A STUDY ON THE IMPACT OF LPG ON NATURAL

RUBBER AND RUBBER-BASED INDUSTRIES IN

KANYAKUMARI DISTRICT

Thesis submitted to the Manonmaniam Sundaranar University

Thirunelveli, in partial fulfilment of the requirements for the

award of the Degree of

DOCTOR OF PHILOSOPHY IN COMMERCE

by

Researcher

V. JANET Y. SELVIA
REG. NO - 3297

Research Supervisor
Dr. E. RAJA JUSTUS

MANONMANIAM SUNDARANAR UNIVERSITY

THIRUNELVELI – 627 012.
MARCH 2012

1
 CHAPTER – I

INTRODUCTION

1:1 Introduction

Socio-economic conditions vastly differ across the world. Globalisation

has become the buzzword on the lips of businessmen, politicians, religious leaders,

educators, students, the rich and the poor. It involves every aspects of life -

economic, political, social, cultural and religion. In the words of Huns Kung,

“Economic globalisation is the composite of Free World Trade, Space Shrinking

Technology and Spread of Financial Markets.”1 Trade is the original and continuing

fundamental of economic globalisation.2 Trade is a key mechanism for increasingly

moving goods and services around the globe. The primary function of World Trade

Organization(WTO) is trade liberalisation and expansion of free market all over the

world. For Amal Raj, “Liberalisation of trade must be accompanied by a certain

control by the government so that free trade serves not only just to create private

profit but also public welfare.”3 The ongoing process of liberalisation fudged the

government policies and pushed them towards privatisation. Privatisation is inherent

in liberalisation. Globalisation has become inevitable.

India is a vast and densely populated country. The economy could achieve an

annual growth rate of 3.5 percentage upto 1970s. The current growth rate is around

eight percentage4. The economic reforms ought to be welcomed. But what to be

realized is that it must not worsen major problems such as poverty, unemployment

16
and regional imparities in development. In India, the prime sectors such as

agriculture and agro-based industries are facing serious problems as globalisation is

laying stress on competition, reduction in cost of production and promoting exports.

Hence it is necessary to study the Impact of Liberalisation, Privatisation and

Globalisation on Natural Rubber and Rubber-based Industries which offer livelihood

to many in India.

India is blessed with rich and diverse agro climatic profile. It has a great

potential in the production of horticulture and plantation crops. Plantation crops are

high valuable crops having great economic importance and providing huge

employment opportunity. Tea, Coffee and rubber are the main plantation crops in

India5. For each of this commodity the government has set up a Board under an Act

of Parliament like the Tea Board, Coffee Board and Rubber Board, which provides

all allied services to make the product of their respective commodities extremely

marketable. Rubber is a prominent plantation crop. Rubber industry is a composite of

rubber plantation and rubber-based industrial units.

1:1:1 Plantation

A plantation is a large tract of mainly mono-culture growing a species of

plant and having long gestation period. According to the Plantation Labour Act 1951,

the term plantation applies to any land used or intended to be used for growing tea,

coffee or rubber which admeasures five hectares or more and in which 15 or more

persons are employed. Plantations are economic entities connected historically with

certain crops and countries. The salient features distinguishing the plantations in

India are their structural concentrations and market orientation. The bulk production

of rubber (87 percentage) and coffee (60 percentage) come from the small holder

17
 sector where as the tea nearly 80 percentage accounts for by the corporate sector6.

The growth in production of these commodities during the last 10 years has been

phenomenal due to increase in both area under the crops as well as productivity. Tea,

coffee and rubber crops generate nearly 15 percentage of total agricultural export

earnings although they occupy only about one percentage of the total cultivated area

in the country7. India has the highest rubber productivity in the world8.

1:1:2 Rubber Plantation

The term rubber plantation refers to all the individuals and organizations

engaged in the activities in connection with the cultivation of rubber, maintenance,

operation, harvesting, processing and marketing. Among the plantation crops, natural

rubber is classified as an industrial raw material by the WTO despite the fact that it is

purely an agricultural activity. Rubber plantation provides the principal raw material

required for manufacturing of variety of rubber products ranging from toy balloons

to tyres for giant earth moving equipments. In India commercial cultivation of rubber

was started in 1902 by European plants at Thattekad near Alwaye. The plantation

was popularly known as Periyar Syndicate9. Rubber plantation sector in India

employs nearly four lakh persons directly. It is noteworthy that good number of

women are employed in this sector. Rubber plantation also provides a variety of

ancillary products like honey, seed oil, seed cake and rubber wood. Being a tree crop,

it has tremendous potential for eco-restoration. The plantation sector consists of

estates and small holdings*. It is dominated by small holdings with an average size of

*
As per the Amendment to the Rubber Act passed by the Parliament in November 2009,

plantations up to 10 ha and above are reckoned as estates and those below 10 ha as small holdings.

18
0.51 hectare and share ninety percentage of area and ninety percentage of production.

The estate sector with twenty hectares or more accounts for the remaining10. Rubber

cultivation in India is traditionally confined to Kerala State and Kanyakumari

District in Tamil Nadu. These traditional areas contribute 81 percentage of the total

area of 661980 hectares cultivated with the crop in 2008–09. Kanyakumari District

shares 98 percentage in the total area under rubber in Tamil Nadu.

1:1:3 Natural Rubber

Natural Rubber (NR) is the unique renewable resource of nature. Though

rubber has been found in the latex over 2000 species of plant, Hevea Brasiliensis is

the most important commercial source of natural rubber for reasons of high yield and

low impurities. It is commonly known as rubber tree. Natural rubber is a tough

material which possesses properties of plasticity, resistance to electricity,

adhesiveness and elasticity. NR constitutes the basic raw material for more than

50000 different articles for everyday use. This has made rubber industry the second

largest in the world next to iron and steel11. So NR plays an important role in the

industrial and economic development of the country.

1:1:4 Rubber Based Industries

There is inseparable relationship between rubber plantation sector and

rubber based industries in India. From a single item of proofed fabric produced in the

1920s, the rubber industry in India has progressed to make 35000 different products.

India realized the strategic importance of NR even before independence and hence it

was brought under Rubber Control and Protection Order in 194212. But the Indian

19
rubber industry was economically insignificant till independence. It has grown at a

phenomenal rate within the last six decades. The plantation sector is the main reason

for the high growth rate of Indian rubber manufacturing industries. . It provides

adequate raw material at an affordable price to manufacturers. The plantation sector

with the production of more than one million tonnes of rubber helps radical and rapid

growth for the Indian rubber based industries. NR has multifarious uses and there is

hardly any segment in modern life which does not make use of rubber based articles.

NR is an essential element for all forms of modern transportation. It plays a

significant role in manufacture of mechanical goods. It also plays vital role in

communications and transmissions. Moreover, it becomes indispensable in health care

and family planning. The new uses of rubber are emerging day by day. Thus NR has

become the base material for manufacturing an incredible variety of products. The

product making units are spread all over the world.

1:2 Statement of the Problem

Liberalisation of trade and financial markets and privatisation of public

sector gradually entered the agricultural sector. A number of policy changes such as

the removal of minimum export price on agricultural commodities, the reduction of

tariff barriers to facilitate agricultural exports and lowering of import duties are

notable. The Indian rubber industry plays a major role in the Indian economy. The

industry has certain distinct advantages like extensive plantation sector, indigenous

availability of basic raw material, a large domestic market, cheap labour, training

facility in various technical institutions, on-going economic reforms and improved

living standard of the masses. The Indian economy is undergoing tremendous

changes with Liberalisation, Privatisation and Globalisation policies initiated in

20
1991. Natural rubber is also subjected to various reforms under the new policies of

Structural Adjustment Programmes. India stands third in the world production of

NR. It has become the second largest natural rubber consumer next to China. It has

recorded a consumption growth rate of 6.8 percentage in 2009-1013. In the era of

globalization, possibility of increased trade in the global rubber market has widened.

According to Zygmunt, “Globalisation has given more opportunities for the

extremely wealthy to make money more quickly. These individuals have utilized the

latest technology to move large sums of money around the globe extremely quickly.

Unfortunately it makes nothing to the lives of the poor.”14 The present study is

aimed at evaluating the impact of L.P.G on natural rubber and rubber based

industries in Kanyakumari District.

Kanyakumari District in Tamil Nadu accounts for 98 percentage of

production of rubber in the State. A large quantum of people depends on this industry

for their existence. So there is a greater need for the sustenance of the rubber sector

both in the forms of rubber plantation and rubber based industries in Kanyakumari

district which covers a geographical area of 167200 hectares. The best quality latex is

produced in Kazhiyal and Kulasekharam rubber plantations in Kanyakumari district15.

Out of 91807 hectares of total crop area, rubber is cultivated in 19500 hectares.

Nearly 24000 tonnes of natural rubber is produced per annum. There are 16 rubber

estates with an area of more than 20 hectares 24 rubber estates with an area of 10 to

20 hectares and growing rubber in 6011 hectares and about 30250 small holdings in

13489 hectares.16 Arasu Rubber Corporation cultivates rubber in 4280 hectares17.

LPG- Liberalisation, Privatisation and Globalisation

21
There are thirty five Rubber Producers Societies in Kanyakumari district. They give

training to the members, conduct seminars, supply planting materials and provide

technical advices. The Rubber Board provides loans and subsidies to the growers

through these RPS. There are fifteen Self-Help-Groups engaged in rubber honey

production and rubber nurseries. Moreover there are 250 registered rubber dealers in

the district18. Thus the district has all the factors favoring rubber plantation. The

value of rubber latex can be enhanced by manufacturing rubber products. In

Kanyakumari district there were 126 small scale rubber-based industries registered

under the District Industries Centre (DIC) with a capital of Rs.437 lakh. They

manufactured rubber products like gloves, rubber balloons, rubber bands, rubber

sheets and mats. They provided employment to 1874 people19. But most of them have

downed their shutters. At present there are only seven manufacturing units. Although

the district has the potential for establishing more and more rubber based industries, it

is obvious that the resources are not tapped efficiently and economically especially

by the tiny units in the age of globalisation. So there is a need to study further. This

study aims at evaluating the impact of Liberalisation, Privatisation and Globalization

(LPG) on natural rubber and rubber-based industries in Kanyakumari district, in order

to seize the new views and avenues opened all over the world through the

globalisation process.

1:3 Objectives of the Study

Indian rubber industry is in a transition period due to the economic reforms

initiated by the Government headed by Shri.P.V.Narasimgha Rao at the Center in

22
1991. The impact of LPG may be adverse or favorable on all fronts of rubber

industry from production to consumption. The object of this study is to throw light

on these impacts, so that a long-term strategy for NR can be formulated. Following

are the objectives of the study

1) To know the liberalisation measures taken by the Indian Government with

regard to NR.

2) To study the supply and demand position of NR in the pre and post-

liberalisation period.

3) To know the impact of globalisation on the price of NR.

4) To analyze the impact of LPG on rubber plantations and rubber based

industries in Kanyakumari district.

1:4 Hypotheses of the study

Following hypotheses have been formulated for the study.

1) Supply side of Natural Rubber (NR) is dominated by small holders and

demand side is dominated by large manufactures.

2) There is no difference between the growth rate of natural rubber

consumption during the pre and post-liberalisation period.

3) Domestic and International prices are highly positively correlated during the

post liberalization period.

4) Increase in rubber production is the basis of rubber based industries in

Kanyakumari District.

5) Rubber cultivation moves into the area of other crops in Kanyakumari

district.

23
1:5 Literature Review

With a view to know what had been done and what is yet to be explored in

the field of Natural Rubber a number of studies have been referred. For a bird’s–eye

view some are given here under four headings.

1) Rubber and Rubber Plantations

2) Rubber-based Industries

3) Problems in and around Rubber Plantation and Rubber-based Industries

4) NR in the global business environment.

