KOCHI: Public memory is short. Archbishop Joseph Pamplany and most of his flock may not have any recollection of the events of 2001, when trading in natural rubber came to a virtual halt for days, due to the ambiguity created by the proclamation on the minimum sale price for rubber.
The deadlock was created with the Union government notifying the minimum price for rubber on September 12, 2001, following a Supreme Court order.
The price of RSS 4 grade rubber was fixed Rs 32.09 per kg and of RSS 5 at Rs 30.79. Toms Joseph, a former economist with the state-run Rubber Board, recalls traders staying away from the market for days and then starting to buy lower-grade rubber, as the order specified only RSS 4 and 5.
“It was chaos. Farmers initially resisted, but traders would not bill for grades coming under the notification. At the time, the domestic price was in the Rs 23-24 range. It was not easy to enforce it as there were around 8,000 traders at the time. Tyre manufacturers stayed away and relied on imports. Farmers suffered and there were huge protests,” he said.
“The move to impose a minimum sales price or minimum support price (MSP) for natural rubber (NR) would be disastrous and will have a long-lasting impact on farmers,” Jom Jacob, chief analyst, of What Next Rubber Media International, told TNIE.
“Consumers can always import NR if domestic prices are high. The government will have to procure at the MSP and the money required would be huge. Stocking will be another big issue and ultimately the government will have to sell. And, when the government decides to sell, it will further depress the market,” said Jom, a former senior economist with the Association of Natural Rubber Producing Countries.
There have been two instances in history when market intervention by governments failed. “The Thailand government started procuring NR in 2016 and accumulated almost 7,00,000 tonnes in the following years. But, every time the government tried to sell the rubber the market declined. Returns for farmers did not improve and the impact was felt for many years,” he said.
Jom believes the demand-supply metrics in NR are not in favour of farmers. Annual demand and supply are almost tied at 14.5 million tonnes and prices are likely to stay muted unless consumption increases
Supply of NR has increased in many countries, including Ivory Coast, Liberia, Myanmar, Cambodia and Laos.
“Demand has not kept pace with supply. China consumes 42% of the global NR supply, while India uses up 8.5%. Given the economic situation in the world, demand for NR is likely to remain muted in 2023,” Jom said.
India is likely to produce 8,51,000 tonnes in 2023 with demand estimated to be 14,00,000 tonnes. But, with the carryover stock in the global market estimated at 1.2 million tonnes, the impact on prices would be minimal, Jom added.