The story so far: After a moderate post-pandemic revival, the price of natural rubber (NR) has crashed to a 16-month low of ₹150 per kg (RSS grade 4) in the Indian market. The price of latex, which soared during the pandemic due to huge demand from glove makers, took a more severe drubbing with its prices rolling down below ₹120. With the impact of the falling prices beginning to reflect in their daily lives as well as the local economy, the growers are up in arms against the authorities for their perceived delay in checking the slide. Under the aegis of the National Consortium of Regional Federations of Rubber Producer Societies India, an umbrella organisation for rubber growers, a day-long sit-in protest was staged in front of the Rubber Board headquarters in Kottayam, Kerala, last week.
What has caused the sharp fall in prices?
The current fall in prices is attributed primarily to a weak Chinese demand and the European energy crisis, along with high inflation and an import glut, among other things. While the unremitting zero COVID strategy in China, which consumes about 42% of the global volume, has cost the industry dearly, analysts have also flagged the acceleration of imports.
The domestic tyre industry, according to them, is sitting pretty on an ample inventory, especially in the form of block rubber from the Ivory Coast and compounded rubber from the Far East.
Where does India stand in terms of the production and consumption of natural rubber?
India is currently the world’s fifth largest producer of natural rubber while it also remains the second biggest consumer of the material globally. (About 40% of India’s total natural rubber consumption is currently met through imports)
A latest report by the Rubber Board has projected the natural rubber production and consumption in India during 2022-23 as 8,50,000 tonnes and 12,90,000 tonnes respectively. The production of the material improved by 8.4%, to 7,75,000 tonnes, during 2021-22 compared to 7,15,000 tonnes in the previous year. An increase in yield, tappable area and area tapped during the year contributed to the rise in production.
On the demand side, the domestic consumption rose by 12.9%, to 12,38,000 tonnes in 2021-22 from 10,96,410 tonnes in the previous year. The auto-tyre manufacturing sector accounted for 73.1% of the total quantity of natural rubber consumption. Import of the material, meanwhile, increased to 5,46,369 tonnes from 4,10,478 tonnes.
How does the falling price affect the growers?
The turnaround has exposed the growers — mostly small and medium scale — to a painful reckoning, contributing to wide-spread panic in Kerala, which accounts for nearly 75% of the total production. The precipitous plunge in prices coupled with high costs have also left them staring at an uncertain future, forcing some to stop production for the time being.
The impact of the price fall is felt more in the rural areas, where most people are solely dependent on rubber cultivation and have no other option but to cut expenses. This has caused a sluggishness in the respective local economies, which also coincided with the festive season in Kerala.
If a reversal in prices seem distant, the trend may also trigger a crop switch or even a fragmentation of the rubber holdings in the long run.
What do the farmers demand?
The key demands they have raised to the Union government include raising the import duties on latex products and compound rubber to make it on par with natural rubber, by either 25% or ₹30 per kg, whichever is lower.
Its demands to the state government are to raise the replanting subsidy in Kerala, which remains at ₹25,000 per ha, and the support price of the crop under the price stabilisation scheme to ₹200 from ₹170.
What are the other implications of falling rubber prices in Kerala?
As ripple effects of the price crash slowly unfold in the local economy, the issue has also assumed a new dimension in the Central Travancore districts — a political landscape crystallised through the anguish and anger among the rubber farmers over the past several decades. Expectedly, the sparring Kerala Congress factions were the first to take up the cudgels on their behalf.
While Jose K. Mani, chairman of the Kerala Congress (M) has urged the Kerala government to hike the support price for the material to ₹200, P.C. Thomas, working chairman of the Kerala Congress, called for the constitution of a special fund to support the growers. Sensing trouble, the Bharatiya Janata Party, which governs the Centre and is responsible for the policy decisions on NR, has appealed against turning rubber into a ‘political crop’.
How is the Rubber Board reacting?
Amidst all the gloom, the Rubber Board professes to be relatively sanguine as it regards the price fluctuation as cyclical and rests its hopes on the projections of a remarkable shortage of rubber seven years from now due to slow replanting in place of old trees in existing plantations. The agency, for the time being, is said to be also working on a set of programmes to arrest the free-falling of prices.
