The recent increase in natural rubber (NR) prices has hit the small scale units across the country. Around 200-300 units in Punjab and Kerala have closed down and another 500 are on the verge of closure.
In the last four months, NR prices have increased 25 per cent. The price of the benchmark grade RSS-4 was at Rs 170 a kg last week. It was Rs 138 a kg in January. The NR mart is under the grip of a strong bull rally and the small scale units cannot withstand this daily rise in prices and therefore have no option but to stop production.
A Kottayam-based manufacturer said that along with rubber, prices of other raw materials such as chemicals, metals and colours had increased 25-35 per cent during the last six-nine months.
“We are not in a position to raise prices on a weekly basis since we are facing tough competition from large manufacturers, he said.
Small units mainly manufacture moulded items, sheets, various rubber gaskets, footwear, cables, hoses and tread rubber for tyre re-treading. Although Kerala accounts for 92 per cent of the total rubber production in India, more than 60 per cent of rubber-based units are in north India, especially in states such as Punjab, Haryana and Delhi.
Because of the unorganised nature of these units, proper data on their number, production and marketing is not available.
According to data available with some manufacturers, around 500,000 workers are employed in these units and their closure of the units would create serious unemployment in skilled and semi-skilled sectors.
N Radhakrishnan, former president of the Cochin Rubber Merchants Association (CRMA), said 15-20 per cent of the total annual rubber production in India (831,400 tonnes) is consumed by the small scale units and the sharp increase in prices had led to a crisis in this sector.
He also said that offtake by small units in the north had fallen sharply during the last couple of months as the price escalated to Rs 170 a kg. The market is now pegging the tag at Rs 200 as international markets are also on an appreciating mode.
Tread rubber industry, which mainly consists of SMEs are also facing the similar problem. Because of the better quality and the advent of radial tyres, re-treading business was affected very badly.
The increase in the price of tread rubber has terribly upset their business. Even the leading tyre majors of the country are gasping with the price increase the small units can not withstand such a huge increase in the price of raw materials.
During the last one year price of RSS-4 has increased 70 per cent and price of other raw materials also registered an increase of 25-35 per cent.
All the leading tyre companies have decided to enhance their prices by 7 per cent on an average, second time in this calender year, since it is unviable to continue with the production, said Neeraj Kanwar, chairman, Automotive Tyre Manufacturers Association (ATMA) and managing director of Apollo Tyres.
“As an industry we cannot absorb such an increase in NR prices which is the main raw material in tyre production. Several small and medium rubber based units are on the verge of a closure and the condition of tyre makers is also getting worse day by day,” he added.
(business-standard.com)
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