Q. The free falling crude price, which hit a 12-year low early this year, has made synthetic rubber cheap even as the price of rubber products such as automobile tyres has remained unchanged. Is it not time we addressed the ‘emotional’ rubber issue from a more logical point of view?
Monopoly pricing should not be permitted
Oommen Chandy Chief Minister
The price of rubber has plummeted to an all-time low. This has demoralised our farmers and has affected the economy of the state. There are two sets of issues here. Firstly, many of the growers find rubber-tapping unviable, at the prevailing market price. As a result, the production of rubber has declined from over nine lakh tonnes in 2011-12 to 6.4 lakh tonnes in 2014-15.
Secondly, there is a paradox. While rubber prices go down, those of rubber-based products like automobile tyres are ‘flexible upwards’ and ‘rigid downwards’. To a certain extent, the price of natural rubber is linked to that of crude and synthetic rubber. But, it is not entirely so. Other factors, like global supply and demand conditions, and unprecedented increase in imports, have influenced the price. The import of natural rubber never exceeded 10-15 per cent of the domestic production. But, in recent years, it has touched almost 70 per cent.
Meanwhile, all aspects of natural rubber production, promotion, marketing, trade and collection of cess have come within the purview of the Union Government. But there is a lack of a proactive intervention by the Ministry of Commerce. This has landed a million small growers and workers in distress.
The ministry could have invoked the ‘substantial injury’ clause under the WTO (World Trade Organisation) and banned the import of natural rubber. It could have also made use of the price stabilisation fund (set up by the previous government, with a corpus of `500 crore, which, by now, would have accumulated, with interest, to over `1,000 crore) to bail out the growers.
Regrettably, the Union Government did not allocate even a rupee from this fund. It continued its irresponsible attitude, when it slashed the allocation for the Rubber Board from `154 crore in the previous budget, to `132 crore in the current one. It also failed to reconstitute the Board, whose term expired in February 2014.
But the UDF Government, within its limits, responded timely and proactively. To address the crisis, `300 crore was allocated in the 2015-16 Budget. This ensured a remunerative price of `15 per kg to all rubber growers. Further, the government also held talks with tyre-manufacturing companies and an agreement was reached to hike the purchase price of rubber by 25 per cent. And `500 crore has been earmarked in the current budget to sustain a decent price for rubber.
In my view, we have done what we could in the short run. It is high time that the Union government and the agencies concerned under it, like the Competition Commission of India, ensured a competitive behaviour of firms in the industry and saw to it that monopoly pricing are not permitted.
The need of the hour is to have interventions, with a long-term perspective. Mobilising the growers of such commodities in India and even in other countries under the South-South Cooperation framework would empower them to move up the value chain. This will enable them to have an effective control over the governance of the value chains of these commodities.
The political commodity that is rubber
Kummanam Rajasekharan BJP state president
Rubber has been more of a political commodity rather than an economic one, as far as Kerala is concerned. Rubber prices have always been handy for certain political parties and their leaderships to manipulate and make political capital. At stake, more often than not, is the political interest rather than the farmer interest. The rubber grower continues to be exploited for political ends. It is high time the growers realised their political exploitation and freed themselves from the yoke which they had been forced to carry all these decades.
The rubber sector has to ensure takers for the produce at fair prices where the state government has a vital role.
Everything cannot be left to the Centre. In the changed economic situation, in the country and the world, subsidising farm products forever cannot be a solution to the farmers’ plight. Kerala, despite being rich in rubber production, has a dearth of rubber-based industries. There has to be a demand for natural rubber from within the state itself. This could be generated only by setting up more rubber-based industrial units. The Central Government’s ‘Make in India’ and start-up programmes have to be made use of, for setting up a chain of rubber-based manufacturing units.
Thanks to the wrong policies of successive governments in Kerala, some of the few rubber-based industries in the state had to be closed down or shifted to other states.
The rubber growers’ cooperatives, with the help of the state and Central Governments and financial agencies, could play an effective role in creating domestic demand. Rubber has to be seen as an economic commodity and not as an emotional or political one.
Government only caters to the interests of industrialists
Pinarayi Vijayan Politburo member, CPM
There has always been a conflict between the interests of rubber glowers and the tyre industries. Tyre industries want to import rubber at cheaper rates, whereas rubber growers want to ban the import, or to put a ceiling on it.
It is rather unfortunate that the successive governments at the Centre, regardless of whether it belonged to the Congress or BJP, had all along been catering to the interests of the industrialists at the cost of rubber growers. As a result, our market is flooded with imported rubber and the rubber growers suffer from falling prices, which remain far away from remunerative levels.
When the Union Government entered into an agreement with ASEAN, we formed a human chain in Kerala, protesting against the agreement, which would be detrimental to the economy, in general, and agricultural economy, in particular. MPs, belonging to the Congress as well as the Kerala Congress, at that point of time were all in praise of that agreement which later proved to be disastrous.
As per such agreements, the government’s hands are tied when it comes to the hike of import duty beyond a prescribed level. Earlier, the government was averse to the import duty hike, which would confine the import spree within limits. Now, an international clause has come to the aid of the government. Since import duty on rubber cannot be increased, beyond a level, owing to the clauses of certain international agreements, the only option left with the government is to impose a ‘Safeguard duty’, which can be effected for a limited period. Despite repeated requests, the BJP Government refuses to impose it, as they are keen to cater to the interests of the tyre lobby.