Severe crunch in the availability of natural rubber is disrupting the production processes at tyre manufacturing units even as the demand for tyres is peaking, Automotive Tyre Manufacturers Association (ATMA) has stated in a communication to the Union Minister of Commerce & Industry.
The scarcity of rubber at the height of peak production season in Kerala is unprecedented and does not augur well for the tyre industry value chain. As against the average domestic production in the range of 75,000 tonnes each in October and November, the same is not expected to exceed 45-50,000 tonnes in the same period this year.
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NR consumption, on the other hand, is expected to remain at over one lakh tonnes each in these two months, with a resultant deficit of one lakh tonnes in a short span of two months of the ongoing peak production season leading to major concern for tyre industry that consumes nearly 75 per cent of total rubber produced in the country, ATMA has stated.
The scarcity comes at a time when domestic production of Commercial Vehicles (CVs) is looking up after a prolonged downturn. Truck and Bus (T&B) Tyres have relatively higher NR content. NR demand is, therefore, expected to firm up further but the availability crisis is likely to throw a spanner in the works, said Rajiv Budhraja, Director-General, ATMA.
Tyre industry voices concern over domestic availability of natural rubber
According to Rubber Board figures, the demand supply gap is widening as consumption growth is far in excess of its production. The domestic deficit for FY22 which was projected to be 45 per cent of the production at 3.4 lakh tonnes in the beginning of the year is now projected to balloon to 55 per cent of the production at a massive 4.4 lakh tonnes.
Such widening deficit is a major concern as the policy to support domestic manufacturing under Atmanirbhar Bharat and especially the policy to restrict unhindered import of tyres has unleashed major growth opportunities for manufacturing and export of tyres.
With a view to ensuring that tyre production and exports take place in an uninterrupted manner, duty free imports of rubber need to be allowed to the extent of projected demand supply gap in the country, i.e. 4.4 lakh tonnes. The duty free import volumes can be reviewed every year, as Tariff Rate Quota (TRQ) quantity, in accordance with Production, Consumption estimates put up by the Rubber Board.
Moreover, port restrictions on NR import need to be removed, since import is imperative and critical for bridging the demand- supply gap. The restriction is only adding to the cost and affecting competitiveness of the industry.
Allaying the concerns of NR producing interests about import of NR being higher than deficit and thereby causing downward pressure on domestic prices, ATMA has stated that NR imports by tyre industry have been solely to meet the domestic deficit as the import figures correspond to deficit figures. As and when domestic availability has improved, NR import by tyre industry has been scaled down.