quarters of

world exports of natural rubber.

To support natural rubber prices ITRO's members agreed to reduce

production (of 4 per cent) and exports (of 10 per cent). The reduction in output

would reduce global stocks, which should have a positive effect on rubber prices.

At the same time they established an organisational structure, the International

91

Tripartite Rubber Organisation (ITRO), to collectively manage their production for

the next few years. To stabilize world natural rubber prices, they launched in

October 2003, the International Rubber Company Ltd (IRCO), sometimes known as

"the rubber consortium", to pool resources of the three charter members. Vietnam

was invited to join this company and its membership could be further expanded

(other countries that are on the invitation list are India, Sri Lanka, Papua New

Guinea as well as Singapore). IRCO management would step into buy rubber when

prices declined.

4.2.8.2. Socio-Economic, Environmental and Policy Aspects

A large number of rubber smallholders are subsistence farmers working in

small family groups. They tend to face many disadvantages and problems, which

minimise their chance of achieving good economic returns from their holdings.

4.3. EXIM Policy

As per the existing export policy natural rubber can be exported from India

free of license (from 01 April 2001) subject to approvals from the concerned Export

Promotion Council (EPC). The EPC for natural rubber is the Rubber Board

(designated agency for export promotion of natural rubber), and hence the exporter

should get a prior permission form the Board for export of Natural Rubber. The

permission issued from the Board is the Registration – Cum- Membership

Certificate (RCMC).

92

4.3.1. Export and Import Registration

Only a valid Import Export Code (IE Code) number holder can import or

export goods to and from India. In case of importing goods from Nepal or Myanmar

through Indo-Myanmar Border areas or from China, through Gunji, Namgaya,

Shipkila or Nathula ports, it is not mandatory to obtain an IE code number, unless

the CIF value of a single consignment exceeds INR 25000/- (Rs.1,00,000 in case

of Nathula port). An IEC number shall be granted on application by the competent

authority in accordance with the procedure in force.

4.3.2. IE Code

Importer Exporter Code number is a unique 10 digit code issued from the

concerned office of the Director General of Foreign Trade.

4.3.3. Selecting the Overseas Buyer

The sources to obtain information regarding overseas buyers includes Trade

Directories and Yellow pages, Consulate Generals and Trade Representatives of

various countries in India and abroad, Friends and relatives in foreign countries,

International Trade Fairs and Exhibitions, Chambers of Commerce, Directorate of

Industries and Indenting Agents of Foreign Suppliers etc.

4.4. INCO Terms

The INCO terms rules or International Commercial terms are a series of

pre-defined commercial terms published by the International Chamber of

Commerce (ICC) widely used in international commercial transactions. A series of

93

three-letter trade terms related to common sales practices, the INCO terms rules

are intended primarily to clearly communicate the tasks, costs and risks associated

with the transportation and delivery of goods. The INCO terms rules are accepted

by governments, legal authorities and practitioners worldwide for the interpretation

of most commonly used terms in international trade. They are intended to reduce or

remove altogether uncertainties arising from different interpretation of the rules in

different countries.

4.5. Payment on Export and Import

Depending upon the credit worthiness of the importer and exporter,

demand for the commodity in the international market, exchange control

regulations prevailing in the importer and exporter countries etc. The export and

import transactions may be settled either by Advance Payment or by Payment and

Acceptance against Documentary collections or even by Letter of Credit.

4.6. Export Promotion Measures

4.6.1. Rubber Board of India

Rubber Board is designated agency for export promotion of natural rubber

in India. Besides issuing RCMC (Registration cum Membership Certificate) and

COO (Certificate of Origin), the Board provides assistance to promote export of

natural rubber and related products.

94

[Of late, the Rubber Board has launched an initiative of branding Indian

natural rubber with the brand name Indian Natural Rubber (INR) in order to

enhance the quality image of Indian rubber products in the international markets].

4.6.2. Chemicals and Allied Products Export Promotion Council (CAPEXIL)

CAPEXIL, a non-profit making organisation, was setup in March 1958 by

the Ministry of Commerce, Government of India to promote export of Chemical and

Allied Products from India. CAPEXIL offers a full range of services to Indian

exporters and foreign importers. Acting as an interface between the government

and the members regarding trade and policy related matters; it provides its

members an indispensable information gateway and helping hand.

4.6.3. Kerala State Rubber Marketing Federation Limited (‘RubberMark’)

Kerala State Rubber Marketing Federation Limited or RubberMark, in short

established in 1971, is the only governmental agency in India (other than the

Rubber Board) engaged in the promotion of natural rubber. Since 2002,

RubberMark has also started exports of natural rubber to various Asian countries.

