Sourcing raw material is critical for rubber industry | SupportBiz

Top Story

Sourcing raw material is critical for rubber industry

In order to promote and protect the interest of the Indian rubber industry, the All India Rubber Industries Association (AIRIA) was formed around 70 years ago. Over the past several years, the industry faced several issues and challenges which were addressed by AIRIA.

The Indian rubber industry, majorly driven by the MSMEs, is still facing several challenges which need intervention of the policy makers. With 1200 members, AIRIA is actively representing rubber industry’s perspective at the government and policy making level. In an exclusive interaction with SupportBiz, Niraj Thakkar, President of AIRIA, emphasized on several key points and trends that are influencing the Indian rubber industry.

Edited excerpts:

What are the key issues that Indian rubber manufacturers industry is facing?

The availability of raw material has become the biggest issue for the industry. As we know, polymer is a natural resource which the rubber products manufacturers require for making rubber related products. The industry is heavily relying on polymer imports. Kerala is the only region where polymer was grown. But over the past few years, the demand has gone up and the industry is relying on imports. Since the import duties are high, the cost of production is also more. The industry is struggling with this situation. We have urged the Government to take some positive and quick actions in this direction to support the industry.

The industry is heavily dependent on imports. How is the industry’s experience in dealing with the varied processes and taxation structure for rubber manufacturing related imports?

We have an inverted import duty structure. Industry is really struggling to accommodate such high import duty structure. For example, CESS import on natural rubber is present since last several years. The import on second hand machinery, used in rubber product manufacturing, was coming under EPCG Scheme. Now this category has been withdrawn from the EPCG Scheme, which again gave the industry a blow. SHIS Scheme has also been withdrawn by the government. We urge the government to restart these schemes so that there can be some sort of motivation for the Indian manufacturers in the rubber industry. Industry players and associations like ours are raising their voices to get heard by the policy makers on these issues.

Accessing capital is a major issue for most of the MSMEs operating in this field. How do you look at this challenge for rubber manufacturing companies?

Government must understand the pain points and challenges of the manufacturing segment. The rate of interest that the banks offer is very difficult to justify, because the profit percentage of the respective business is not that high. If we are doing a business which is giving us 7 to 8 per cent of profits, how can we take credit on 14 per cent? This is a very critical situation for the growth of the industry. Government and banking organizations must sit together to come up with something more appealing for the MSMEs in the manufacturing segment.

What are the opportunities that the rubber industry is witnessing?

Opportunities are extremely lucrative, but to capture them the industry needs support. Indian manufacturers are considered as quality players in the international market. But issues like high cost of production, import duty structure etc. make our products costlier as compared to other parts of the world. Automotive industry is the biggest buyer for rubber products.

Can you share some demographic information on the Indian rubber industry?

There are around 5500 manufacturers doing business in the Indian rubber industry. In this figure, around 50 are large organizations and around 200 are medium sized businesses. The remaining more than 5300 manufacturers are falling in the category of MSMEs. The Indian rubber industry is producing more than 35000 products. More than 2 million people are getting employment from this industry. This is a labour intensive industry and 50 per cent of the total cost of production goes in the form of taxes.