A memorandum sent by India’s Automotive Tyre Manufacturers Association (ATMA) to the nation’s finance ministry outlines the tire industry’s hopes for a reduction in natural rubber duties.

Reuters reports that the memorandum, sent in advance of the national budget, states “the customs duty on natural rubber should be reduced from 20% to 7.5%, lower than the duty on tires.” At present natural rubber attracts a customs duty twice that of tires, making imports more competitive than locally produced tires.

"Or alternatively, the customs on tires should be increased to 20% from the current 10%," memorandum continued. This contentious issue – it should not be forgotten that, on average, natural rubber accounts for more than 40% of total tire cost for Indian manufacturers – is seen as a major factor behind the growing levels of tyres imported, particularly from China, in recent years. According to Reuters, 80% of India’s tire imports are now sourced from China and South Korea.

"The industry has been at a receiving end due to the ever increasing price of natural rubber in the domestic markets and a high duty, which makes imports unviable," said A.S. Mehta director, marketing at J.K Tyres & Industries.

Indian tire manufacturers are also seeking an extension of the excise duty cut introduced in 2009, a two-phased reduction from 10% to 8%. "The reduction in excise duty should be continued, if not for a year at least six more months," Mehta added.

Reuters reports that analysts believe there is a “fair chance” of a reduction in duties, though not as steep as the industry seeks. "The duty reduction in rubber may not be more than 4% to 5%, and that may happen in a phased manner,” commented a Mumbai based broker. (Tyres & Accessories)