4.7. Import Policy related to Natural Rubber

As per the current Import policy, natural rubber can be imported to India

free of license (w.e.f. 01 April 2001) on payment of prevailing import duty. The

current basic import duty is 20 per cent based on the average domestic price in the

preceding three years for all forms of natural rubber except natural rubber latex for

which the percentage of duty is 70 per cent. The policy indicates that natural rubber

95

can be imported through any port. Applied duty is fixed annually based on the

average domestic price of rubber in the preceding three years. The following are

the various channels through which natural rubber can be imported to the country:

4.7.1. Open Channel

In this mode, the importer has to pay the prevailing import duty ie; 20 per

cent of the average domestic price of the preceding three years for all forms of

natural rubber except natural rubber latex for which it is 70 per cent. A four per

cent countervailing duty has been imposed on all forms of natural rubber, effective

from 01 March 2006.

4.7.2. Duty Entitlement Passbook Scheme (DEPB)

Under this scheme government provides credit (called DEPB credit) to

exporters at rates fixed for different products exported. The exporter can use the

DEPB credit entered in his passbook for payment of customs duty for further

imports made under this scheme. This scheme introduced by the Government of

India under the EXIM Policy for 1997-2002 was confined to products not included

under the ‘negative list’ of imports. Since natural rubber was in the ‘negative list’ of

imports till 31 March 2001, it was not importable through the DEPB scheme. The

removal from the ‘negative list’ on 01 April 2001 made natural rubber importable

under the DEPB scheme. Though import undertaken under the DEPB scheme

provides payment of full customs duty, it is considered as a duty free channel at the

operational level.

96

4.7.3. Duty Exemption Entitlement Certificate or Advance License Scheme

The Duty Exemption Entitlement Certificate (DEEC) or Advance License

Scheme facilitates duty free imports of raw materials in advance against

commitment on export of manufactured products. Against each export product,

importable quantity of different inputs is notified in the SION (Standard Input Output

Norms) published by the Government of India. DEEC has a normal validity period

of 18 months after issue which could be extended twice for durations of six-months

each. DEEC is issued subject to fulfilment of time-bound export obligations.

4.7.4. Duty Free Import Authorization Scheme (DFIAS)

This scheme was introduced by the Government of India in place of Duty

Free Replenishment Certificate (DFRC) scheme. Imports made under DFIAS are

exempted from basic customs duty, additional customs duty, anti-dumping duty and

safeguard duty as long as certain conditions are met. The DFIA Scheme allows

exporters to import the required inputs before exports. The scheme also allows

exporters to transfer the scrip once the export obligation is completed. Under the

DFIAS, exporters have to give a declaration of the technical characteristics and

specification of materials used in the shipping bill.

4.7.5. Scheme for 100 per cent EOU and units in SEZ and EPZ

The 100 per cent Export Oriented Units (EOU) and the manufacturing

units which operate in Export Processing Zones (EPZ) can import natural rubber

free of duty.

97

4.8. Analysis of Foreign Trade of Natural Rubber

4.8.1. Introduction

Having already covered the details of rubber producing and consuming

countries in the beginning of this chapter, analysis of export and import of rubber is

given below.

4.8.2. Import and Export of Natural rubber

The major importers of natural rubber are China, USA, Japan, Germany

and France. China imports 1211.7 thousand tonnes and ranks first accounting for

21.15 per cent of the world import whereas USA imports 1052.6 thousand tonnes

and ranks second having a share of 18.4 per cent of world import. Japan is

ranking third with an import of 756.1 thousand tonnes having a share of 13.4 per

cent and Germany imports 264.1 thousand tonnes with 4.61 per cent of total

world import. India ranks only 15th with import being 61 thousand tonnes. The

import of India is less because the country is a major producer of rubber. The

variability in imported figures is greatest in the case of India and China. The

variability is least in Taiwan, Japan and USA.

98

Table 4.1

Country-wise Import of Natural Rubber

(in 1000 Tonnes)

Year Average % to Total Rank CV

China 1211.69 21.15 1 63.73

U.S.A 1052.63 18.37 2 11.50

Others 791.94 14.00 3 19.03

Japan 765.13 13.36 4 9.91

Germany 264.06 4.61 5 18.60

France 222.50 3.88 6 17.64

Spain 171.13 2.99 7 14.68

Brazil 157.13 2.74 8 31.3

Canada 140.69 2.46 9 10.59

Italy 138.38 2.42 10 13.49

Turkey 104.38 1.82 11 24.32

Taiwan 103.88 1.81 12 9.48

U.K. 101.5 1.77 13 21.7

Mexico 73.25 1.28 14 12.06

India 61 1.06 15 84.17

Argentina 33.5 0.58 16 19.28

Korea 335.94 5.70 17 9.54

World 5728.69 100 -- 18.65

Source: Computed from Rubber Statistics, 2010

99

Table 4.2

Country-wise Export of Natural Rubber

(in 1000 Tonnes)