1:5:1 Studies Related to Rubber and Rubber Plantations

Loren, G. (1962), in his book titled ‘Rubber’ has mentioned that though

rubber has been obtained from thousands of plants, Hevea is the preferred and viable

one because hevea latex has high molecular weight and low non-rubber materials20.

George, M.V. (1965), has made a study on the relative changes in acreage

under different crops namely rubber, paddy, sugarcane, coconut, cashew and tapioca

from1952-62 in Kerala. He has observed that the maximum growth in the acreage was

towards rubber followed by sugarcane and cashew and the lowest rate was for tapioca.

He has concluded that the cropping pattern in Kerala has undergone a slight shift from

food crops to cash crops21.

Jose Thomas (1979) in his study on “The Economics of Rubber Plantation

Industry in Kerala”, evaluated the role of the Rubber Board in the development of the

rubber-plantation industry in Kerala. He reviewed the various schemes of the Board to

increase the rubber-based industries. He also assessed the benefits derived by the

rubber cultivators in Kerala from the new-subsidy scheme introduced by the Board22.

24
 Elsamma (1981) in her study on “The Economics of Rubber Cultivation by

Small Holders in Kottayam District” estimated the cost of production as Rs.305 per

quintal sheet rubber. She also reported that the pay-back period of rubber cultivation

as 9.51 years. According to her it was profitable for small holders23.

Dato, Y.B. (1983), presented a research paper in the Planters Conference

held in RRIM and stressed the need for mechanization of rubber plantation to cope up

with the growing labour shortage. He recommended to develop a tool which should be

as light as a tapping knife and be able to tap a tree in less than two seconds the time

required for the conventional manual tapping24.

Uma Devi (1984) in her doctoral thesis titled, “The Impact of Plantation

Crops on Kerala’s Economy” analysed the various aspects of plantation crops such as

area, production, productivity, price, import, export and employment generation

during the pre and post independence periods. She identified that tapping decision

was significantly influenced by the price output while planting decision was

negatively related to price. She concluded that expansion of plantation ought to be

accompanied by decline in area under forest and in the domestic production in another

source of food25.

Ajith Kumar et.al. (1994), analysed the growth performance of the rubber

plantation industry in Kerala. They stated that the growth rate of tappable area,

production and productivity were positive and significant during 1955-1992. They

concluded their report by stating that as there was only limited scope for extension of

cultivation in Kerala further development depends on an increase in productivity26.

Peter Mathew (1996) examined the relationship of scientific literacy of small

holders with their training and education. The study revealed that the extent of

25
scientific literacy among small holders was inadequate. He concluded his study by

stating that the formal education along with different types of training would enhance

the scientific literacy and in turn would improve the cultural practices of rubber for

the maximum yield from their small holdings27.

Sethuraj, M.R. (1998), in his study on “The Productivity Improvement in

Rubber” stated that continuous cultivation of rubber for the past several decades had

not deteriorated the productivity of the land. Instead scientific cultivation of the crop

resulted in an increase in the yield without sacrificing the long term productivity of

the soil28.

Rajasekharan and Krishnamoorthy (1999) had indentified the determinants

of technical efficiency in NR production in the estate sector of Kerala. According to

them, technical efficiency was associated with the role of management in the

production process. They were of the view that the differences in the efficiency of

factor use were attributable to differences in the entrepreneurial talents of the firms.

They identified that the supervisor- tapper ratio, farm size and the managers training

were the sources of variation in technical efficiencies. They have concluded that

except farm size the other two were significant factors and the management functions

such as organization of the work, motivation, training and supervision of employees

were important to achieve the frontier level of output from the rubber estates29.

Mathew, N.M. (2002), in his study on “Natural Rubber Research in India,

Yesterday, Today and Tomorrow,” mentioned that the rubber plantation industry had

an inward orientation as there was adequate demand from the domestic manufacturing

industry and a protective market environment. He opined that with globalisation of

trade and entry of new competitors, consolidation of the position of Indian rubber in

26
the internal market and aiming at competition in the world market emerged as the

most important challenges. He suggested to face them by ensuring cost and qualitative

competitiveness30.

Sekhar, B.C. (2004), in his article justified the use of the name Kamadenu

for the rubber tree for the reason that it was the provider of rubber, tropical hardwood,

pharmaceuticals, chemicals and desirable materials for human sustenance and

comfort31.

Vijayakumar, et.al. (2005), conducted studies in various parts of India with

different agro-climatic patterns. Since non-availability of sufficient tappers and cost

of tapping accounted for seventy percentage of the expenditure in NR production,

they recommended low frequency tapping systems to achieve the full yield

potential32.

Vibin, V. (2005), in his article about “Natural Rubber Average Yield May

Touch Record High”, highlighted that the main reason for the spurt in productivity

was the prevailing high price for NR, which induced farmers to provide better

fertilization and care to trees33.

Sajen Peter (2008) has mentioned in his article titled,” Rubber Industry

and its Bright Prospects”’ the need for trained tappers in order to maintain the lead

position in rubber yield over the world. He has pointed out that inefficient tappers

could bring down yield even upto fifty percentage34.

Paramasivan, T. (2008), in his study on, “Production and Marketing of

Rubber”, had pointed out that in rubber plantation the bottom level workers who

involved in tilling, grooming, manuaring and tapping were low paid while the

plantation owners were drawing high profit. He asked the workers to form unions to

27
come out of the exploitation. He requested the government to cover the plantation

workers too by the Tamil Nadu Government policy of giving land to the landless35.

Cyril Kanmony and Gnana Elplinston (2010) analysed the impact of

climate change on important crops in Kanyakumari district. They have reported that

the climate conditions particularly the rainfall pattern of any country affect the area

under cultivation, production and productivity of important crops like paddy, wheat,

sugarcane and rubber. So the conversion of agricultural land into non-agricultural land

has been going on in a great speed. They have suggested the district authorities to take

suitable action not only to mitigate adverse impact of climate change but also

conversion of agricultural land into non-agricultural land36.

Sivaniah, A., in his attempt to identify the factors affecting NR production

and productivity in the district has revealed that rainfall is the major factor. He has

suggested to use raingurads to increase production by 11 percentage, as nearly twenty

seven tapping days are affected per year due to rain37.

Sheela Thomas, Chairman, Rubber Board, in her report to Indian Rubber

Journal has briefed that the rubber plantation industry in India has recorded

spectacular achievements during the six decades since 1950-51. NR production

provides livelihood to million people. There has been nearly a seven-fold expansion

in area and four-fold increase in average yield. As a result, the total production has

surged from a mere 1530 tonnes to 855000 tonnes in 2011. During the last three years

the growth rate in production has been 6 percentage per annum. as against the global

average of 3.3 percentage. In yield per hectare, India has emerged as the highest

performer among the major rubber producers. The high yield has served considerably

in imparting cost competitiveness to Indian rubber38.

28
1:5:2 Studies related to rubber-based industries

Loren,G (1962), in his book ‘Rubber’ has written that many uses of rubber

are made daily around home in electrical fixtures and appliances, plumbing fixtures

and appliances and cleaning equipments and children’s amusements. He has

mentioned that in many cases, the choice of rubber or other material is determined

entirely on the basis of cost but in some cases rubber contributes to operating comfort

and in others particularly if non-conductivity of electivity is necessary rubber is

essential. Personal use of rubber, in the form of boots, shoes, raincoats, is its oldest

application. While the use of rubber in transportation has now far out- distanced all

other applications39.

Raju (1990) analysed the development and problems of the rubber based

industries in Kerala and suggested two steps to increase productivity namely

reorientation of tax structure to reduce tax burden and to stabilize the prices of basic

inputs to produce rubber goods at competitive prices40.

Baker, C. (1998), has mentioned in his article titled “Natural Rubber from

Wickham to 21st Century”, that the use of rubber accelerated after the discovery of the

pneumatic tyre. The 1940 s, 50s and 60s saw a whole series of innovations with NR in

terms of new uses. A prime example is rubber on roads. Accordingly, there was the

development of rubber-metal laminated bearing for the protection of whole buildings

against ground borne vibration in 1965. In the 1970s Expodised Natural Rubber and

Thermoplastic Natural Rubber were developed which could be recycled five times

without significant loss of properties. In the mid 1980s the rubber-metal laminated

bearing was developed to protect buildings from earth quakes by damping out the

seismic vibration. He had viewed that the prospects for the NR industry were very

29
promising as space shuttles to use NR in their tyres. So generations to come in 21st

century would still need this unique polymer41.

Paul Vinaya Lal Wilson (1999), studied the performance and problems of

the rubber-based industries in Kanyakumari district. He identified that most of the

entrepreneurs who had started rubber-based industries in the district had no exposure

to rubber product manufacturing technology. He recommended the government to set

up rubber techno-park in the district for the development of rubber-based industries42.

Abraham, P.O., (2001) in his doctoral thesis tilted, “Problems and

Prospects of Rubber-based Industries in Kerala”, confirmed that the backwardness in

the development of rubber-based industries in Kerala were attributed to concentration

of rubber goods production in a few items, lack of enterprising entrepreneurs, non-

availability of sufficient power, labour problem, difficulties in arranging finance, non-

cooperative attitude of the government officials, etc. He concluded his study with a

note that the rubber-based industrial activities had a bright future in the state, provided

a favourable industrial climate was created and maintained by the government,

financial institutions and the industrialists43.

Smit, H.P. (2005), analysed the NR price trend and came to the view that

rubber consumption was more in tyre sector when compared with the non-tyre sector.

Tyres of commercial vehicle had a major role in the demand of rubber44.

Gorden Cook, J. (2005), in his book “Rubber” has mentioned that rubber

from the plantation, in the form of sheet or liquid latex, is the raw material for

producing more than 60000 different articles and the number is increasing steadily as

new applications are discovered from it. But despite this immense range of rubber

products, the prosperity of the rubber industry is linked directly with that of the

30
motor-car industry because it alone consume more than two-thirds of the annual

output of rubber45.

1.5.3 Studies related to problems in and around rubber plantations and rubber-

based industries

Jacob George (1985), evaluated the performance of Co-operatives in the

field of natural rubber marketing. He reported that co-operative rubber marketing

societies had been confronted with the problems such as over politicalisation, less

accountability, lack of professionalism, competition from dealers and visual grading.

