Tourist brochures describe India’s southern State of Kerala as ‘God’s Own Country’. The National Geographic magazine called it one of “the ten paradises of the world” and included this rubber growing land in its list of 50 of the world’s top destinations emphasising that it is one of “places that every curious traveller should visit in a lifetime.” It is the State where Heveabrasiliensis plays a pivotal role in sustaining its economy. Before the collapse of rubber prices, it had given substantial support to the State’s rural economy, says Dr Rajesh Rajagopal, an economist who is currently working as an Associate Fellow on a World Bank-funded project. A specialist in plantation economy, rural livelihood issues, international trade and climate change, he says this scenario is changing for the worst.

Traditionally rubber plantations have played a pivotal role in Kerala, the verdant State at the southern end of India. In terms of cropping area and share in agricultural income, the State – a major international tourist destination – has had a remarkable record. “Natural rubber over the years has turned to be one of the principal crops of the State,” points out Dr Rajesh Rajagopal, an economist who has studied about rubber plantations and their role in economic and social development. Now things have changed.Even though the history of rubber plantations in Kerala dates back to the pre-Independence British era, the fall in the commodity prices of coconut and paddy – considered as the traditional crops of Kerala – have changed the State’s agricultural pattern. The low prices for these two major agricultural products coupled with better NR prices speeded up the spread of NR plantations in the State.
Earlier, with the scale of expansion of rubber plantations across the State on the back of better prices, Kerala began to witness a substantial surge in terms of NR planted area, production and productivity. “Presently NR occupies about 20% of the total cropped area in the State and contributes to over 72% of total NR production in the country,” DrRajagopal told Rubber Asia in an interview. The acreage of NR in the State jumped from 407,821 ha in 1990-91 to 549,955 ha in 2014-15. Along with the changing agriculture landscape, the NR sector has left an important impact on the State’s rural economy. It has generated substantial employment and livelihood to about 1.1 million small-scale rubber farmers and tappers.
The share of agriculture in Kerala’s GDP declined from about 23% in 2004-05 to almost 11.6% in 2014-15. The share of major crops like paddy, coconut, tea, coffee in the total agriculture income of the State also declined from 65.68% in 2004-05 to 46.75% in 2014-15. During the corresponding period, the income share of NR among the major agriculture crops had doubled from less than 25% in late 1990’s to 51.52% by 2010-11. This increase was also due to a spike in NR prices during the period. However, the income share of NR declined to less than 45% by 2014-15 owing to the fall in prices in the international market.
In recent times, NR’s share in income is not encouraging, especially for the growers. Global price fluctuations are taking a heavy toll on the domestic NR sector. Commodity prices are going through turbulence similar to what was experienced during the late 1990’s. It is causing serious concerns regarding the production and productivity of NR that could ultimately undermine the health of the State’s rubber economy.