Year AVG % to Total Rank CV

Thailand 2319.31 40 1 18.42

Indonesia 1791.94 32 2 21.97

Malaysia 861.25 15 3 38.68

Vietnam 437.88 8 4 52.76

Liberia 85.06 1 5 37.06

Sri Lanka 46.19 1 6 27

Nigeria 37.38 1 7 51.04

Cambodia 32.63 1 8 21.73

India 30.06 1 9 98.09

Total 5641.69 100 -- 23.71


The major exporters of natural rubber are Thailand, Indonesia, Malaysia

and Vietnam. Thailand exports 2319.3 thousand tonnes and tops the list of

exporters. Indonesia ranks second with 1791.9 thousand tonnes of export.

Malaysia and Vietnam come at third and fourth positions having exports of 861.2

and 437.9 thousand tonnes of export respectively. In the world export, Thailand’s

share is 40 per cent whereas that of Indonesia is 32 per cent, of Malaysia 15 per

cent and of Vietnam 8 per cent. India has a share of only 1 per cent of the world

export and comes only at the 9th position in the list of major exporters of rubber.

Variability in export is seen to be the highest in the case of India. Export rate of

100

India has been decreased in the last few years because India’s export is on the

basis of demand from other countries. The variability is least in the case of

Thailand.

4.8.3. Supply Chain in Indian Rubber Sector: A Kerala Perspective

A brief description of the supply chain in natural rubber is discussed below.

Typically a supply chain consists of producers (primary market) and consumers

(terminal market), with two major types of middlemen in between viz. agents and

intermediaries. Here, the term agents refer to brokers too. Intermediaries include

Rubber Producers’ Societies (RPSs) and dealers. But in respect of a few large

producers there are direct links to consumers that facilitate direct trading in natural

rubber (Figure 4.1).

Figure 4.1

A Typical Supply Chain for Trade in Natural Rubber in Kerala

101

4.8.4. Factors influencing the Foreign Trade of Natural Rubber

Various factors that influence the foreign trade of natural rubber are

discussed below:

4.8.4.1. International and Domestic Price

Price rate in international and domestic market is a major factor that

influences trade in natural rubber. Industries based on natural rubber are tempted

to import natural rubber when the international price is less; else they depend on

domestic production. Factors like variation in the climatic conditions, political

decisions, labour problems, lack of quality and quantity of yields would lead to

decrease in production and influence the international market.

The international price declined until 2001-’02 and thereafter increased

sharply, the increase being remarkable after 2005-’06. This phenomenon is noted

in the price of all the varieties of rubber. A slight decrease is seen in the year 2007-

’08 except for SMR 20. The minimum price recorded is in the year 1999-’00. By the

year 2009-’10 the researcher can see that the price of all the grades are 120 per

cent above the price in 1995-’96.

The domestic prices of all the grades too show a similar pattern as shown

by the international price. The domestic price declined until 2001-’02 and thereafter

the price started increasing. After 2004-’05 the price was increasing rapidly. Here

also a slight decrease can be seen during the year 2007-’08. The price in 2009-’10

is 120 per cent above the price in 1995-’96.

102

Table 4.3

Index Values of International Price of Different

Grades of Natural Rubber (F.O.B. Price) (1995-’96 = 100)

Year RSS 1 RSS 2 RSS 3 RSS 4 RSS 5 SMR 20

1995-’96 100 100 100 100 100 100

1996-’97 90 90 90 89 89 88

1997-’98 65 64 64 63 63 66

1998-’99 58 58 58 56 56 54

1999-’00 55 54 54 53 52 56

2000-’01 60 59 59 58 57 57

2001-’02 56 56 56 54 54 54

2002-’03 81 78 78 77 77 83

2003-’04 106 106 105 107 107 102

2004-’05 115 116 115 116 117 112

2005-’06 148 149 148 151 152 140

2006-’07 194 196 195 198 200 185

2007-’08 192 194 193 196 198 190

2008-’09 206 208 207 210 211 204

2009-’10 NIL 221 222 224 224 216


RSS 5 is given the preference in terms of price after 2003-’04 whereas RSS

1 is given the first priority till 2003-’04 in International market as well as in Kottayam

Market. (See Note I, regarding Kottayam prices of natural rubber)

103

[Note I: Kottayam market is chosen because the natural rubber trade in India which is

always dominated by the state of Kerala (that represents over 92 per cent of the total

production and sales in India) is in turn is dominated by Kottayam (that represents over 23

per cent of the total production and sales in Kerala). Accordingly, often Kottayam prices

are preferred by many stakeholders as the base price. So also, based on different factors

as above the Rubber Board is taking Kottayam price as the base price].