He suggested remedies such as professional orientation and professional

representation among the Board of Directors of Co-operative Societies, strengthening

the Apex Body and restriction of membership for better performance of the

societies.46

Manoharan Nair.K. (1990), in his research work on Problems and

Prospects of Plantation Industries in Kerala identified the problems in the cultivation

of rubber, marketing of rubber products and the management of plantation industry in

Kerala. He suggested modernization as the major solution for problems associated

with cultivation and marketing of rubber products.47

Knox. G and Theison. A. A. (1991), have made a study on the feasibility

of introducing new crops. According to them natural rubber has been facing many

technical and economic barriers towards commercial development. They have

suggested technical refinement to reduce the cost of production of NR to a level that

would be economically attractive. 48

Varghese (1991), in his report on, “Marketing of Raw Rubber in India” has

analysed the marketing system in rubber industry. He has mentioned that in the midst

31
of adverse conditions the favorable aspect is the well spread network of dealers in

villages to procure natural rubber. 49

Colin Barlow, et.al. (1994), examined the key aspects of rubber

consumption. According to them the vital aspect of demand for rubber is derived one,

as elastomers are intermediate goods used in producing final consumer goods. Thus

demand for rubber in general, depends on many factors influencing demand for final

goods. So the rubber demand situation is more complex than that of rubber supply.50

Kuriakose (1995) conducted a study on the marketing channels of NR and

reported that the co-operative sector handled only less than 20 percentage of the

rubber traded in the Indian rubber market. He concluded his study by stating that

Government and Rubber Board should take special efforts to strengthen the co-

operative marketing in order to minimize the problems of rubber growers such as lack

of grading, shortage of storage facilities, indebtedness and delay in payment. 51

Lakshmi (1996) analyzed the NR price movement for a period of twenty

six years. She opined that among the different variables like production, consumption,

stock, import and international price, production of NR was the most significant

variable that influenced the price of NR in India. 52

Sundar, P.S. (1999), in his article, “ How to Achieve Stability in Prices?”

has stressed that the stability in prices does not mean a fixed price for a given period

of time. For him, it means that the demand factor would be stable to match the supply

side of the rubber economy. When the supply increases, there will be a number of

factors working to the advantage of the market to push up the demand, be it at home

or abroad. While the Indian rubber goods manufacturers can have an access to the

Indian or the global rubber market, the Indian rubber producers should have an equal

32
access to sell their rubber in India or abroad. So, a stable price mechanism does not

injure an open policy or globalization, but uses the globalisation factor as a weapon to

ease the pressure of glut. 53

Cashin, et.al., in their report on, “ Task Force on Plantation Sector” have

assessed that the volatility of commodity prices prevents plantations from meeting

their debt re-payment obligations even during the phase when the physical

productivity of their holdings reaches economic levels of yield. For them as the

plantation commodities undergo cycle of booms and basts the price shock lasts for a

period of six to seven years in case of coffee, seven to twenty one months in case of

tea and more than eighteen months in case of rubber.54

Viswanathan and Raja Sekaran (2001), in their analytical report on

“Decline in NR Prices and Adoption of Agro-Management Practices in Small

Holdings in India”, brought out that the period since mid-90s was unique in the case

of NR in India as it experienced severe crisis characterized by sharp increase in NR

price during 1995-96 followed by a steep decline thereafter. The crisis in NR price

posed severe constraints on the viability and sustenance of rubber cultivation as well

as adverse effects on the adoption of improved agro-management practices by the

small growers in India. They identified low cultural practices and stagnancy in

tapping wages as the immediate responses for the small rubber growers in Kerala for

the decline in rubber prices55.

Gurder Singh and Ashokan (2001), in their study on, “ Competitiveness of

Indian Rubber Under WTO has stated that as costs incurred and return realized are

spread over the economic life of the plantation. Their simple summation and annual

33
averages would not reflect the real values. So time value of money has to be used to

compute the present value and annuity of inputs and outputs. 56

Sundar, P.S. (2005), made a market outlook for 2005 and reported that

there was a sign for increase in demand particularly beyond 2005. For him the

increasing pace of industrialization and the tight supply of rubber for the major

players such as India, China, Malaysia and Thailand were the two factors responsible

for the increase in demand. He concluded that the global output would increase by

seven percentage in 2005 as against 11.7 percentage in the previous year. 57

Tiyo (2007) analyzed the impact of Futures Trade in rubber on the price

spiral. He believed that Futures Trade had a role in generating wide fluctuations in the

cash market of rubber in India. In support of his belief he quoted that in March 2003,

the month in which NR futures was commenced in India, the price of Ribbed Smoked

Sheet was Rs. 42.75 per kg it then increased to Rs.55 in October and to Rs.116 in

May 2006. 58

Budiman (2009) in his report on “ Recent Developments in NR Prices”

pointed out that the demand for elastomers both for SR and NR was well secured and

had been continuously increasing at a rate of three to four percentage per year, in line

with improvement in living standards around the world. 59

Sajeena, H. (2010), in her study on, “ Production and Marketing of Rubber

in Kanyakumari district”, revealed that the major factors affecting the viability of

rubber producers were steadily increasing in the cost of production, the instability of

price and the shortage of skilled labour. She was of the view that as the production

sector was dominated by small holdings, a group approach in an organized form

would be a proper strategy to maximize return.60

34
 Kaushik Roy (2010) in his interview with Rubber Asia has responded that

the impact of higher level NR prices has reduced the profit margin of tyre and other

rubber consuming industries. He has the view that as it is difficult to predict the

continuity of the NR price at a higher level, it is necessary to invest in fresh crop,

increase acreage under cultivation, replace older crops with new ones and to find

ways and means of replacing NR usage in tyres and allied items with synthetic

rubber.61

James Jacob (2011), Director of Rubber Research Institute of India, reported

that climate change had its impact on NR supply and price fluctuation. He had opined

that the world NR production was adversely affected by extreme and unusual weather

conditions in the years 2005, 2007, 2009 and 2010.62

1:5:4 Studies Related to NR in the Global Business Environment

Sharma and Saxona (1998), studied the impact of international trade and

various factors of growth in India and revealed that liberalisation of trade made

positive and significant effect on the growth of output of various sectors. They

concluded their study by stating that the contribution of import substitution and

technological change for growth of output was positive after trade liberalization and it

was negative prior to liberalisation. 63

Kuttaiah (1999), in his analysis on the overall development of the Indian

rubber industry since independence was of the opinion that Export Import Policies

during liberalisation period had adversely affected the growth of the industry. His

finding was that the import and domestic price for NR were closely related. 64

Kulkarni (1999), analyzed the challenges and opportunities of Indian

rubber industry in the wake of liberalisation and globalisation. He was of the opinion

35
that rubber industry in India had a prolific growth rate with the support of easy access

to raw materials, rapidly expanding international market, adequate government

support and technically qualified and experienced man power. 65

Jesu Rajam, S. (2001), in her study on “Rubber Industry in Kanyakumari

District” has mentioned that if liberalisation, economic changes and removal of

licensing system have brought a hope for better opportunities, they have posed a

challenge to the rubber industry to stand up to the international competition to

survive.66

John (2002) in his study on, “ The impact of Economic Liberalization and

Globalisation on the Marketing of NR in India” has pointed out the protective

environment of NR sector was transformed into a new protection-free liberalized NR

economy. For him it was indispensable to meet the challenges of liberalisation and

globalisation and to explore the new marketing opportunity opened in a liberalised

world. 67

Desalphine, S.M. (2005), the Chairman of the Rubber Board of India

perceived the WTO as a challenge and an opportunity. His special mention was that

there was a wide spread fear that there would be large-scale import of NR into the

country due to the removal of Quantity Restriction on import of NR in April 2001.

But since export of NR was adopted as a strategy to guard against the possibility, the

export of India was more than the import. India exported 75905 tonnes while only

44199 tonnes were imported during 2003-04. According to him, the market access

provided by the WTO was an opportunity for India to explore the international

market. 68

36
 Sekhar, B.C. (2005), in his article titled, “ How Asia can take on the

West?” has mentioned that the driver in the globalisation process would inevitably be

the private sector corporations and their singular persuit is profit. The corporations are

sustained by innovative science and technology. What they obviously lack is a socio-

economic conscience. The conscience must be manifested in appropriating 20 to 25

percentage, of their profit for the benefit of the workforce which maintain high

standards of productivity, quality, morality and loyalty. By providing incentives in the

form of financing for housing, pension during retirement and an insured life, the

Asian worker productivity can match or even exceed that of the West. He has stressed

that without such increase in productivity, competition from the industrialized

countries can not be faced. 69

Sunny Varghese & Jayaprakash (2006), analyzed the Tenth Plan schemes

for rubber plantation development and reported that the development schemes of the

Rubber Board have played a crucial role in the expansion and modernization of

rubber plantation in India. The schemes were designed to provide financial and

technical assistance to growers. They had also pointed out that NR production in the

country had been inward oriented and catering to the demand of the domestic

industry. They suggested that in an era of liberalised economy and an emerging global

market, the NR production sector should aim at exporting NR to the major consuming

countries. The government’s schemes could be for increasing productivity besides

bringing in a significant improvement in quality in order to make the small holdings

globally competitive. 70

Jomo, K.S. (2008), in his article on ‘Economic & Political Weekly’ raised

a question which went like this Trade liberalization for Development? Who Gains?

37
Who Loses? For him trade liberalisation caused unemployment or reduced income in

previously protected or internationally uncompetitive activities. 71

Mohan Kumar, S. (2008), in his article titled “Branding and Logo for

Indian NR”, has mentioned that Indian natural rubber was marketed as an unbranded

product, in which the scope of differentiation with the competitors market offerings

was lesser. But in recent years, the international business environment influenced the

domestic NR sector and the industry started to grab the export market. To protect

India as one among the global leaders in quality NR producers and suppliers, the

Rubber Board introduced Indian rubber logo trade mark of ‘quality assured’. The logo

stabilized quality assurance, enhanced the image and highlighted the attributes of

rubber as a quality product. 72

Sajen Peter (2008), in his report on “ Rubber Industry and its Bright

Prospects”, has stated that the domestic and international demand for rubber has been

increasing. Nearly fifty percentage of the domestic NR production is consumed by

automobile industry. He has stressed that though in the near future, the entire

production will be consumed internally, it is necessary to ensure that atleast ten

percentage of the production has to be exported for tactical and exposure advantage in

the globalised era. 73

Joseph and Nagi Reddy (2009), have analyzed the Foreign Direct

Investment Spillovers and Export Performance of Indian Manufacturing Firms after

Liberalisation and has reported that the extent of globalisation of a country’s

economy is usually evaluated from its trade relations with the rest of the world. They

have suggested that an exporter requires to have knowledge about the foreign market

conditions to be successful in the overseas .74

38
 Smitha (2009), in her study on ‘Multi National Companies Impact on

India’, has mentioned that the process of liberalisation and globalisation has opened

the markets up to global competitions. Her point is that competition has become acute

with the entry of new players. So the business approach has to be shifted from

product-centric to customer centric.75

Vijaya Malik (2010), the Director of Bureau for Indian Standards has

said that India has formulated 236 Indian standards on rubber and rubber products and

is in the process of aligning them with respective International Standards. He has also

forecasted the growing acceptability for Indian rubber and rubber products in the

international market. 76

Binoi K. Kurian (2011), in his article on Indian Natural Rubber Brand-The

Quality Icon has stated that India’s pressure in global rubber market is rather recent.

The total global market size of NR is 10.97 million tonnes, where as the country

produces less than 10 percentage of the total global demand. Still it is managed to

export 0.5 million tones NR and remains a potential destination for global importers.

To differentiate the quality of NR exported from India and to acclaim its unique

selling propositions, a brand for export has been unveiled by the Rubber Board. For

him ‘Indian Natural Rubber’ brand is having a forerunner advantage as no other

producing country has attempted to market rubber in their brand. 77

Narasimha Sarma (2011), Registar, Acharya Nagarjuna University has

reported in the National Seminar on Impact of Globalisation and Rural Development

that globalisation has become inevitable. It should be used as a means to achieve our

Plan objectives. He has also opined that in the globalisation context, India has to

39
concentrate on education and training labour force and modernization of industry with

a view to enhance productivity. 78

Satya Sundaram (2011), mentioned in his paper in the ‘National Seminar

on Globalisation and Rural Development’ that in the past Indian economy had

become a victim of too much State interference and controls. The economic policies

followed so far had not been able to reduce rural and urban disparities. He had also

stressed that in the Indian context, reducing regional disparities in development and

bridging the gap between rural and urban areas in respect of living standards were

very important. He suggested the government to take up the responsibility of

enhancing infrastructural facilities in rural areas. 79

1:6 Methodology

The methodology adopted for the study is descriptive cum analytical.

1:6:1 Database

The study is based on both primary as well as secondary data. Secondary

data has been gathered from published sources like Indian Rubber Statistics, Rubber

Growers Guide, Rubber Board Bulletin, Planters’ Chronicles, Rubber Asia, Asian

Rubber Handbook and Directory and Rubber News parliamentary Digest. Moreover,

data published in Journals, Books and Newspaper have also been used. Statistical

reports about area of cultivation, production, productivity, consumption, import,

export and price are collected for a period of 40 years from 1970-2010. Data and

information has also been collected from websites. Primary data has been collected

from rubber growers and officials of the Rubber Board.

