Rubber production on the rise amidst dip in consumption

630F48BC-2E32-40A5-B975-EB7787D13C14-scaled.jpeg

Encouraged by higher prices, the production of natural rubber in India has upped a bit in the 2020-21 fiscal. The Rubber Board’s early estimates indicate an increase of about 0.4 percent to 7.15 lakh tonnes from a year ago. 

KN Raghavan, Rubber Board chairman and executive director attributed the rise in production during the last 3 quarters of 2020-21 to increase in the domestic price of rubber, good rains in rubber growing areas and extensive rain guarding of trees by farmers and adoption of untapped plantations by Rubber Board which has helped to bring more area into tapping. 

“We managed to implement rain guarding in a big way which has helped to increase natural rubber production. We covered 2.25 lakh hectares. And this was only possible by getting the Kerala government’s permission to secure soft loans from co-operative banks at minimum interest for the installation of rain guards,’’ says Raghavan.

The sector also received a further boost with the Kerala government raising the support price for small farmers by Rs 20 to Rs 170 per kg under the state incentive scheme. 

Though the first quarter of the fiscal year 2020-21 was a washout in the wake of nationwide lockdown following the Covid -19 crisis, the second quarter started seeing some recovery in production. The rise came after the production in the first quarter dropped by 41,000 tonnes to 82,000 tonnes.

Spike in natural rubber prices

Natural rubber prices have been seeing an upswing globally from mid-2020. This has occurred primarily due to shortages on the supply side. There has been a fall in production in Thailand, Myanmar, and Laos due to labour shortages. Also, floods in Vietnam and NR growing areas of China led to fall in production.

The demand side, especially from China, improved considerably from August 2020 onwards. The combination of high demand and low supply resulted in an upswing in global rubber prices. 

Since Indian natural rubber market mirrors global trends the domestic prices started hiking from August 2020 onwards. It breached the Rs 150 per kg mark in September 2020. The average price of rubber in 2019- 20 has hovered mostly around 135 per kg. 

The average monthly price of RSS-4 grade that goes into the making of tyres rose from Rs 126.83 per kg in July 2020 to touch a high of Rs 171 per kg in April 2021. The current prices are ruling at around Rs 168 per kg.

Consumption 

While production of natural rubber has increased a tad the demand remains fairly crippled in India in the pandemic times. This has led to a fall in consumption by nearly 3.5 percent to 10.9 lakh tonnes.

The only redemption came after the first quarter of 2020-21 when the tyre sector managed some recovery. This was helped primarily by the Union government’s decision to restrict the import of tyres into the country. 

“The buoyancy in the automobile sector towards the end of last year led to a rebound in the OE and replacement segments of the tyre industry.  This resulted in improving consumption,” says Raghavan.

The non-tyre sector, however, witnessed a fall in consumption from 3.77 lakh tonnes in 2019-20 to 3.15 lakh tonnes this fiscal.

The reduced domestic consumption and rise in production caused fall in rubber imports by 111.3 percent. It fell from 4.57 lakh tonnes in 2019-20 to 4.10 lakh tonnes in 2020-21. 

To continue the trend of lowering imports Raghavan says that farmers need to complete the rain guarding operations before the onset of monsoon so as to conduct tapping from June till November 2021, when the rubber growing areas get rain.

Going forward 

The second wave of COVID-19 which is sweeping the country has trimmed India’s demand outlook. 

“However, it is likely that it will be offset by the expected improved demand from Europe and the US where economic activities are picking up fast,” says a senior economist from the Association of Natural Rubber Producing Countries (ANRPC).

It is also expected that the prices will make marginal gains in the short term helped by improving demand from Europe and the US in the backdrop of good monsoon prediction 

Meanwhile the Rubber Board of India has initiated steps to future proof the industry’s well-being.

A new project to develop rubber plantations in 200,000 hectares in the North East of India over a period of five years has been kicked off with the participation of consuming industry and concerned state governments. The first planting under this project will commence in Tripura in June 2021. 

“The support from consuming industry will come either in the form of interest subvention, to the extent of Rs 50,000/ on credit availed by farmers through a NABARD sponsored scheme or through the supply of planting materials. This is the first time that consuming industry is involved in the efforts to improve rubber production in the country” says Raghavan. 

Further, the first-ever Genetically Modified (GM) Rubber plant is ready for field trials and the same is scheduled to commence in June 2021 in Assam.

“An electronic trading platform is also being developed by Rubber Board and is nearing completion and a security audit of this platform is expected to start within a month. It will be launched after this audit is completed successfully,” added Raghavan.  

Moreover, in a bid to help the industry, the Board is also planning to conduct a “Census” of all rubber plantations across the country to update its data about the number of holdings, acreage under plantation, age of rubber trees, and a system of tapping adopted. This work will be commenced as soon as Covid restrictions are lifted.

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

Leave a Reply

Your email address will not be published. Required fields are marked *