Table 4.4

Index Values of Price of Different Grades of Natural Rubber

(Base Year 1995-’96=100)

Year RSS 1 RSS 2 RSS 3 RSS 4 RSS 5 EBC 2X LATEX ISNR 20

1995-’96 100 100 100 100 100 100 100 100

1996-’97 93 96 95 94 94 94 80 94

1997-’98 71 73 71 69 69 69 69 69

1998-’99 62 62 60 58 57 56 57 56

1999-’00 61 63 62 60 59 60 52 60

2000-’01 61 62 61 58 58 59 58 58

2001-’02 62 64 63 62 61 56 56 58

2002-’03 74 78 78 75 74 74 67 76

2003-’04 94 98 99 97 97 102 83 100

2004-’05 103 108 109 107 108 112 90 108

2005-’06 122 128 130 129 130 134 100 131

2006-’07 170 179 181 177 178 183 143 180

2007-’08 166 175 177 175 177 183 134 180

2008-’09 182 193 196 194 198 199 148 198

2009-’10 209 221 224 221 223 224 168 220


104

Table 4.5

Correlation between Prices (International & Kottayam)(RSS 1)

Correlations intrss1 kotrss1

intrss1

Pearson Correlation 1 .994**

Sig. (2-tailed) .000

N 14 14

kotrss1

Pearson Correlation .994** 1


N 14 15

**. Correlation is significant at the 0.01 level (2-tailed).

Conclusion: There is very high positive correlation.

It is noted that there is strong positive correlation between international

price and domestic price of natural rubber in respect of RSS 1 as is evidenced by

the strong positive co-efficient of correlation of 0.994. This clearly shows that there

is almost perfect relationship between the movement of international and domestic

price for RSS 1. (See Note I in the previous page relating to Kottayam prices of natural rubber.)

Table 4.6

Correlation between Prices (International & Kottayam Market)(RSS 4)

Correlations intrss4 kotrss4

intrss4

Pearson Correlation 1 .992**


N 15 15

kotrss4

Pearson Correlation .992** 1


N 15 15

**. Correlation is significant at the 0.01 level (2-tailed).

Conclusion: There is very high positive correlation.

105

The international price movement of RSS 4 is also analysed with the

domestic price. RSS 4 price also shows a significant correlation and the value of

correlation is 0.992.This clearly shows the strong linkage between international

prices and RSS 4 prices at Kottayam.

4.8.4.2. Regression Models for Predicting the Price of Rubber at Kottayam

In this section, an attempt is made to fit regression equations to predict the

price of rubber at Kottayam (for both RSS 1 and RSS 4) given the respective

international prices of the same. Accordingly, firstly a regression model of the form,

y = a + bx + u is sought to be fit here, where denotes the Kottayam price (RSS 1),

x the international price, u the random error term; and a and b the regression

parameters.

Table 4.7

Model Summary (Regression Analysis) (for RSS 1)

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .994a .988 .987 286.74953

a. Predictors: (Constant), intrss1

Table 4.8

ANOVAb (Regression Analysis) (for RSS 1)

Model Sum of Squares Df Mean Square F Sig.

Regression 7.840E7 1 7.840E7 953.529 .000a

Residual 986703.520 12 82225.293

Total 7.939E7 13

a. Predictors: (Constant), intrss1 b. Dependent Variable: kotrss1

106

Table 4.9

Coefficientsa (Regression Analysis) (for RSS 1)

Model

Unstandardized Coefficients

Standardized Coefficients t Sig.

B Std. Error Beta

1 (Constant) 963.053 175.825

.994 5.477 .000

intrss1 .877 .028 30.879 .000

a. Dependent Variable: kotrss1

The fitted Regression Equation is y = 963.05 + 0.877x which can be

used for predicting the price of rubber at Kottayam, given the international price

(for RSS 1).

Now, another regression model of the form, y = a+ bx + u is sought to be

fit here, where denotes the Kottayam price (RSS 4), x the international price, u the

random error term; and a and b the regression parameters.

Table 4.10

Model Summary (Regression Analysis) (for RSS 4)


1 .992a .985 .983 367.63694

a. Predictors: (Constant), intrss4

Table 4.11

ANOVAb (Regression Analysis) (for RSS 4)

Model Sum of Squares df Mean Square F Sig.

Regression 1.122E8 1 1.122E8 829.940 .000a

Residual 1757039.926 13 135156.917

Total 1.139E8 14

a. Predictors: (Constant), intrss4 b. Dependent Variable: kotrss4

107

Table 4.12

Coefficientsa (Regression Analysis) (for RSS 4)

Model Unstandardized Coefficients Standardized Coefficients

t Sig. B Std. Error Beta

1 (Constant) 542.535 206.056

.992 2.633 .021

intrss1 .918 .032 28.809 .000

a. Dependent Variable: kotrss4

The fitted Regression Equation is y =542.5+ 0.918x which can be used

for predicting the price of rubber at Kottayam, given the international price (for

RSS 4).