1:6:2 Sampling

40
 The field enquiry was conducted between September and December 2010.

The survey covered three taluks namely Vilavancode, Kalkulam and Thovalai in

Kanyakumari district. A stratified random sampling was used to draw samples for the

survey. Householders with large holdings of more then 20 hectares are excluded due

to their thinness.

Table 1.1

Sample Size

Sl.No Taluks Holdings Sample Size

1 Vilavancode 16638 165

2 Kalkulam 10587 105
3 Thovalai 3025 30

Total 30250 300

1:6:3 Analysis of Data

The data collected for the study has been analysed with the help of

statistical techniques such as mean, correlation, trend, T-test, NPC and SWOT

Analysis.

1:7 Limitations

The bias of the respondents while collecting primary data has been tried by

the researcher, by testing and asking indirect questions. However, the researcher

cannot rule out the possibility of bias completely. The secondary data has been used

as such, without cross examination. Thus, the possible adversities if any existing

cannot be ruled out.

41
1:8 Scope for Further Studies

The researcher has identified the following areas for further studies for the

development of NR sector

1. Movement of NR price before and after globalisation in India.

2. Challenges before rubber plantations and rubber-based industries under

globalisation in India.

3. Role of Rubber Board to maintain the lead position in NR productivity in the

globalisation era.

4. Value addition in NR- A comparative study in the States of Kerala and Tamil

Nadu.

1.9 Chapter Scheme

Chapter I. presents a brief picture of statement of the problem, objectives,

methodology, limitation, scope for further studies and reviews of previous

studies in this regard.

Chapter II is devoted for liberalisation measures initiated in the Indian rubber market.

Chapter III presents descriptive and analytical evidences on the impact of

liberalisation measures on the supply side of NR.

Chapter IV highlights the impact of liberalisation and globalisation on the demand

side of NR.

Chapter V analyzes the impact of globalisation on the price of NR.

Chapter VI explores the feasibility of rubber plantations and rubber-based industries

in Kanyakumari district in the globalisation era.

Chapter VII summarizes the findings and suggestions

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42
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34. Sajen Peter, “Rubber Industry and its Bright Prospects”, The Hindu, February
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35. Paramasivan, T., “Production and Marketing of Rubber – A Study with special
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36. Cyril Kanmony and Gnana Elpinston,”Impact of Climate Change on Important

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37. Sivaniah, A.,”Use rain guards, check output loss”, Rubber Asia, January-
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38. Sheela Thomas,”Rubber Board’s 64 Glorious Years”, Indian Rubber Journal,

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Kerala”, Ph.D. Thesis, Department of Commerce, University of Kerala,
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44. Smit, H.P., “NR Price Could Hit $ 2 in the Near Future”, Indian Rubber and
Plastics Age, July 2005, p.7.

45. Gorden Cook, J., Rubber, Somaiya Publications Pvt.Ltd, Bombay, 2005, pp. 92-95.

46. Jacob George, “ Co-operative marketing in India”, Rubber Board Bulletin, 21

(2) Kottayam, 1985. pp. 22-27.

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Kerala”, Ph.D.Thesis, University of Kerala, Thiruvananthapuram, 1990.

45
48. Knox, G., and Theison,A.A., “ Feasibility of Introducing New Crops”, Emmas
Pa. Rodale press, 1991, pp. 100-120.

49. Varghese, E.T., “Marketing of raw rubber in India”, Indian Rubber Dealers’
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50. Colin Barlow, Sisiya and Suan, “ The key aspects of rubber consumption”,
The World Rubber Industry, 1994, pp. 210-212.

51. Kuriakose, K.K., “ The marketing channals of NR – with special reference to

co-operative marketing in Kerala”, Ph.D.Thesis, Cochin University, Cochin.
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52. Lekshmi, “ The Trend and Pattern of NR price in India, An Exploratory

Analysis”, Indian Journal of Natural Rubber, RRII, Kottayam, 1996, pp. 82-
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53. Sundar,P.S., “ How to achive stability in NR prices?”, Rubber Asia,

September-October, 1999.pp. 25,26.

54. Cashin, Liang and McDermett, “Report of the Task Force on plantation sector,
“ Planters’ Chronicle. Vol.103, No.8, Auguest 2001, p.36.

55. Viswanathan and Raja Sekaran, “ Decline in NR Prices and Adoption of Agro-
management Practices in Small Holdings in India”, The Planter, Kuala
Lumpur, Vol.77 (899), 2001, pp. 65-76.

56. Gurder Singh and Ashokan, “ Competitiveness of India Rubber Under WTO”
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57. Sundar.P.S., “ Can the grower ride out possible glut? Rubber Asia, March-
April 2005, pp. 78-79.

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Ph.D.Thesis, M.S. University, June 2010.

46
61. Kaushik Roy, “ Bullish Trend to continue”, Rubber Asia, September –
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62. James Jacob, “ Impact of climate change on NR” Indian Rubber Journal,
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under liberalization of trade in India”, Artha Vijana, Vol.Xi, No:1, March 1998, pp.
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64. Kuttaiah, A.A., “ Overall Development of the Indian Rubber Industry Since
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Study”, Ph.D.Thesis, M.S.University, January 2001.

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marketing of NR in India”, Ph.D.Thesis, Mahatma Gandhi University, June
2002.

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Rubber Handbook and Directory – 2005, p.167.

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Anniversary Issue, Dhanam Publication, Cochin, P.20.

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Development”, Rubber Board Bulletin, Vol.28, No.3, 2006 pp. 18-20.

71. Jomo,K.S., “ Trade Liberalisation for Development? Who Gains? Who loses?”
Economic and Political Weekly, Vol.XL111, No:48, November 29- December
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Bulletin, Vol.29, No:1, 2008, pp. 19 & 20.

73. Sajen Peter, “Rubber Industry and its Bright Future”, The Hindu, February 28,
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47
74. Joseph and Nagi Reddy, “ FDI Spillovers and Export Performance of Indian
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Economist, Vol.50, No:5, July 2011, p.54.

48
 CHAPTER – II

LIBERALISATION MEASURES INITIATED IN THE INDIAN

RUBBER MARKET

2:1 Introduction

In the new millennium, the Indian economy is rapidly changing as a result

of the new economic reforms initiated by the Indian Government headed by

P.V.Narasimgha Rao in 1991 with the help of his finance minister Manmohan Singh.

Since the new strategy is oriented towards free market, it is called LPG model

development.1 India faced acute financial crisis in 1991. Indian Government sort

assistance from the International Monetary Fund and the World Bank. These

international financial institutions insisted the Government to accept the new

economic policies such as Libreralisation, Privatisation and Globalisation. Indian

Government had to be part of the new policies for its survival.2

LPG model of development introduced several major changes at the

domestic level. Firstly, areas hitherto reserved for the public sector were opened to

private sector. Secondly, permission was granted to private sectors to set up industrial

units without licence. Thirdly the business houses were free to undertake investments

without any ceiling by the Monopoly Restrictive Trade Practice (MRTP) commission.

Fourthly, granted permission for direct foreign investment upto 51 percentage in high

priority areas. Fifthly, the government formulated rehabilitation schemes to protect

the workers from the sick public sector enterprises referred to the Board for Industrial

or Financial Reconstruction (BIFR). Lastly, the economy was opened to other

countries to encourage more exports. To facilitate the import of foreign capital and

49
technology and other allied imports, reduction in import duties and other barriers were

brought about.

LPG model of development emphasizes a greater role for the private

sector. It envisages a much larger quantum of foreign direct investment to supplement

our growth process. It aims at a strategy of export led growth as against import

substitution. It also aims at reducing the role of the State significantly and planning

fundamentalism in favour of a more liberal market pattern of development.

2:1:1 LPG

Liberalisation means liberalizing rules and regulations for trade and

commerce in a country. Liberalisation is the gateway to globalisation. Privatisation

can be defined as the transfer of three kinds of rights from the state to the private

sector; ownership rights, operating rights and development rights, and the application

of private sector objectives and disciplines in the operation and management of public

enterprises. Globalisation means erasing national, economical and political boundaries

for the purpose of business. It denotes free exchange of goods, serwices, labour and

capital among nations.

The Indian economy has been undergoing tremendous changes since 1991

by dismantling controls and regulations as a part of Structural Adjustment Programme

(SAP) of the Intemational Monetary Fund (IMF)3. Market interventions deviced by

the Government were cancelled one by one since 1991. A number of developments

have taken place in the Indian rubber market. These new developments are treated as

the measures initiated by the government to libreralise the Indian rubber economy

under SAP. All these measures have the effect of changing the existing rubber market

50
in some way or other. This chapter deals with the measures taken by the Government

of India to liberalize the rubber market since 1991.

2:2 Liberalisation Measures

The measures taken by the Government of India in the natural rubber

sector since 1991 as part of the SAP includes importing Synthetic Rubber (SR) rubber

products and Natural Rubber (NR) under Advance Licence Scheme (ALS),

suspension of Buffer Stock Scheme, State Trading Corporation’s passive attitude

towards rubber procurement, replacement of Statutory Price by Benchmark Price,

curtailment of subsidies, reduction in import duty and the like. These measures are

described below.

2:2:1 Import of Synthetic Rubber

Synthetic Rubber (SR) is a group of high molecular weight polymers,

synthesized chemically, having physical properties somewhat similar to natural

rubber.

As per the commitment with WTO, import duty on synthetic rubber has

drastically reduced from 141.5 percentage in 1993 to 49.43 percentage in 1994.4 In

India the domestic consumption of synthetic rubber always exceeds its domestic

production, The excess consumption was being met by import. The rubber goods

manufactures are in an advantage position to import more synthetic rubber rather than

to produce or procure it from the domestic market due to low import duty. Table 2.1

shows the consumption, production and percentage of import on consumption of SR

after liberalisation.

Table 2:1

51
CONSUMPTION, PRODUCTION AND IMPORT OF SYNTHETIC RUBBER

(in tonnes)

Percentage of
Year Consumption Production Import Import on
Consumption

1993 – 94 113395 49633 64338 56.74

1994 – 95 122710 63681 73860 60.19

1995 – 96 134085 68223 71735 53.50

1996 – 97 142810 64563 91050 63.76

1997 – 98 160915 71993 86389 53.69

1998 – 99 156395 67590 97548 62.37

1999 – 00 167220 60293 104842 62.70

2000 – 01 170670 65460 106923 62.65

2001 – 02 174530 69653 111572 63.93

2002 – 03 194850 80401 129902 66.67

2003 – 04 210190 89240 104733 49.83

2004 – 05 224650 93854 113095 50.34

2005 – 06 237495 97638 132118 55.63

2006 – 07 270830 99513 171998 63.51

2007 – 08 297155 106286 195705 65.86

2008 – 09 292950 96739 190630 65.07

2009 - 10 347710 106743 250210 71.96

Source : Rubber Growers Guide-2010

Indian Rubber Statistics, Vol .33
From the table it is apparent that reduction in import duty has resulted

importing 50 to 70 percentage of SR consumption during the post-liberalisation

period.

52
 2:2:2 Importing Used Tyres

Importing used tyres was permitted freely in the Export Import policy

w.e.f. 01-4-1997. when tyres were put in the Open General Licence List along with

400 other items.5 However, after considering the representations from the

Government of Kerala and the Automotive Tyre Manufacturers Association, New

Delhi, the Government has prescribed a minimum c.i.f. value per tyre to restrict

indiscriminate import of such tyres w.e.f. 08-8-1997. Used tyres can be imported

freely only if c.i.f. value is US $175 and above per tyre for buses, trucks and light

commercial vehicles and US $ 25 and above for passenger automobile vehicles. The

used tyres have been imported from Germany, Japan, Malaysia and the United

Kingdom. The importing used tyres have increased from 634 in 1996-97 to 6207 tyres

in 1998-99.6 It shows a nine fold increase in importing of used tyres. Which has the

detrimental fact for natural rubber sector in India.

2:2:3 Importing New Tyres

Another important policy making decision of the Central Government in

the liberalisation era, which affected the natural rubber sector in India was the

permission for importing new tyres. Importing new tyres was allowed w.e.f.

