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Fall in Price of Natural Rubber

Fall in Price of Natural Rubber

What has Caused the Sharp Fall in Prices?

Poor Demand and Other Factors: Due to weak Chinese demand and the European energy crisis, along with high inflation.

While the unremitting zero COVID strategy in China, which consumes about 42% of the global volume, has cost the industry dearly.

Import from Other countries: There is an ample supply of block rubber from Ivory Coast and compounded rubber from the Far East in the domestic tyre industry.

The Auto-Tyre manufacturing sector accounted for 73.1% of the total quantity of natural rubber consumption.

How does the Falling Price affect the Farmer?

Crop Shifting: The impact of the price fall is felt more in the rural areas, where most people are solely dependent on rubber cultivation, therefore, they might switch to other crops.

It can even lead to the fragmentation of rubber holdings.

Effect on Small and Medium Enterprises: As most of the production occurs in small and medium enterprises, the falling price could lead to their uncertain future and force them to stop production temporarily.

Panic in Kerala: The state accounts for almost 75% of total production, as local economy depends on rubber production, therefore the falling price could lead to major panic in villages of Kerala.

What do we Know about Natural Rubber?

Commercial Plantation Crop: Rubber is made from the latex of a tree called Hevea Brasiliensis. Rubber is largely perceived as a strategic industrial raw material and accorded special status globally for defence, national security and industrial development.

Conditions for Growth: It is an equatorial crop, but under special conditions, it is also grown in tropical and sub-tropical areas.

Temperature: Above 25°C with a moist and humid climate.

Rainfall: More than 200 cm.

Soil Type: Rich well-drained alluvial soil.

Cheap and adequate supply of skilled labour is needed for this plantation crop.

Major Producers Globally: Thailand, Indonesia, Malaysia, Vietnam, China and India.

Major Consumers: China, India, USA, Japan, Thailand, Indonesia and Malaysia.

What is the Status of Rubber Production in India?

Production:

The British established the first rubber plantation in India in 1902 on the banks of the river Periyar in Kerala.

India is currently the fifth largest producer of Natural Rubber in the world with one of the highest productivity.

The production of the material improved by 8.4%, to 7,75,000 tonnes, during 2021-22 compared to 2020-21.

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.

Top Rubber Producing States: Kerala > Tamil Nadu > Karnataka.

Government Initiatives:

Rubber Plantation Development Scheme and the Rubber Group Planting Scheme are examples of government-led initiatives for rubber.

100% Foreign Direct Investment (FDI) is allowed in plantations of rubber.

The Department of Commerce brought out the National Rubber Policy in March 2019.

The policy includes several provisions to support the Natural Rubber (NR) production sector and the entire rubber industry value chain.

It is based on the short-term and long-term strategies identified by the Task Force constituted in the rubber sector for mitigating problems faced by rubber growers in the country.

Developmental and research activities for supporting the NR sector for the welfare of growers are carried out through Rubber Board by implementing the scheme Sustainable and Inclusive Development of Natural Rubber Sector in the Medium-Term Framework (MTF).

Way Forward

The Government needs to raise the import duties on compound rubber to make it on par with natural rubber.

The government must address the demands of the farmers by raising the replanting subsidy and the support price of the crop under the price stabilization scheme.

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