The regression results show that one unit change in international price

would lead to 0.877 unit changes in domestic price for RSS 1 (Table 4.9). Similarly,

one unit change in international price would lead to 0.918 unit change in domestic

price for RSS 4 (Table 4.12). Thus, there is a significant cause and effect

relationship between the prices of natural rubber prevalent in international and

domestic markets. Here, two grades RSS 1 and RSS 4 alone are considered

because these two grades are the most prominent ones in the trade for natural

rubber in Kerala.

4.8.4.3. Crude Oil Prices and Its Influence on Rubber Prices

The price of natural rubber has a strong dependence on the price of crude

petroleum oil. “The demand for naturally produced rubber always strengthens when

the crude oil price rises because it becomes more economical.” (Myanmar Times,

108

Myanmar, April 4, 2011). This is because changes in oil price induce changes in

synthetic rubber prices, resulting in substitution between natural and synthetic

rubbers. Although the actual substitution remains low, even a small development in

oil market gets immediately reflected on the future of rubber market through

speculative trading by hedge managers and investors. The correlation of rubber

and crude oil prices is shown in Figure 4.2.

Figure 4.2

Correlation between Price of Rubber and Crude Oil Price

In the global scenario, about 75 per cent of the rubber demand is met by

synthetic rubber. Synthetic rubber is a direct by-product in crude oil. Therefore, the

analysis shows that there is a direct relationship between crude oil prices and

synthetic rubber price. Thus, it can be noted that an increase in crude oil price

influences the synthetic rubber price and finally the natural rubber price. It is noted

109

that there is a 94 per cent correlation between crude oil prices and prices of natural

rubber.

4.8.4.4. Other Factors Influencing Trade in Natural Rubber

Apart from the various price-related factors mentioned in the foregoing

paragraphs, there are other factors that influence trade in natural rubber. These

include the following two groups:

I. Tariff Barriers (like Export Duty, Import Duty, Floor Pricing) (Table 4.13).

II. Non-Tariff Barriers (like Distinction between quality grades, for instance

RSS 4 in India becomes RSS 3 in international markets, Differences in

Quality Standards, Quota Systems).

Table 4.13

Current Structure of Duties and Bound Rate of Trade in Natural Rubber

Item Customs Duty Excise Duty Bound Rate (under WTO)

Natural Rubber (dry forms of rubber) 20% Rs.1.50/kg* 25%

Latex (drc) 70% Rs.1.50/kg* Unbounded

Poly Butadiene rubber (PBR) 10% 10% 40%

Styrene Butadiene Rubber (SBR) 10% 10% 40%

Butyl Rubber 5% 10% 40%

Nylon Tyre Cord Fabric (NTCF) 10% 10% 40%

Steel Tyre Cord 10% 10% 40%

Carbon Black 5% 10% 40%

Reclaimed/Retreaded Rubber 10% 10% 40%

Rubber Chemicals 7.50% 10% 40%

*Cess on Natural Rubber is exempted on duty free imported rubber. Now cess collected on natural rubber is at the rate of Rs. 02-00 per kg.

Source: Pocket Book on Rubber Statistics, Vol. 5, 2010, p.xiv

110

4.9. Trade of Natural Rubber in India

India is in the fourth place in production and consumption of natural rubber

in the worlds map. India is a fast developing country where high growth can be

seen in industrial sector, automobile sector, infrastructure development etc. In all

these sectors rubber is used as a raw material and so the consumption of rubber is

increasing in India.

4.9.1. Consumption of Natural Rubber and Synthetic Rubber in India

Consumption of natural rubber shows an increasing trend. The percentage

growth in consumption is the greatest for the year 2002-’03 followed by the years

1996-’97,1999-’00, 2005-’06 and 2009-’10. Consumption of synthetic rubber also

shows an increasing trend. Here the growth rate is negative for the years 1998-’99

and 2008-’09. The consumption growth rate is the highest for the years 2002-’03

and 2006-’07. The growth in the consumption of synthetic rubber is at a faster rate

when compared with the growth in the consumption of natural rubber. Comparing

with the consumption figures of 1995-’96, by the year 2009-’10 the consumption of

natural rubber has increased by 77.1 per cent whereas the consumption of

synthetic rubber has increased by 159.3 per cent.