01-4-1997. According to the present EXIM policy, tyres were put in the free list of

import. In order to discourage discrimination in importing new tyres, no steps had

been taken by the government so far. As a result, the consumption rate of natural

rubber in India has been decreasing.

2:2:4 Replacement of Statutory Price by Benchmark Price:

i. Statutory Price

53
 In India, domestic price of natural rubber had been statutorily controlled

by the Government from May 1942 to January 1991. With a view to maintain steady

development of natural rubber industry, natural rubber price was controlled by fixing

minimum and maximum prices. This is known as Statutory Price. It shows that the

government was very particular in stabilizing the price, beneficial both to the growers

and manufacturers. Minimum and maximum prices were notified in 1947 for different

grades. The ceiling on price was in force from 1947 to 1970. The rates were

periodically reviewed based on the cost of inputs. The difference between the

minimum and the maximum price was one rupee for all grades for all the 23 years.

From September 1970 to September 1981 only the minimum price was notified. The

statutory price fixation came to an end by 1981.

ii. Benchmark Price

From 1991 onwards the Government gave up the policy of Statutory Price,

but it started fixing Benchmark Price, which had no statutory backing.7 Benchmark

Price was only an indicative price based on cost of production. Cost Accounting

Department of the Union Finance Ministry estimated the cost of production which

was kept secret by the ministry. It had no legal bindings. After 1998, the concept of

Benchmark Price was dispensed with. In September 2001, the government announced

a Minimum Support Price (MSP) related to landed cost of inputs. While the

benchmark price fixed in 1998 was Rs. 34.05/kg, for RSS4 which was the largest

volume grade consumed by tyre sector, the MSP was only Rs. 32.09. In the post-

liberalisation period, it was not the policy of the Government to control the price of

natural rubber but leave it to the forces of demand and supply.

2:2:5 Suspension of Buffer Stock Scheme:

54
 Buffer Stock Scheme (BSS) was started on February 1986 in order to

stabilize the price of natural rubber in such a way that would benefit both the growers

and manufacturers. It was basically introduced as an important device for market

intervention through the State Trading Corporation. The scheme was successful in

avoiding wide fluctuations in the price of natural rubber. It was effectively in

operation till 1991. But on February 22, 1994, the scheme was suspended in

accordance with the liberalisation policies. Through the suspension of BSS, the

Government made it clear that it had no intention to intervene in the rubber market to

stabilize the price, but the price would be determined by the forces of demand and

supply.

2:2:6 State Trading Corporation’s Passive Attitude Towards Rubber

Procurement

State Trading Corporation was brought into rubber sector in 1968 for the

effective market intervention, when the price shows wide fluctuations. It was

supposed to procure excess rubber from the market when price was decreasing.

Rubber procurement was effectively and successfully made by STS during the pre-

liberalisation period. It was helpful to avoid heavy price crash. During the 1970s the

entire surplus had been procured,8 but the picture of rubber procurement was different

in the post-liberalisation period. During 1997-98 STC procured only 18 percentage of

the surplus rubber. In the year 1999-2000, the excess rubber in the market was 87885

tonnes, but STC procured only 20000 tonnes that is 23 percentage of the excess.9 This

showed the gradual withdrawal of STC and the unwillingness of the Government to

intervene in the rubber market in the light of liberalisation.

2:2:7 Import Under Advance Licence Scheme (ALS)

55
 Although the commercial production of rubber in India had started in

1902, the internal consumption took place only in 1930s. Restriction on exporting

rubber, as per the International Rubber Regulation Agreement 1934, ensured the

growth of rubber goods manufacturing industry in India. Gradually, the internal

consumption exceeded the internal production in 1947 and India became a net

importer of rubber by 1948. The rubber import was controlled under three methods

before April 1, 2001. They are the following

i. Public Notification Scheme

ii. Special Import Licence

iii. Advance Licence Scheme

i. Public Notification Scheme

The Government permitted import against public notice as and when

required to supplement the availability of rubber with in the country. Actual users

should apply for import licence against public notice issued for the purpose and the

Government issued the licence after proper scrutiny. The imported rubber might or

might not have import duty as decided by the Government. Since there was excess

availability of natural rubber in the domestic market after 1995- 96, the Government

did not allow the import of natural rubber under Public Notification Scheme.

ii. Special Import Licence

Big export houses used Special Import Licence (SIL) for importing rubber.

Under this scheme the normal import duty and a premium for the licence were borne

56
by the importer in addition to the normal value of rubber. It made the cost of imported

rubber considerably high. So considerable import had not taken place. Government of

India discontinued issuing licence to import using SIL w.e.f.2001.

iii. Advance Licence Scheme

Rubber goods manufacturers who could export their products were

allowed to import natural rubber in large quantity under Duty Exemption Entitlement

Certificate (DEEC), known as Advance Licence Scheme (ALS). It facilitated duty-

free imports of raw materials in advance against commitment on export of

manufactured goods. This facility was granted as an export promotion measure.

Against each export product, importable quantity of different inputs was notified in

the Standard Input Output Norm(SION) published by the Government of India. Under

the scheme, the tyre companies were entitled to import rubber against exports of tyre

at the rate of 53 kg for every 100kgs of tyre and tubes exported, of which 9kgs could

be synthetic rubber and the rest natural rubber.10

Import under ALS had created an imbalance in supply- demand position.

When 51640 tonnes natural rubber was imported during 1995-96, supply-demand gap

was only 18000 tonnes.11 Whereas during 1996-97 when 19970 tonnes natural rubber

was imported, the supply- demand gap was only about 12000 tonnes. Again in 1997-

98 rubber import under this scheme was 29389 tonnes, when there was over supply of

more than 12000 tonnes. As a result of this pattern of import, the accumulated stock

of natural rubber in India increased from 69,550 tonnes in 1994-95 to 1,92570 tonnes

at the end of 1999 -2000.12 In this context, as a measure to enhance the demand for

indigenous rubber, the Government temporarily suspended the scheme from February

20, 1999. It asked the licence holders to meet their requirements by purchasing natural

rubber from STC at the international price from their locally procured stock.

57
 From April 1, 2001 Government of India permitted to import rubber

without licence on payment of the prevailing import duty.13 Another development in

the Government policy making towards natural rubber import took place during the

period of 2003-04. The Government removed the ban on import under ALS. It

restored the facility for duty free import of rubber in July 2003 and further from

January 9, 2004. It reduced the basic import duty from 25 percentage to 20 percentage

for all forms of natural rubber except for NR latex. Importing natural rubber in India

during the period from December 10, 2001 to August 5, 2004 was permitted only

through the customs port of Kolkata and Visakhapatnam.

2:2:8 Removal of Restrictions on Port Entry

The restriction on port entry was removed on August 6, 2004 by Open

Channel Import. This was the general channel through which natural rubber could be

imported. Importer had to pay the prevailing import duty. The duty effective from

January 9, 2004 was 20 percentage for all forms of natural rubber except NR latex for

which it was 70 percentage. A countervailing duty of 4 percentage had been imposed

on all forms of natural rubber effective from March, 200614.

2:2:9 Replacement of Quantity Based Advance Licence Scheme with Value

Based Advance Licence Scheme

Advance Licence Scheme was being implemented in two ways such as

Value Based Advance Licence Scheme (VBALS) and Quantity Based Advance

Licence Scheme (QBALS). Under VBALS, there is no ceiling on the quantity of

material that could be imported by a licence holder. Maximum import was fixed on

the basis of value of material and it would be specified in the licence. But under

QBALS, maximum import was fixed on the basis of quantity and value would not be

considered. In 1998, the Government introduced VBALS in the place of QBALS.

58
Consequently, rubber goods manufactures had been granted more opportunities to

import natural rubber in larger quantities.

2:2:10 Membership in the Regional Trade Block

Mutual agreements and understanding among the members of trade blocks

and regional associations are also influencing the export and import aspects of natural

rubber. Following two agreements are worth mentioning in this regard.

i) Bangkok Agreement:

India, China, South Korea, Sri Lanka and Bangladesh are the signatories to

the Bangkok Agreement. These countries agreed to export or import among them

goods at a concessional rate of import duty called preferential import duty. The

agreement follows the guidelines set by Economic and Social Commission for Asia

and Pacific (ESCAP). It is basically aimed at Asian trade expansion through regional

co-operation among the member countries. Under this agreement every member

country gives a list of items for giving tariff and non-tariff concessions, to other

participating countries. Natural rubber is one of the items to which concession is

allowed for its import. The preferential import duty effective from January 9, 2004 in

India under provision of Bangkok Agreement is 16 percentage for all forms of

natural rubber except NR latex for which it is 40 percentage.

ii) SAARC Preferential Trading Agreement (SAPTA)

The signatories of SAPTA in April 1993 are Bangladesh, Bhutan, India,

Maldives, Nepal, Pakistan and Sri Lanka. The member countries agreed for low tariff,

liberal non-tariff and direct trading measures to be followed for the trading activities

among them under the SAPTA. India agreed to allow concession on import duty

ranging from 1.5 percentage to 20 percentage on rubber related goods under the

SAPTA. It directly influences the consumption of natural rubber in India by

increasing the import of rubber goods.

59
2:2:11 Duty Entitlement Pass Book [DEPB] Scheme

Under Duty Entitlement Pass Book [DEPB] Scheme, Government of India

provides credit called DEPB credit to exporters at rates fixed for different products

exported. The exporters can use the credit entered in his passbook for payment of

customs duty for further imports made under DEPB Scheme. The scheme introduced

by the Government under the EXIM policy for 1997-2002 was confined to products

not coming under the negative list† of imports. Since natural rubber was in that list of

imports till March 31, 2001, it was not importable through the DEPB Scheme. The

removal from the negative list on April 1, 2001, automatically made natural rubber

importable under the DEPB Scheme15. Although import undertaken under the scheme

involves payment of full customs duty, it is considered as a duty free channel at the

operational level. This has an adverse effect on the domestic natural rubber growers.

2:2:12 Duty Free Import Authorization Scheme [DFIAS]

By the Annual Supplement (2006 – 07) to the Foreign Trade Policy,

Government of India discontinued issuing the Duty Free Replenishment Certificate

(DFRC) from April 30, 2006 and introduced a new scheme called Duty Free Import

Authorization Scheme (DFIAS). Imports made under this scheme were exempted

from basic customs duty, additional customs duty, anti-dumping duty and safe-guard

duty. The DFIAS allowed exporters to import the required inputs before exports. The

scheme also granted exporters to transfer the scrip once the export obligation was

completed.

†
Negative List – the commodity in the list can be imported only against licence or

against public notification.

60
2:2:13 Scheme for 100 percentage Export Oriented Units and Units in Special

Export Zones/Export Processing Zones

Under this scheme the 100 percentage Export Oriented Units (EOUs) and

the manufacturing units which operate in Export Processing Zones and Special Export

Zones can import natural rubber duty free. It paves way for the manufactures to go for

importing natural rubber.

2:2:14 Reduction in the Import Duty of NR

Duty for importing natural rubber was introduced for the first time in

1957. Initially the duty was five percentage, which was increased to 10 percentage in

March 1961 and again to 22 percentage in April 1963. In February 1965 the duty was

further revised to 32 percentage. Again in 1980, it was increased to 45 percentage and

to 60 percentage in 1983.16

By liberalizing the rubber sector in 1991, the import duty was reduced to 30

percentage. It was again reduced to 25 percentage and to 20 percentage in 1993 and

1996 respectively. From 1999-2000 onwards, the duty was fixed at 25 percentage in

accordance with the WTO Agreement. It was further reduced to 20 percentage from

2004. The duty was reduced to 13.1 percentage in August 2010 and further to 7.5

percentage in December 2010 as a temporary measure to help consumers. The drastic

reduction in the import duty had its influence over the quantum of importing natural

rubber. It is depicted in table 2:2.