Economic hit

Dr Rajagopal said the slump in NR prices is having a serious negative impact on Kerala’s rural economy. When the State has the capacity to annually produce about 1 million tonnes, the actual production is only half of the potential. The price slump is having serious consequences as rubber has been a major source of livelihood for as many as 1.1 million farmers, most of them small-holders having only less than 1.5 ha under rubber.
As the NR production is price-driven similar to other agriculture crops, the sector witnessed a vertical increase in production from 594,917 MT in 2002-03 when the price of RSS 4 stood at Rs 36.50 a kg to 783,495 MT in 2008-09 when the average price of RSS 4 increased to Rs 107 a kg during the corresponding period. Kerala’s NR production peaked during 2012-13 when the price was around Rs 185 a kg. During this period, the State’s annual production was at its historic high of 800,050 MT.
But when NR prices started declining, the domestic market began to witness a steep production drop with a concomitant fall in NR prices. NR production stood at 507,700 MT in 2014-15 with the price falling to a low of Rs 132 per kg during the corresponding period.
In order to support the rubber farmers struggling on account of the current price crisis, the State Government has announced a special ‘Rubber Price Stabilisation Scheme’ to procure rubber from growers. Rs. 3 billion was earmarked in the State’s budget. The scheme was planned in such a manner that the procurement would be at a price tag of Rs. 150 a kg. If the local price was lower than this, the difference in the amount would be given to the farmers through banks.
However, the scheme failed to generate sufficient response. Out of 1.1 million small-scale rubber farmers, only 350,000 got registered under the stabilisation scheme. The farmers felt that even Rs. 150 a kg was not sufficient given the high labour and other input costs, he said.
Even rubber traders are feeling the pinch of NR price fall, as the trading volumes have declined considerably. The worst-hit region is central Kerala, which is home to about 60% of the small-scale rubber farmers. The price decline is also said to have affected consumer habits of people reliant on the NR sector. Sales of automobiles and FMCG’s have been hit, especially in the major rubber producing regions. Meanwhile, gold loans have registered robust growth with demand mostly coming from farmers having small holdings.
The NR sector, which has been facing scarcity of tappers, is also getting battered by the fall in commodity prices. It has impacted both production and productivity. Recent figures published by the Rubber Board are revealing. High imports of NR by domestic tyre manufacturers from major Asian rubber growing countries such as Malaysia and Thailand are pushing the domestic prices to new lows. As price of crude oil, a major source of synthetic rubber, is low (oil price has shown an up-trend of late), there is no respite for NR prices in the near future.

Bleak future

According to Dr Rajagopal all these factors suggest that the prospects of the rubber plantation sector would look bleaker in
the near future. The current prevalence of low rubber prices is compelling farmers to reduce the frequency of tapping and application of inputs. The poor maintenance of trees is having an adverse impact on production and productivity.
With NR prices remaining unremunerative in the context of production costs mainly because of high tapper wages and increased cost of fertilizers, growers have begun to stay away from production.
A look at the productivity numbers will unravel the real story. Productivity, which stood at 1,903 kg/ha, and was much higher than the national average in 2012-13, declined to 1,481 kg/ha and to 1,182 kg/ha in 2013-14 and a historic low of 923 kg/ha in 2014-15. This was corresponding to the decline in commodity prices. Drastic decline is visible in major NR producing districts of Kerala, including Kottayam, Pathanamthitta, Ernakulam and Idukki.
Low NR prices have turned the sector very unattractive to both farmers and tappers. Untapped rubber plantations is a common sight across the State these days. The NR sector, which is already grappling with the problems of shortage of tappers, has received a body-blow with the current price slump. Even though labour wages have increased in the State, rubber farmers have not been in a position to offer higher wages given the poor price scenario.
The situation has forced the tappers to shift to other jobs in the rural areas, especially to the construction sector and other agriculture-related daily wage labour. Rubber tapping is no longer a primary source of employment.
Dr Rajesh’s current research covers the poor conditions of plantation workers in terms of their livelihood options. The much hyped Kerala model of economic development, which has made considerable strides in improving human capital capabilities including education and health indicators, has now failed to create an impact on the life of most of the plantation sector workers who have been working there for generations. Poor education and health conditions, coupled with low wages of the plantation sector, are pushing them into a vicious circle of deprivation. The situation is more severe in the tea and spices plantations.
Even when commodity prices were high in the past, they have not helped to improve the conditions of workers associated with the plantation sector. Lack of effective social welfare nets, including social security provisions, poor health conditions due to constant exposure to fertilizers and pesticides, have continually worsened the condition of workers, especially in the tea and spices plantations.
In the case of the rubber plantations, workers failed to enjoy the benefits of high commodity prices earlier. Even among the existing workforce, most are seeking employment in this sector because of alack of other livelihood options.
Poor livelihood and employment status are reflected in the current dilemma of tapper shortage in the rubber plantations and labour shortage in the spices and tea plantations. The need of the hour is effective policy intervention from Governmental agencies, says Dr Rajagopal.
The present crisis, however, offers an opportunity for the NR sector to restructure and move up in the global value chain. For that to happen, the State Government should work with rubber growers and draw up value addition projects as that would ensure better returns. It is the only way to address the poor livelihood options of Kerala plantation workers.