111

Table 4.14

Consumption of Natural Rubber and Synthetic Rubber in India (in 1000 Tonnes)

Year Synthetic Rubber % of Growth

Natural Rubber % of Growth

1995-’96 134085 -- 525465 --

1996-’97 142810 6.51 561765 6.91

1997-’98 160915 2.68 571820 1.79

1998-’99 156395 (-) 2.81 591545 3.45

1999-’00 167220 6.92 628110 6.18

2000-’01 170670 2.06 631475 0.54

2001-’02 174530 2.26 638210 1.07

2002-’03 194850 11.64 695425 8.96

2003-’04 210190 7.87 719600 3.48

2004-’05 224650 6.88 755405 4.98

2005-’06 237495 5.72 801110 6.05

2006-’07 270830 14.04 820305 2.40

2007-’08 297155 9.72 861455 5.02

2008-’09 292950 (-) 2.42 871720 1.19

2009-’10 347710 18.69 930565 6.75

Total 3182455 -- 10603975 --

Average Growth Rate 07.92 per cent -- 04.20 per cent

Source: Computed from Rubber Statistics, Vol. 33, 2010

It may be noted that there has been a steady and positive growth in the

consumption of natural rubber in India throughout the period of study, the average

growth rates being 7.92 per cent and 4.20 per cent for synthetic and natural rubber

respectively.

112

4.9.2. Natural Rubber Consumption in India

Here, an attempt is made to fit a regression equation to predict the

consumption of natural rubber the regression model, y = a+ bx + u where y is the

consumption in tonnes, x the year, u a random error term; and a and b are

regression parameters.

Table 4.15

Model Summary (Regression Analysis) (Rubber Consumption)


1 .990a .981 .980 18250.46923

a. Predictors: (Constant), year

Figure 4.3

Rubber Consumption in India – Projections from 2010

Projections are

done by taking

FY 2010 = 0 as

the Base Year

113

Table 4.16

ANOVAb (Regression Analysis) (Rubber Consumption) (for RSS 4)

Model Sum of Squares df Mean Square F Sig.

Regression 2.233E11 1 2.233E11 670.357 .000a

Residual 4.330E9 13 3.331E8

Total 2.276E11 14

a. Predictors: (Constant), year b. Dependent Variable: cons

Table 4.17

Coefficientsa (Regression Analysis) (Rubber Consumption) (for RSS 4)

Model Unstandardized Coefficients

Standardized Coefficients

t Sig.

B Std. Error Beta

1 (Constant) 481020.381 9916.541

.990

48.507 .000

year 28238.911 1090.674 25.891 .000

a. Dependent Variable: cons

The fitted Regression Equation is y =481029.4+ 28238.9 x which can be

used for predicting the consumption of rubber in India over the years. This

regression equation pertains to RSS 4 grade of natural rubber which has been

selected here because the major portion of the transactions are taking place in

Kerala for this grade of natural rubber. The regression result shows almost a

straight line relationship in the case of domestic rubber consumption in India.

Based on the regression equation fitted as above, the projected values of

rubber consumption (RSS 4) for the next few years (till 2013-2014) are given

in Table 4.18.

114

Table 4.18

Projected Figures of Consumption of Natural Rubber (RSS 4)

Year 2010-’11 2011-’12 2012-’13 2013-’14

Consumption (1000 Tonnes) 509268.3 537507.2 565746.1 593985

4.9.3. The Growth of Automobile Industry of India

Regarding the use of the tyres that are produced, motor cycles occupies

the first place claiming 29.62 per cent, followed by scooters and mopeds claiming

18.84 per cent. The tyres that are used in trucks and buses constitute only 18.69

per cent and tyres used in cars claim 17.84 per cent. It can be seen that out of the

total tyres produced 85 per cent of them are used in one of these 4 categories and

the remaining 15 per cent only are used for other purposes. From the values of

coefficient of variation (CV), less variability is seen in the number of tyres

manufactured for usage in scooter and moped and also for usage in truck and bus.

The variability is large in the case of tyres produced for use in motor cycles

followed by that are used in cars. Thus the production of automobiles like

motorcycles and passenger cars would have a significant influence in deciding the

demand for natural rubber.

115

Table 4.19

Production of Automobile Tyres (in 1000 Nos) (1995 to 2010)

Automobile Tyres Average % to total Rank CV

Car 9845.4 17.84 4 54.18

Motor Cycles 16345.67 29.6 1 61.37

Scooter & Moped 10395.53 18.84 2 11.13

Truck & Bus 10312.53 18.69 3 22.18

LCV 3269.07 5.92 5 46.99

Tractor 2866.47 4 6 30.79

Jeep 1301.13 2 7 12.5

A.D.V 440 1 8 32.12

Industrial 334.4 -- 9 63.99

OTR 75.53 -- 10 60.22

Total 67185.73 100 - --

Source: Computed from Indian Rubber Statistics, Vol. 33, 2010

Based on the table the researcher can see that with regard to growth in the

production of tyres, motor cycles occupies the first position the increase being 841

per cent, car and jeep comes at the second position the increase being 503 per

cent, LCV comes at the third position where the increase is 388 per cent, tractor

comes at the fourth position the increase being 111 per cent and truck and bus

comes at the fifth position recording an increase of only 92 per cent. The growth in

the case of motor cycles is highly significant.