Table 2:2

QUANTITY OF NATURAL RUBBER IMPORT

61
 Import Percentage of
Year Increase/Decrease
(in tones) Increase/Decrease

1991 – 92 15070 - -
1992 – 93 17884 +2814 +18.67
1993 – 94 19940 +2056 +11.50
1994 – 95 8093 -11847 -59.41
1995 – 96 51635 +43542 +538.02
1996 – 97 19770 -31865 -61.71
1997 – 98 32070 +12300 +62.22
1998 – 99 29534 -2536 -7.91
1999 – 00 20213 -9321 -31.56
2000 – 01 8970 -11243 -55.62
2001 – 02 49769 +40793 +454.77
2002 – 03 26217 -23546 -47.31
2003 – 04 44199 +17982 +68.59
2004 – 05 72835 +28636 +64.79
2005 – 06 45285 -27550 -37.83
2006 – 07 89799 +44514 +98.30
2007 – 08 86394 -3405 -3.80
2008 – 09 77762 -8632 -10.00
2009 – 10 176756 +98994 +127.30

Source : Indian Rubber Statistics, Volumes 30, 31, 32 & 33

2:2:15 Subsidy Modifications to Rubber Growers

In order to boost the production of rubber in India, Replanting Subsidy

Scheme was introduced in 1957. Under this scheme subsidy was given only for

replanting old and uneconomic plantations both in estate and holding sectors. The

scheme had been in implementation till 1979. Over the 23 years period, replanting

was carried out in 53605 hectares. The total financial assistance granted under the

scheme was Rs.19.35 cores17.

62
 In 1980, a new Rubber Plantation Development Scheme (RPDS) was

introduced. Under the scheme, subsidy was given for both planting and replanting.

During the period from 1980 to 1984, subsidy was given at the rate of Rs.5000 per

hectare for the small holding and Rs.3000 per hectare for the estate.

A slight modification was made in the scheme during the period from 1985

to 1989, by which subsidy was given at the rate of Rs.5000 per hectare up to five

hectares in traditional areas (Kerala and Kanyakumari district in Tamil Nadu) and

Rs.5000 per hectare in the non-traditional regions. It was to be noted that the

beneficiary for subsidy was limited to five hectares in traditional regions.

The rate of subsidy was again modified during the period 1993–94 limiting

the beneficiaries only for two hectares in traditional regions and up to five hectares in

non - traditional regions. Accordingly, subsidy was fixed at Rs.8000 per hectare up to

two hectares in traditional regions and up to five hectares in non-traditional regions.

After the representation to the Central Government about the inadequacy

of subsidy from various quarters, the rate of subsidy was increased in 1997-1998. The

increased rate was Rs.18000 per hectare up to two hectares in traditional regions and

Rs.22000 and Rs.18000 per hectare in the non-traditional regions for areas up to 5

hectares and up to 20 hectares respectively.

The amount of subsidy was further revised from April 1, 2000 onwards. The

revised rates were Rs.12000 per hectare in the traditional regions and Rs.16000 and

Rs.12000 per hectare in the non-traditional regions for area up to 5 hectares and up to

20 hectares respectively.

With a view to accelerate new planting and replanting rubber on modern

scientific lines, the Rubber Board has revised the Rubber Plantation and Development

63
Scheme. The scheme would be implemented for five years from 2007–08 to 2011–

2012. According to the revision the prevailing subsidy scheme is Rs.19500 per

hectare up to two hectares in traditional area and Rs.22000 per hectare up to 20

hectare for both new planting and replanting in non – traditional regions. The growers

in non-traditional regions are also entitled for a reimbursement for the cost of

polybaged plants to Rs.4000 per hectare and transportation grant Rs.4000 per

hectare.18 Thus the subsidy scheme has been subjected to number of modifications.

The effects are seen in the table 2:3 below

Table 2:3

SUBSIDY TO INDIAN RUBBER GROWERS

Financial assistance Planted Area

Period
(Rs. In Cores) (in hectares)
Phase I (1980 – 84) 40.17 73740

Phase II (1985 – 89) 45.78 75001

Phase III (1990 – 92) 29.69 45565

Phase IV (1993 – 01) 115.19 104712

Phase V (2002 – 06) 89.30 62799

Phase VI (2007-12) - 68500

Source: Rubber Board Bulletin.

From the table it is clear that the area planted with rubber is more during

the period when the financial assistance is high. Government of India has targeted to

plant rubber in 68500 hectares during the VI phase (ie) from 2007–08 to 2011 – 12

2:2:16 High Import of Rubber Products

64
 With the relaxation of import regulations and reduction in import duties,

Indian rubber market is flooded with large quantity of imported rubber products. The

non-tyre rubber industry, which mostly produces footwear, conveyor belts, hoses and

tubes, consumes 60 percentage of the natural rubber produced in the country. The rest

is consumed by automotive tyre manufactures. With a demand for natural rubber over

strips supply by almost 2, 00,000 tones per annum, the importing natural rubber is

necessary to keep the industry running. For India more than 200 firms producing

rubber based products have shut shops down in 2009 due to higher input price and the

inverted duty structure. While raw rubber is imported at 20 percentage tax, the

finished rubber products are taxed at 10 percentage.19 This inverted duty structure

favors import for finished products, which work against the interest of the domestic

industry. Table 2:4 shows the value of rubber products imported from 1980-81.

Table 2:4

VALUE OF RUBBER PRODUCTS IMPORTED

Value Increase Percentage

Year
(Rs in crore) (Rs in crore) Increase
1980-81 16.95 - -
1990-91 99.22 82.27 485.37
1992-93 144.82 45.60 45.96
1994-95 204.43 59.61 41.16
1996-97 334.27 129.84 63.51
1998-99 549.99 215.72 64.53
2000-01 590.32 40.33 7.33
2002-03 770.35 180.03 30.50
2004-05 1129.20 358.85 46.58
2006-07 2104.78 975.58 86.41
2008-09 2706.01 601.23 28.58
Source: Indian Rubber Statistics

2:2:17 Export Promotions

65
 There were no tariff regulations on natural rubber export. Even though

Government of India has removed restriction on export for natural rubber in 1992,

India could not make any headway in the export front20. It was not a regular natural

rubber exporter since the price in abroad was lower than the Indian price and also due

to lack of adequate information about overseas markets for rubber. The export

quantum remained low till 2002. The highest export was 75905 tonnes in 2003-04,

when the world price along with the export incentives were attractive to the

exporters. By exporting significant volume of natural rubber, India had made its tent

in the world market. But export during 2004-05 became lower since the world price

was around Rs.58 per kg for RSS3 Whereas the Indian price for the equivalent grade

was around Rs.52 per kg. Moreover, considering the fact that natural rubber produced

in the country is more or less consumed internally, there wasn’t a sustained effort to

increase its export. India has been recognized as a good quality supplier of rubber in

abroad. To sustain the trend of higher export and to maintain international price

parity, the export incentive scheme has to be continued. So that the wide fluctuations

in the volume of export as it could be viewed in table 2:5 can be reduced in the future.

Table 2:5

66
 NATURAL RUBBER EXPORT

Export Increase/Decrease
Year
(in tonnes) (in tonnes)

1991-92 5834 -
1992-93 5999 +165
1993-94 186 -5813
1994-95 1961 +1775
1995-96 1130 -831
1996-97 1598 +468
1997-98 1415 -183
1998-99 1840 +425
1999-00 5989 +4149
2000-01 13356 +7367
2001-02 6995 -6361
2002-03 55311 +48316
2003-04 75905 +20594
2004-05 46150 -29755
2005-06 73830 27680
2006-07 56545 -17285
2007-08 60353 +3808
2008-09 46926 -13427
2009-10 25090 -21836

Source : Rubber Board Bulletin.

2:3 Impact of WTO Agreement on NR in India

The General Agreement on Tariff and Trade (GATT) framed in 1947 by

23 countries was transformed into WTO on January, 1995 with 136 member

countries. It envisages open markets without discrimination and global competition in

international trade for the welfare of all the member countries. It is responsible for

multilateral trade agreements negotiated by its members. Since India is a signatory to

the WTO, the country is bound to honor its commitment to the organization. NR is

67
one of the commodities under the influence of WTO Agreement. Indian Rubber

market has been influenced in many ways by the WTO Agreement on January, 1995.

2:3:1 Status of NR in the WTO Agreement

According to WTO Agreement natural rubber is classified as an industrial

raw material and not as an agricultural produce. NR is an agricultural produce since it

is drawn from a tree that is grown on soil. It is used for manufacturing rubber goods.

Moreover, in case of tax income from rubber is considered as an agricultural income

and hence it comes under the purview of State Agricultural Income tax, which is 50

percentage in Kerala and 30 percentage in other States21. So natural rubber should

have been classified as an agriculture produce and brought under the purview of the

Agreement On Agriculture (AOA). The classification of natural rubber as a non-

agricultural produce is great injustice to the rubber growers, as it has lost the

protections applicable to agricultural commodities given in the WTO Agreement on

Agriculture. The following privileges of WTO Agreement on Agriculture are not

available to natural rubber

i) Being placed in the Negative List

With the removal of Quantitative Restrictions‡ (QRS) in April 2001and in

compliance with the WTO regulations, importing natural rubber has been made free.

Thus its position is transferred from the Negative list20 to Open General Licence

(OGL) List.

‡
* QRS- Quantitative Restrictions refers a to specific limits imposed by countries on
the quantity or value of goods that can be imported. In India, these restrictions
were on 10202 tariff lines, because of unfavourable balance of payment position.
The process of removing QRS was started in India on April 1, 1996. The final
phase of removing QRS took place on April1 2001.

68
ii) Being placed in the State Trading List

After finalizing the process of QRS removal, the Government prepared a

list of products called State Trading List. It includes some agricultural commodities

such as wheat, rice, maize and copra with a view to regulate their import. Products in

the State Trading List can be imported only through designated Government Agency

and not private individual. Since natural rubber is a non-agricultural product under

WTO Agreement, it has lost the privilege of being placed in the State Trading List for

import regulation.

iii) Green Box Domestic Support

Domestic supports which are allowed in agriculture under AOA cannot he

given to natural rubber as it is not an agricultural commodity as per WTO Agreement.

iv) Protection of High Bound Rate

In the case of agricultural products, the bound rates are 100 percentage for

primary agricultural products, 150 percentage for processed products and 300

percentage for edible oil.22 The bound rate for natural rubber has been 25 percentage

till 2007. Now it is 20 percentage. Whereas for other plantation crops like tea and

coffee it is 150 percentage and 100 percentage respectively.

v) Protection of High Basic Import Duty

The basic import duty for other plantation crops is 35 percentage but it is

20 percentage for dry form of natural rubber.

Vi) Export Subsidies

According to the WTO Agreement On Agriculture, there was no export

subsidy to natural rubber in the base year 1986-87. Therefore it could not be permitted

69
in future. But the other plantation crops such as tea, coffee, pepper, cardamom are

entitled to get export subsidies. United Nations Commission for Trade and

Development (UNCTAD) has stated that natural rubber is an agricultural commodity.

Therefore it has been receiving all the privileges of an agricultural commodity from

UNCTAD. But the WTO has denied the privileges of beeing agricultural produce to

natural rubber. Thus it can be summed up that the Indian rubber market has witnessed

some unprecedented trends and tendencies due to liberalisation measures. These

influence the production, consumption and price for NR in India. Impact of these

measures on the domestic rubber market is analyzed in the subsequent chapters.

REFERENCES

1. Ruddar Datt and Sundharam, Indian Economy, S. Chand & Co, 2008, p.174.

2. Ponmurugan and Rose Catherin, Social Value Education, Sathana Publication,

2005, p. 1.

3. The Indian Government headed by P.V. Narashimgha Rao in 1991 initiated

the new economic policy with the help of his Finance Minister, Manmohan
Singh. It contains two programmes such as Stabilization Programme in the
short term and Structural Adjustment Programme in the medium term.

