The Hindu : Kerala News : Restore export incentive for rubber: UPASI

Online edition of India's National Newspaper
Monday, Sep 20, 2004

Kerala

Kerala

Restore export incentive for rubber: UPASI

By Our Staff Reporter

KOCHI, SEPT. 19. J.K. Thomas, Chairman, Rubber Committee, United Planters' Association of Southern India (UPASI), has urged the Government to restore the port restrictions and export incentive for natural rubber.

In a statement here recently, he pointed out that the 50 per cent reduction in export incentive and the removal of port restriction had a detrimental effect on the domestic price levels.

He said the domestic natural rubber (NR) prices (RSS 4) which had shown an improvement since 2003 reached Rs.67.38 a kg in the first week of July 2004. From this level, the prices started declining owing to the relaxation of port restriction in August 2004, followed by the slashing of export incentive. The prices have fallen below Rs.50 and the latest price as on September 15, 2004, is only Rs.49.50 a kg, representing a fall of 26.5 per cent compared to the prices realised during July 2004. The fall in the international price (RSS 3) during the corresponding period represents a decline of only 7.8 per cent. Notably, the magnitude of the decline in domestic prices has resulted in a wide gap between domestic and international prices. Currently, the domestic NR price is lower than the international price by Rs.7.14, which is a matter of concern. The port restrictions were introduced in 2001 to check the sub-standard imports flooding the country while the export incentives were conceived to enable India to establish its credentials in the international NR market.

Interventions relevant

The relevance of these interventions continues in the context of larger imports and lower exports. The imports into India during April-August 2004 were 30,221 tonnes compared to 20,020 tonnes during the corresponding period last year, representing an increase of 51 per cent. The export from the country during April-August 2004 was only 6,922 tonnes compared to 12,802 tonnes in April-July 2003, a decline of 46 per cent.

Special additional duty

Moreover, the removal of special additional duty of 4 per cent in lieu of sales tax and the reduction of import duty from 25 per cent to 20 per cent are added incentives for the consuming industry to source NR from the world market.

While slashing the export incentive, the Government had highlighted that export incentive is not WTO (World Trade Organisation) compatible, but it may be noted that the export incentive scheme available for NR exports is WTO compatible as incentives are provided to the exporters towards meeting their cost for packaging, handling and transport, both domestic and international.

As per the WTO, any country can resort to such an incentive scheme until the export share of the commodity reaches 3.25 per cent of world export.

Notably, India's export share in the world market in 2003-04 was only 1.3 per cent, he said.

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