Interview – India’s natural rubber output, consumption beginning to recover after Covid-19 shock as demand rises

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After being hit hard by the Covid-19 pandemic that saw India’s natural rubber production and consumption fall sharply, the industry is experiencing buoyancy once again as demand for tyres by the automobile sector and other non-tyre requirements continue to rise, Dr. K.N. Raghavan, Chairman and Executive Director, Rubber Board,
Ministry of Commerce and Industry,
tells indoasiancommodities.com in an exclusive interview.

How has the coronavirus pandemic impacted the natural rubber industry?  

Both the production and consumption of natural rubber (NR) were adversely affected by the nationwide lockdown to curb the Coronavirus pandemic. Production of NR in the period March to June 2020 fell to 114,000 Metric Tons (MT) from 156,000 MT in the same period in 2019. Consumption too, in the March-June 2020 period, dropped to 217,460 MT from 394,620 MT in the previous year.

There was a shortfall of 42,000 MT, about 26.92 percent on the production side while on the consumption side the shortfall was steeper, amounting to 177,160 MT about 44.89 percent.

Are we seeing recovery now?

The July–September 2020 quarter of the present financial year has been seeing some recovery, both in production and consumption.

Though the second quarter did see a rise in production to 174,000 MT, it was short of what was achieved during second a quarter of last financial year by 11,000 MT (5.94 percent).

This had more to do with the heavy and unseasonal rains in Kerala, the main producing state during the month of September, then due to the impact of the pandemic.

On the consumption side, there has been a buoyancy over the corresponding period of the previous year. For the second quarter of 2020, consumption stood at 293,000 MT as against 282,500 MT in the previous year.

This indicates that both sectors of the consuming industry – the tyre and non-tyre have recovered from the impact of pandemic and business is in full swing.

In the case of tyre sector, there are indications that industry is coming out of the slowdown faced by the automobile sector that faced a slump in 2019.

Dr. K.N. Raghavan, Executive Director, Rubber Board

What is India’s rubber production capacity? How has it changed?

India has 822,300 hectares (ha) of land under NR cultivation, out of which 663,700 ha carry mature plantation which could be tapped. However, in 2019-20 only 488,000 ha were tapped. Productivity in 2019-20 was 1,459 kgs per ha while it was 1m629 kgs per ha in 2013-14.

This shows that India has the capacity to produce 1 million MT of NR. However, we have not been able to achieve this on account of plantations being left untapped which has led to fall in productivity.

This is a direct result of the fall in prices of NR since it attained a peak average price of Rs 208 per kg in 2011-12. Compared to that, the average price of NR has been only 135.22 per kg during 2019-20. This sustained spell of low prices following the peak prices has resulted in many farmers leaving their plantations untapped.

Further, farmers have also stopped expending money on good agricultural practices such as rain guarding (which helps to tap rubber during the monsoon).

The Rubber Board had launched a programme in 2019-20 to adopt plantations which are lying untapped and start tapping there. Similarly, measures have been initiated to supply rain guarding materials to poor farmers either free of cost or by organising interest-free loans so that they can continue tapping even during the rainy season.

This is already showing positive results. The area under tapping has increased from 448,000 ha in 2018-19 to 488,000 in 2019-20. The efforts are being continued in the current year as well and it is expected that the benefits will be visible in the coming years as total quantity of NR produced increases.

How much natural rubber do we import and export?

The production of NR within the country is not sufficient to meet the demands of domestic consumption industry. This makes India a net importer of NR. Exports are seasonal and sporadic depending on market conditions.

Has the branding of NR helped to increase the demand for the commodity?

The Rubber Board had introduced the facility for branding of NR in 2011. This was targeted mainly at NR exported. Presently, on an average, 70 percent of NR exported falls under branded category.

Since exports from India are seasonal and sporadic and dependent totally on global and domestic price situation, branding per se has a limited role to play in boosting exports. However, this serves the objective of ensuring quality parameters of NR exported.

What are some of the major concerns faced by the industry?

On the production side, the concerns are mainly three, low prices of NR for more than 7 years; slump in production leading to more imports and fall in new planting and replanting practices.

The main concern of growers pertains to low prices. Since prices are decided by the demand and supply position in the market, there is little scope for any intervention in this area.

The Rubber Board has been working towards improving productivity and bringing down the cost of production by recommending Low-Frequency Tapping and promoting self-tapping by small holders.

Expenses incurred towards tapping accounts for more than 50 percent of the present market price of NR. If this can be brought down by bringing down the frequency of tapping and self-tapping, then the income from plantations would increase considerably.

The government of Kerala is also implementing a Rubber Production Incentive Scheme (RPIS), which ensures that a grower gets Rs 150 per kg of NR produced. This is being done by supplementing the market price he gets with the differential between Rs 150 and the market price being paid as an incentive.

For improving production, Rubber Board has brought in the practice of adopting untapped plantations and supporting the farmers to initiate tapping by the supply of rain guarding materials etc. This has already started showing results.

Low rates of new planting and replanting of senile trees is an area of worry. The total area of new planting and replanting which was in the region of 35,000-40,000 ha per year, has come down to less than 10,000 ha during the last three years.

The Rubber Board is proposing to undertake a major project in north eastern states of India to promote new planting there from next year onwards. This would not only help to improve the supply of NR in domestic market but also help to improve the socio-economic status of the resource poor sections of populations in these states.

For example, Tripura is seeing the beneficial effects of rubber plantations on the tribal population as their living standards have improved significantly. Presently, Tripura is the second-largest source of NR in the country after Kerala.

For the consuming industry, major concerns pertain to quality and availability of required grades of NR. While availability is being addressed through measures mentioned earlier, steps have been taken to improve the quality of NR, particularly in North eastern states of India, through the construction of group processing centres and through training programmes. It is expected that these measures will give the desired results soon.

What are the broad trends that the rubber industry is seeing globally?

NR prices have been on an upswing globally in the aftermath of the Coronavirus pandemic. This occurred primarily due to shortages on the supply side. There is a fall in production in Thailand, where labourers from Myanmar and Laos who went back to their home countries took time to return.

Floods in Vietnam and NR growing areas of China led to fall in production in these countries also. Further, the demand, especially from China, improved considerably from August onwards. The combination of high demand and low supply resulted in upswing in prices globally.

Indian NR market also follows global trends and domestic prices started moving upwards from August 2020. They crossed the threshold level of Rs 150 per kg in September and reached Rs 160 per kg last week. 

Shampa Bahadur has been a business journalist for more than two decades. She has written for Business India, PTI Media TransAsia and India Infrastructure Publication Ltd among others. She has also written coffee table books. She can be reached at shampa@indoasiancommodities.in

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