116

Table 4.20

Index Numbers of Automobile Tyres Produced in India (in 1000 Nos) for 1995-2010

(FY’s) ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10

Truck & Bus 100 105 105 103 117 112 113 128 141 144 155 161 171 167 193

Tractor 100 90 89 92 103 100 97 104 103 121 134 167 169 168 212

Car&Jeep 100 117 128 138 132 205 225 257 300 357 409 429 495 499 603

M.Cycles, Scooter, Moped 100 118 147 192 245 296 324 413 441 479 556 689 737 796 942

LCV 100 156 162 163 168 179 200 242 278 335 385 410 452 450 488


Table 4.21

Production of Tubes (in 1000 Nos)

Year Truck & Bus

Tractor Car Jeep LCV Motor Cycles

Scooter &

Moped ADV OTR

Indust-rial

Total

AVG 8820 1122 5932 1087 2627 16293 6831 221 27 61 43021

STDEV 2637.34 392.65 2925.74 214.83 1307.86 11262.07 1778.92 42.92 21.89 28.65 20002.01

CV 29.90 34.98 49.32 19.77 49.78 69.12 26.04 19.41 81.08 46.97 46.49

Source: Computed from Indian Rubber Statistics, 2010

[Note: AVG=Average; STDEV = Standard Deviation]

It can be seen that 37 per cent of the total tubes produced are used in

motor cycles, 21 per cent used in truck and bus, 15 per cent in scooter and moped

and 14 per cent used in cars. Based on the indices of production the researcher

can see that the growth in production of tubes is the highest in the case of motor

cycles claiming an increase of 1341 per cent, followed by LCV recording an

increase of 407 per cent and then by car recording an increase of 281 per cent.

117

The percentage increase in the case of scooter and moped is only 135 per cent

and that of truck and bus is 187 per cent. The coefficient of variation shows that

there is great variability in the production of tubes that are used in motor cycles,

LCV and car. The variability is less in the number of tubes manufactured for jeep as

well as scooter and moped.

Table 4.22

Production of Rubber Tubes– Trend Indices (Base year: 1995-’96=100)

Year Truck & Bus

Tractor Car Jeep LCV Motor Cycles

Scooter &

Moped ADV OTR

Indust-rial

1995-’06 100 100 100 100 100 100 100 100 100 100

1996-’07 121 96 118 124 137 128 104 97 25 80

1997-’08 132 109 135 177 147 205 113 90 50 140

1998-’09 138 123 137 174 146 253 144 114 56 97

1999-’00 150 127 152 160 167 302 128 103 75 110

2000-’01 152 111 166 144 181 380 117 100 56 160

2001-’02 148 93 164 149 189 442 107 83 81 203

2002-’03 159 83 182 159 220 543 120 89 94 217

2003-’04 180 91 205 162 272 599 119 72 119 167

2004-’05 192 15 228 161 320 725 137 54 163 237

2005-’06 214 124 268 163 390 865 147 64 238 330

2006-’07 229 143 327 173 429 1090 151 82 300 360

2007-’08 244 145 441 217 428 1197 185 70 375 373

2008-’09 242 134 414 216 435 1225 167 71 375 263

2009-’10 287 198 381 219 507 1441 235 91 425 213


118

During the period 2005-’10 the automobile production in India shows an

upward trend. The production growth is the highest in the case of passenger

vehicles where there is 80 per cent growth in 2009-’10 compared to 2005-’06. The

growth in the production of commercial vehicles and three wheelers in 2009-’10

compared to 2005-’06 are 45 per cent and 43 per cent respectively. In the case of

two wheelers too there is an overall growth of 38 per cent although there was

negative growth during the year 2007-’08.

Table 4.23

Production of Automobiles in India– Trend Indices (Base: 2005-’06)

Category 2006 2007 2008 2009 2010

Passenger vehicles 100 118 136 140 180

Commercial vehicles 100 133 140 107 145

Three Wheelers 100 128 115 114 143

Two Wheelers 100 111 105 111 138

Grand Total 100 114 111 115 144


119

Figure 4.4

Trend in the Production of Automobiles ( 2005-’06 to 2009-’10)

Table 4.23 gives the trend indices in respect of the production of

automobiles in India the last five years under study viz. 2005-’06 to 2009-’10. It

may be noted that there is a constant and increasing trend over the years and that

too in respect of all the products. The trends in respect of the production of various

types of automobiles are more clearly depicted in Figure 4.4 along with the

respective trend (regression) equations. It may be noted that there is clear positive

slopes for the trend lines in respect of all types of automobiles. Growth of

passenger vehicles in the automobile industry shows a linear trend given by the

equation y = 80.2 + 18.2x. The trend line in respect of commercial vehicles is given

by the trend equation y = 105.8 +6.4 x

The trend equations in respect of two-wheelers and three-wheelers are

respectively given by y = 90.2 + 7.6 x and y = 98.4 + 7.2 x. ( Figure 4.4 ).