4. John, K.K., “Impact of Economic Liberalisation and Globalisation on the

Marketing of Natural Rubber in India” Ph.D.Thesis, Mahatma Gandhi
University, Kottayam, June 2002 p.37.

5. It is a reply given by the then Union Commerce and Industry Minister

Murasoli Maran for the starred question No: 39 of P. C. Thomas M.P on 25-
02-2000 in the Indian Parliament and published by the Business Information
Bureau, New Delhi.

6. Parliamentary Digest, Business Information Bureau, New Delhi.

7. Parliamentary Digest – reply given by the then Industry Minister Murasoli

Maran to the unstirred question no: 806 on 03-12-1999.

70
8. John, K.K., “ Impact of Economic Liberalisation and Globalisation on the
Marketing of NR, “Ph.D Thesis, Mahatma Gandhi University, Kottayam, June
2002. p.32.

9. Lalithakumari and Jacob, “ Natural Rubber Industry in India RRII, Kottayam,

2000.p.592.

10 . Tiyo, “ Excess Supply May Cause NR Price Crash,” Rubber Asia, September
to October, 1999, p.57.

11. Ibid.

12. George, C.M “ NR Economy in the Doldrums”,Rubber Asia January –

February, 1999, p.23.

13. As per the provisions of General Agreement on Tariff and Trade 1994, each
WTO member country is bound to limit its import duty within a ceiling called
bound rate. The rate committed by India was 25 percentage for all forms of
NR except NR latex for which India did not commit any ceiling on import
duty.

14. Rubber Grower’s Guide-2010, Rubber Board, Kottayam, p.72.

15. Ibid, p.73.

16. John, K.K.,” The Impact of Economic Liberalization and Globalizations on the
Marketing of Natural Rubber,”Ph.D.Thesis, Mahatma Gandhi University,
Kottayam, June 2002, p.32.

17. Rubber Grower’s Guide-2010, Rubber Board, Kottayam, p.110.

18. Ibid, p.114.

19. Rubber Asia, November- December, 2010, p.130.

20. Thomas, J.K., “Natural Rubber Sector In A Liberalized Regime”, Planters’

Chronicle, April 2004, p-5.

21. Joseph, “Planters flay cap on import duty on NR”, Rubber Asia, November-
December, 2010, p.150.

22. Damodaran. :”WTO Agreement on Agriculture and Plantation Commodities”,

Paper No.:1 Submitted to UPASI, 2000, p.14.

71
 CHAPTER – III

RUBBER SUPPLY- AN ANALYSIS

3:1 Introduction

The supply side of the Indian rubber market comprises Natural Rubber

(NR), Synthetic Rubber (SR) and Reclaimed Rubber (RR). Here supply includes

production and import. This chapter analyzes the relative share of NR, SR and RR in

the Indian Rubber market and the major policy of the Central Government on the

market in the light of LPG model of development.

3:1:1 Natural Rubber

Natural Rubber is an elastomer an elastic hydrocarbon polymer that is

originally derived from a milky collodial suspension or latex found in the sap of some

plants. Hevea Brasiliensis tree is the most important source of NR. From Brazil it was

introduced in tropical Asia in 1876 through Kew Garden, England. The tree is now

grown in the regions of Asia, Africa and America. Rubber trees are tappable for a

period of 30 to 35 years. The economic life span of the tree is 25 to 30 years

depending on the soil and climate conditions.1 Timen, Director of Botanical Gardens

of Ceylon, made the first tapping of latex from Hevea in 1884.2 A fully grown rubber

tree gives about 60gm of rubber a day and about 8 kg per year.3 No other species of

plant which influences the life style of people around the globe as much as Hevea

Brasiliensis, the prime source of rubber.

72
3:2 World Supply of NR

In the global scenario, there are twenty three countries that produce NR in

the world. Natural Rubber is treated as an Asian product as its production is

geographically concentrated in Asia, which accounts for 92.8 percentage of the world

production.4 Almost all the developed countries depend upon Asia for NR supply.

Thailand, Indonesia, Malaysia and India together account for 80 percentage of the

global production.5 The total land used for NR in the world is 10.78 million hectares.

It is dominated by the Asian region with 93 percentage of the area.6

3:2:1 Global Area under NR

Area under rubber cultivation has been increasing in the main producing

countries. The total area under rubber cultivation was 9297000 ha in 1998. After a

decade it reached the level of 10293000 hectare. Table 3:1 shows the area under

rubber cultivation in different countries in the world in 1998 and in 2008.

Table 3:1

RUBBER PRODUCING AREA IN MAJOR COUNTRIES (‘000 ha)

Percentage Percentage
Countries Area in 1998 Area in 2008
of share of share

Indonesia 3344 36 3433 33

Thailand 1972 21 2457 24
Malaysia 1568 17 1247 12
India 553 6 662 6
China 618 7 776 8
Vietnam 275 3 619 6
Others 967 10 1099 11

Total 9297 100 10293 100

Source: Rubber Growers’ Guide

From the above table it is clear that 80 percentage of the total area of

rubber cultivation is with Indonesia, Thailand, Malaysia and India. It is also obvious

73
from the table that along with the main NR producing countries, other countries are

also showing interest in rubber cultivation as their share increased from 10 percentage

in 1998 to 11 percentage in 2008. Anyhow the largest area under rubber cultivation

can be noticed in Indonesia followed by Thailand, Malaysia, China, India and

Vietnam. But the growth rate is the highest in Thailand.

3:2:2 Dominance of small-holdings

Land use of rubber in small-holdings in five major NR producers by the

end of 1998 and 2008 are given in Table 3:2

Table 3:2

AREA OF NR UNDER SMALL-HOLDINGS (in ‘000 ha)

Total Small- Total Small-

Percentage Percentage
Countries Extent holdings extent holdings
to Total to Total
in 1998 extent in 2008 extent
Indonesia 3344 2795 84 3433 2920 85

Thailand 1972 1887 95 2457 2334 95

Malaysia 1568 1373 88 1247 1186 95

India 553 484 88 662 584 89

Vietnam 275 35 13 619 309 50

Source : Rubber Board Guide and Rubber Asia, Sep – Oct 2010

Table 3.2 shows that in all the major NR producing countries nearly 90

percentage of the area is under small holdings except in Vietnam. Even in Vietnam

the percentage of the extent of small holdings has increased from 35 to 50 percentage

in a decade. Thus it is clear that small holdings dominate the NR production sector in

the global level.

74
 Figure: 3:2. a.

AREA OF NR UNDER SMALL-HOLDINGS:

1998 2008

From the above figure it can be noticed that in 1998 except in Vietnam in

all the other major NR producing countries, the majority of rubber area was in small

holdings. But after a decade even in Vietnam the share of holdings extended to 50

percentage. This shows ongoing shift in geographical and structural composition of

rubber area within each country.

3:2:3 Global Production

Table 3.3 shows the world production of NR, respective share of NR

producing countries and annual world production growth rate during the period from

1970 to 2009.

75
 Table 3.3
PRODUCTION OF NR IN THE MAJOR PRODUCING COUNTRIES
(in ‘000 Tonnes)

Year Thailand Indonesia Malaysia India China Vietnam Others Total

1970 290 815 1269 90 - 28 611 3103

1975 355 823 1459 136 69 20 453 3315
1980 501 1020 1530 155 113 49 482 3850
1985 724 1130 1470 198 188 53 637 4400
1990 1275 1262 1291 324 264 103 601 5120
1991 1341 1284 1256 360 296 87 536 5160
1992 1531 1387 1173 383 309 114 553 5450
1993 1553 130 1 1074 428 326 117 511 5310
1994 1718 1361 1101 464 374 149 553 5720
1995 1805 1455 1089 500 424 155 612 6040
1996 1970 1527 1083 540 430 220 670 6440
1997 2031 1505 971 580 444 212 727 6470
1998 2076 1714 886 591 450 218 885 6820
1999 2153 1599 769 620 460 262 1007 6870
2000 2346 1501 928 629 445 291 624 6764
2001 2320 1607 882 632 478 313 1020 7252
2002 2615 1603 890 641 527 331 730 7337
2003 2876 1792 986 708 565 364 742 8033
2004 2984 2066 1169 743 573 419 804 8758
2005 2937 2271 1126 772 510 469 821 8906
2006 3137 2637 1284 853 533 555 792 9791
2007 3056 2755 1200 811 590 606 783 9801
2008 3090 2751 1072 881 560 660 1022 10036
2009 3164 2440 856 820 637 724 976 9617

Total 47848 39606 26814 12859 9565 6519 17152 160363

Average 1993.67 1650.25 1117.25 535.79 398.54 271.62 714.67 6681.79

Percentage 29.84 24.70 16.72 8.02 5.96 4.07 10.70 100

Rank 1 2 3 4 5 6

76
Source: Indian Rubber Statistics – Rubber Board Vol. 32 & 33.

From the above table it can be noticed that the average production of NR

in the six main producing countries is nearly 90 percentage. Moreover, Thailand ranks

first followed by Indonesia, Malaysia, India, China and Vietnam.

3:2:4 Productivity

Productivity of NR is measured in terms of yield per hectare. Table 3.4

shows the average productivity of NR in the major producing countries.

Table 3.4

AVERAGE PRODUCTIVITY OF NR IN THE MAIN PRODUCING

COUNTRIES (in kg/ha)

Productivity
Percentage increase over 6
Country
years
In 2003 In 2009

India 1653 1760 6.47

Thailand 1418 1704 20.16

Vietnam 1412 1697 20.18

Malaysia 1280 1450 13.28

China 767 1178 53.33

Indonesia 750 901 20.13

Source : Rubber Growers Guide–Rubber Board Bulletin of NR trends and statistics

From the above table, it is observed that India is at the top in productivity

but at the bottom in growth rate. Growth rate in productivity is the highest in China.

Inorder to be competitive in the global market and to maintain the lead position in the

productivity, India has to move towards modernization.

77
 Figure: 3.4.a

AVERAGE PRODUCTIVITY OF NR IN THE MAJOR PRODUCING

COUNTRIES

The above diagram shows that the productivity of rubber has been

increasing in all the major NR producing countries. But the growth rate is the highest

in China and the lowest in India.

3:2:5 Types and Grade of NR

World production of NR was 9.44 million tonnes in 2009 in dry and latex

concentrated forms. Major forms of processed natural rubber are sheets, crepes,

technically specified block rubber, preserved latex concentrates and specialty grades

(see Appendix VI). The first three are in dry form accounting for almost 90

percentage of the grades marketed. Sheet rubber and block rubber dominate NR

market in the world.

3:3 Rubber Production in India

78
 Rubber production in India consists of three segments such as Natural Rubber

(NR), Synthetic Rubber (SR) and Reclaimed (RR). Aspects such as production and

import of these segments during 20 years of pre-liberalization and post-liberalization

are analyzed below

3:3:1 NR Production in India

Rubber cultivation in India on a commercial scale is said to have

commenced in 1902 by the European planters.7 Since then the industry has been

developing. Indian rubber plantation sector that has passed through a number of ups

and downs before it has attained the present distinguished state. The salient features of

the NR production segment are as follows.

3:3:1:1 Geographical Concentration

The important feature of the Indian rubber plantation industry is the

regional concentration of the crop area. NR production in India are highly

concentrated in three Southern States namely kerala, Tamil Nadu and Karnataka.

