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Tyre manufacturers in India are set to lose competitiveness in global markets amid fears of a spurt in the price of locally available natural rubber, due to import restrictions imposed on this key raw material by the government.

In a recent notification, the Directorate General of Foreign Trade (DGFT) said that facility for importing natural rubber under advance authorisation issued or revalidated on or after January 21 will not be available until March 31. A similar notification, dated a day earlier, allowed import of natural rubber of all varieties only through sea ports of Chennai and Nhava Sheva (Jawaharlal Nehru Port).

Restrictions on import of natural rubber -- the crucial raw material on which India is import-reliant up to 52 per cent of the country's overall consumption -- is likely to raise its prices resulting into proportionate increase in the cost of production. Since Indian exporters have been facing huge competition from the countries like China and Vietnam, further escalation in the production cost would push India out of the export markets.

"The Government's decision to restrict natural rubber imports through the ports of Nhava Sheva and Chennai, and the ban on duty-free import of natural rubber till the end of the fiscal, will be a double-blow for the tyre industry. The latter one would have a higher impact (negatively), as Apollo Tyres sells its products in large number of countries across the world, and we would not like to put a stop on its exports to countries, where we have a ready customer base," said Gaurav Kumar, Chief Financial Officer, Apollo Tyres Ltd.

The decision assumes significance especially in the wake of a sharp decline in exports of tyre in the first half of the current fiscal due to cheap availability of raw materials in overseas markets compared to India.

"Natural rubber prices will rise at least by Rs 5 a kg as transportation cost would rise from ports to distant factories. This will force loose India's competitiveness in global markets," said Rajiv Budhraja, Secretary General, ATMA.

Data compiled by the apex industry body the Automotive Tyre Manufacturers' Association (ATMA) showed India's total medium and heavy commercial vehicle (M&HCV) tyre exports declined by 9 per cent to 9,68,061 units in the period between April - September 2016 as compared to 10,63,938 units in the corresponding period last year. Exports of passenger car tyres too nosedived by 22 per cent to 10,81,841 units in the first half of the current financial year as against 13,95,921 units in the same period last year.

Further, facing heat of high cost of production, around 40 per cent units engaged in rubber products manufacturing have shut down their shops. Import restriction on natural rubber is likely to escalate the situation further.

"Tyre exports from India which have grown at a CAGR of 21 per cent in the last 10 years have petered out during the current fiscal. Tyre industry has put in adequate capacities to meet the foreseen demand. Auto industry is looking up. Government's emphasis on domestic manufacturing through Make-in India initiative is also a big plus. However the growth environment in case of tyres is vitiated in view of no-holds barred import of cheaper tyres. Truck and bus radials is among the fastest growing categories in the tyre industry. However imports have come to account for more than 30 per cent of the replacement market impacting domestic production," added Raghupati Singhania, Chairman and Managing Director, J K Tyre.

Meanwhile, prices of the benchmark rubber RSS 4 declined by 8.25 per cent in January following global trend.

As against 1.2 million tonnes of annual consumption, India's natural rubber production stands at 575000 tonnes. Thus, India has no option but to import natural rubber.

Import restrictions on natural rubber is set to defy the "Make in India" logic of the Prime Minister which would escalate import of tyre from China and Vietnam which India has already facing problem with.