Acute shortage of NR has been hitting the Indian tyre industry where it hurts the most. Production planning is in serious disarray due to volatility in availability of NR in the country, says K M Mammen, Chairman & Managing Director of MRF Ltd, who was recently elected as the new Chairman of Automotive Tyre Manufacturers Association (ATMA).
In an interview to Rubber Asia, he points out that domestic production of NR matches just about 53% of the domestic demand and for the remaining 47%, the industry has no other option but to take recourse to imports. Even imports have become tough for the industry in view of punitive taxation, port restrictions on import of NR, slashing of export obligation period for tyres from 18 months to only 6 months etc. EXCERPTS:

How serious is the demand-supply gap in natural rubber in the domestic market?

Demand-supply gap in natural rubber has been widening over the last few years and has reached an all-time high level in the just concluded fiscal 2018-19. Till the year 2012-13, NR production and its domestic consumption were largely in sync. Ever since, consumption has consistently gone up while domestic production has been a laggard, leading to widening of gap.

NR production-consumption data for 2018-19 fiscal, just released by the Rubber Board, reflects domestic production  of 642,000 MT vs. domestic NR consumption of over 1.2 million MT.
Accordingly, domestic production matches just about 53% of the domestic demand. For the remaining 47%, the industry has no other option but to take recourse to imports.

How is the NR supply crunch affecting the tyre industry?

The tyre industry is raw material-intensive and NR is a critical raw material. Acute shortage of NR has been hitting the industry where it hurts the most. Production planning is in serious disarray in view of volatility in availability of NR in the country. Not only adequate availability, at times the quality of NR required is not available. The state-of-the-art radial tyres currently being produced in the country require very high-quality grades of NR which is hard to come by.

What, in your opinion, are the reasons for the shortage of NR and what are your suggestions to improve supply?

To my mind, NR production has not kept pace with the changing times. Given economic growth of the country and the automobile revolution that it has led to, the tyre industry in India has been setting up new capacities to be ahead of the demand curve. That has led to an increase in demand for NR.On the other hand, NR production has been floundering for different reasons despite the fact that domestic NR prices have been ruling much higher than international prices. To my mind, both production and productivity of NR need to be enhanced in a structured manner. The potential of other NR growing regions such as North-East need to be harnessed.

To what extant does the tyre industry depend on imports to meet its requirements?

Imports are in direct proportion to the domestic shortage. As the gap between demand-supply has widened from 417,000 MT in FY 17-18 to nearly 570,000 MT in the last fiscal, more imports have been contracted to bridge the gap. Since domestic NR availability can fulfil less than 55% of the demand, the remaining quantity of NR has to be imported.

What are the problems relating to import of natural rubber?

The punitive taxation on the import of rubber, a commodity which is awfully in short supply, is a major worry for the industry. Imports of NR are imperative for tyre plants to run. However, the policy environment is highly restrictive. The Customs duty (on NR imports) is at 25%, much higher than the rate of duty levied by any other NR importing countries.

There are port restrictions on import of NR which is allowed to be imported only from two ports — Chennai and JNPT — adding to the costs and delays. Moreover, the tyre industry needs to adhere to pre-import condition for NR import against (tyre) export obligation. Further, the export obligation period (for tyres) has been reduced from 18 months to only 6 months making it tough for the industry.