120

Domestic production of automobiles shows an upward trend over the years.

The growth in production is the highest in the case of passenger vehicles where

there is an overall growth of 80 per cent base year being 2005-’06. Similarly, in

respect of three-wheelers and two-wheelers there is considerable growth of 43 per

cent and 38 per cent respectively.

Table 4.24

Domestic Sales of Automobiles in India–Trend Indices (Base: 2005-’06)

Category 2005-’06 2006-’07 2007-’08 2008-’09 2009-’10

Passenger vehicles 100 121 136 136 171

Commercial vehicles 100 133 140 109 151

Three Wheelers 100 112 101 97 122

Two Wheelers 100 112 103 105 133

Grand Total 100 114 108 109 138


Figure 4.5

Trend in the Domestic Sales of Automobiles (2005-’06 to 2009-’10)

121

Table 4.24 gives the trend indices in respect of the sales of automobiles in

India the last five years under study viz. 2005-’06 to 2009-’10. It may be noted that

there is a constant and increasing trend over the years and that too in respect of all

the products. The trends in respect of the sales of various types of automobiles are

more clearly depicted in Figure 4.5 along with the respective trend (regression)

equations. Growth of passenger vehicles in the automobile industry is given by the

linear equation, y = 85.7 + 15.7 x, and that in respect of commercial vehicles is

given by y=103.2+7.8 x. A similar behaviour is shown in the case of two wheelers

wherein the estimated trend equation is y=92.9+5.9 x. Similar trend equation in

respect of three-wheelers is given by y = 97.7 + 2.7 x (Figure 4.5).

Domestic automobile sales also show an upward trend quite similar to that

of the production trend. The growth in sales is the highest in the case of passenger

vehicles where there is an overall growth of 71 per cent base year being 2005-’06.

There is also 51 per cent growth in the sales of commercial vehicles. In the case of

three wheelers and 2 wheelers there is a decline during 2007-’09 period but in

2009-’10 growth is revived. There is an overall growth of 33 per cent in the case of

two wheelers and 22 per cent in the case of three wheelers. The sustained growth

of automobile industry in India is evident from the positive trend in respect of the

production and sales of all major types of automobiles.

In view of the foregoing analyses, the projected values of the trend indices

in respect of production and sales of automobiles for the next few years are found

using the respective trend equations for the next few years till 2013-’ 14(with base

122

year 2005-’06=100). It is noted that the maximum expected growth in production is

in the case of passenger vehicles (53 per cent) followed by commercial vehicles

(31.4 per cent), three wheelers (27.2 per cent) and two wheelers in that order. In

respect of sales, the anticipated growth is maximum for passenger vehicles (48.5

per cent) followed by commercial vehicles (32 per cent), and then by two wheelers

(16.5 per cent) and three wheelers (09.30 per cent) in that order (Table 4.25).

Table 4.25

Projected Trend Indices of Production and Sales of Automobiles (Base: 2005-’06=100)

Types of Automobiles 2010-’11 2011-’12 2012-’13 2013-’14

Passenger Vehicles

Production 98.4 116.6 134.8 153

Sales 101.4 117.1 132.8 148.5

Commercial Vehicles

Production 112.2 118.6 125 131.4

Sales 110.4 117.6 124.8 132

Three-Wheelers Production 105.6 112.8 120 127.2

Sales 100.6 103.5 106.4 109.3

Two-Wheelers Production 97.8 105.4 113 120.6

Sales 98.8 104.7 110.6 116.5

4.10. Concluding Remarks

Indian Rubber Industry has been performing reasonably well in the past

decade. However with the foreseen challenges such as volatile prices, climatic

conditions, unavailability of skilled labour etc., it is advisable to take precautionary

actions to protect the industry’s growth. Adapting best practices in regulating the

123

export and import policies would positively impact the natural rubber industry in

India. The export promotion agencies should recommend necessary

augmentations the existing policies that will help bridge the demand-supply gap for

natural rubber in India.

In view of the above, it may be noted that government should preferably

make a rethink on certain issues and accordingly modify its policies; for instance

the high rates of import duties on natural rubber, inspection of imported natural

rubber, fixing of the upper price band as per the Rubber Act, banning of future

trading in natural rubber etc. so as to further enhance the prospects for the natural

rubber industry and also other rubber-based industries.

policies and implications of foreign trade in natural...

Documents