Kerala and Kanyakumari district in Tamil Nadu constitute the traditional regions of

rubber in the country. These account for 98 percentage of the total area in the country

in the 1950s and 95 percentage in the 1970s.8 But there was a shift in the geographical

concentration of area over the years and the relative share of traditional regions came

down to 84 percentage in 2007-08 and to 81 percentage in 2008-09.9 This change

happened from the Rubber Board’s policies and programmes for the promotion of

rubber cultivation in the non-traditional regions. Now rubber is grown in Karnataka,

Tripura, Assam, Meghalaya, Mizoram, Manipur, Nagaland, the Andaman and

Nichobar Islands, Goa, Maharastra, Orissa, Andrapradesh, Madhyapradesh and West

Bengal. However, Kerala enjoys a monopoly position of the regional concentration

and NR production. Table 3:5 shows the statewise tapped area, production and yield

79
per hectare in order to substantiate the geographical concentration of rubber

cultivation and production in the country.

80
 Table 3.5
STATE WISE TAPPED AREA, PRODUCTION AND YIELD OF NR IN INDIA.

State Tapped Area (in hectares) Production (in tones) Yield (kg / ha)

1970 1990 2000 2009 1970 1990 2000 2009 1970 1990 2000 2009

Kerala 134103 284960 359780 401706 86773 307521 579866 783485 647 1079 1612 1948
(95) (93) (90) (86.74) (94.14) (93.30) (92.02) (90.62)
Tamil Nadu 857 1149 1582 1612
5673 11873 13651 15113 4859 13645 21611 24355
(4) (3.87) (3.41) (3.26) (5.27) (4.13) (3.43) (2.82)
Karnataka 378 958 1212 1406
1374 6957 11043 13635 519 6665 13115 18175
(0.97) (0.85) (2.75) (2.94) (0.56) (2.02) (2.08) (2.10)

Others 26 2623 15427 32676 20 1784 15560 38485

769 680 1002 1172
(0.03) (2.28) (3.85) (7.06) (0.03) (0.55) (2.47) (4.46)

Total 141176 306413 399901 463130 92171 329615 630152 864500

Average
- - - - - - - - 653 1067 1352 1867
Yield

Source: Indian Rubber Statistics – Rubber Board.

Rubber Growers Guide – Rubber Board
Note: Figures in parentheses represent the percentage to total of the respective column.

81
 Table 3:5 shows that tapped area in traditional regions of Kerala and Tamil

Nadu accounted for 99 percentage of the total area in 1970. It decreased to 97, 95 and 90

percentage in 1990, 2000 and 2009 respectively. It showed that the significance of NR in

non-traditional regions too. In the regions, NR production was less than one percentage in

1970 but it increased to seven percentage in 2009.

With regard to productivity, the yield per hectare in Kerala was less than the

national average in 1970 but it outweighed the national average in 1990, 2000 and 2009.

In Tamil Nadu, the yield per hectare exceeded the national average in 1970, 1990 and

2000. But it came down in 2009. The key factors which depressed the growth in

productivity are relatively lower level of adoption of short-term yield enhancing measures

by the dominant tiny holdings of less than 20 cents and the passive attitude of Arasu

Rubber Corporation in developing the plantation under its control.

Figure : 3.5.a

STATE WISE NR YIELD IN INDIA

82
 The figure above highlights the improved productivity in the States of Kerala,

Tamil Nadu and Karnataka over four decades. The productivity is at the peak in Kerala,

growing faster in Karnataka but slow in Tamil Nadu.

3:3:1:2 Dominance of Small-holdings

In India, upto 1925 plantations of 40 hectares and below were treated as

holdings and they occupied 27 percentage of the area under rubber.10 In India, rubber

cultivation was confined to estates in the early 1950s. But since then the rubber plantation

industry had been dominated by holdings. The word holding meant rubber area contiguous

or non-contiguous aggregating 20 hectares or less under a single ownership. Land

contiguous or non-contiguous aggregating more then 20 hectares planted rubber under a

single ownership was treated as estate. However, estates or holdings situated in different

taluks even if they were under a single ownership were considered separately. According

to the Rubber Act passed by the Parliament in November 2009, plantations of 10 ha and

above are reckoned as large estates and those below 10 hectares as small holdings. After

the amendment, the number of large estates rose to 600 with the total area of 70000

hectares.11 The planted area of rubber had been mounting up year after year. In 2009, it

covered 695000 hectares. Highly remunerative price of rubber attracted many small

agriculturists to go in for rubber plantation. Almost 90 percentage of the planted area was

in the hands of over a million of small planters.12 The average size of small holdings was

about 0.53 hectare. In India 92 percentage of NR production was from small-holdings.13

83
 Table 3.6

AREA OF NR HOLDINGS AND ESTATES IN INDIA (in hectares)

Percentage Percentage
year Total Area Holdings Estates
to Total to Total

1970-71 217198 149800 68.97 67398 31.03

1975-76 235876 168687 71.52 67189 28.48
1980-81 284166 215443 75.82 68723 24.18
1985-86 382831 310209 81.03 72622 18.97
1990-91 475083 397465 83.66 77618 16.34
1991-92 488514 410623 84.06 77891 15.94
1992-93 499374 421159 84.37 78215 15.63
1993-94 508420 430093 84.59 78327 15.41
1994-95 515547 437519 84.87 78028 15.13
1995-96 524075 449499 85.77 74576 14.23
1996-97 533246 459437 86.16 73809 13.84
1997-98 544534 474880 87.21 69654 12.79
1998-99 553041 483701 87.46 69340 12.54
1999-00 558584 490277 87.77 68307 12.23
2000-01 562670 495358 88.04 67312 11.96
2001-02 566555 498961 88.07 67594 11.93
2002-03 569667 502894 88.28 66773 11.72
2003-04 575980 509652 88.48 66328 11.52
2004-05 584090 518157 88.71 65933 11.29
2005-06 597610 532058 89.03 65552 10.97
2006-07 615200 549715 89.36 65485 10.64
2007-08 635400 569155 89.57 66245 10.43
2008-09 661980 595378 89.94 66602 10.06

Source : Indian Rubber statistics – Rubber Board

Rubber Growers Guide – Rubber Board

It is evident from the above table that the planted area has been mounting up

year by year. The table displays that the percentage share of holdings has been increasing

84
from 1970-71. The ratio of holdings to estate was 69:31 in 1970-71 and 90:10 in 2008-09

of the total area of NR in India.Table 3:7 shows the share of small holdings and estates

towards NR production in India.

Table 3:7
PRODUCTION OF NR IN SMALL HOLDINGS AND ESTATES IN INDIA
(in tonnes)

Holdings Estates
Total
Year
production
Production percentage Production percentage

1970-71 51538 55.92 40633 44.08 92171

1975-76 84616 61.43 53134 38.57 137750
1980-81 107700 70.35 45400 29.65 153100
1985-86 149673 74.66 50792 25.34 200465
1990-91 268500 81.46 61115 18.54 329615
1995-96 436500 86.11 70410 13.89 506910
2000-01 553770 87.84 76635 12.16 630405
2005-06 739530 92.14 63095 7.86 802625
2009-10 - - - - 831400

Source : Indian Rubber Statistics

The above table clearly indicates that NR production under holdings has been

increasing from 1970-71. The contribution of holdings was 55.92 percentage in 1970-71.

It then considerably increased to 92.14 percentage of total NR production in India.

3:4 Area Under Rubber In Tamil Nadu

In Tamil Nadu, rubber is extensively cultivated in the ever green forests of the

Western Ghats and North Eastern regions. In Kanyakumari district the factors favouring

rubber cultivation are soil, climate, rainfall and skilled manpower. It constitutes the

traditional region of rubber in the State. On account of mounting pressure, on land, further

expansion in traditional regions is not easy. To maximize NR production, rubber

85
cultivation is extended to other parts of the State which are not fully hospitable to rubber.

The notable characteristic feature of rubber plantation in the State is marginal and tiny size

of the individual units in the dominant small holding sector. Table 3:8 provides the area of

rubber plantation in holdings and estates and the percentage of increase or decrease of

total area from 1990 to 2009 along with the trend values.

Table 3.8

AREA COVERING RUBBER IN TAMIL NADU (in hectare)

Percentage
Increase/
Year Holdings Estates Total of Increase/ Trend Value
Decrease
Decrease

1990-91 9696 7454 17150 - - 16474

1991-92 9673 7539 17210 60 0.35 16572
1992-93 9621 7639 17260 50 0.29 16670
1993-94 9621 7679 17300 40 0.23 16768
1994-95 9772 7658 17430 130 0.75 16866
1995-96 10908 7040 17948 518 2.97 16964
1996-97 11185 7024 18209 261 1.45 17062
1997-98 11817 6653 18470 261 1.43 17160
1998-99 12121 6510 18631 161 0.87 17258
1999-00 12139 6520 18659 28 0.15 17356
2000-01 12273 6437 18710 51 0.27 17454
2001-02 12262 6442 18704 -06 -0.03 17552
2002-03 12292 6339 18631 -73 -0.39 17650
2003-04 12302 6331 18633 02 0.01 17748
2004-05 12367 6275 15642 09 0.05 17846
2005-06 12495 6320 18815 173 0.93 17944
2006-07 12643 6590 19233 418 2.22 18042
2007-08 12760 6650 19410 177 0.92 18140
2008-09 13344 6011 19355 -65 -0.33 18238

Source: Compiled from Indian Rubber Statistics

86
 It could be noticed from the above table that the area used for rubber

cultivation in Tamil Nadu was in increasing trend except in 2001-02, 2002-03 and in

2008-09. The negative growth rate in the first phase was due to slack in price. But the

main reason for the negative growth rate in 2008-09 was the limited scope for expansion

of area for rubber cultivation in the traditional areas even though the price was at

increasing trend. At the same time, it is obvious from the table that the total area under

rubber cultivation has increased from 17150 hectares in 1990-91to 19355 hectares in

2008-09.

Table 3.8 also shows that the area under holdings has been increasing steadily.

The holdings increased from 9696 ha in 1990-91 to 13,344 ha in 2008-09. While the area

under estates decreased from 7454 ha to 6011 ha in the same period.

It can also be seen from the table that the trend value for the area covering

rubber cultivation in Tamil Nadu has increased from 16474 hectares in 1990-91 to 18238

hectares in 2008-09. It confirms the scope for expansion in future.

Figure: 3.8.a
AREA UNDER RUBBER IN TAMIL NADU

87
 The graph points out that the area under rubber in Tamil Nadu has been

increasing. The increasing trend line is due to the increasing trend of holdings.

From tables 3.6, 3.7, 3.8 and from figure 3.8.a it is confirmed that the

hypothesis-supply side of NR is dominated by small holdings.

3:4:1 Rubber Production in Tamil Nadu

The traditional rubber plantation area in India is confined to the States of

Kerala and Tamil Nadu in the South. These traditional area contribute eighty one

percentage of the total area of 661980 hectares of rubber cultivation in 2008-09. In Tamil

Nadu, rubber cultivation is primarily confined to Kanyakumari district. Due to non-

availability of land in the traditional area and to increase NR production, rubber

cultivation has been extended to other parts of the State. As a result, the crop area, tapped

area and even production have been increasing but the rate of productivity that is yield per

hectare has been decreasing. It is evident from table 3:12 that while the yield in Kerala

was 1948 kg per hectare, it was just 1612 kg per hectare in Tamil Nadu. Which was even

less than the national average yield of 1867 kg/ha in 2008-09.14

88
 Table : 3.9
TAPPED AREA, PRODUCTION AND YIELD OF NR IN TAMIL NADU
Increase
Productio
Tapped Increase over a Increase/ over a
n Yield
Year Area decade Decrease decade
(in (kg/ha)
(in ha) (in percentage) (in kg) (in
tones)
percentage)
1970-71 5673 - 4859 857 - -
1980-81 9700 71.00 10446 1077 220 26
1990-91 11873 22.4 13645 1149 72 7
1991-92 12110 13975 1147 -2
1992-93 12180 14250 1177 30
1993-94 12215 14720 1205 28
1994-95 12550 15065 1200 -5
1995-96 12420 17335 1396 196
1996-97 12730 18505 1454 58
1997-98 13000 19175 1475 21
1998-99 13215 20263 1533 58
1999-00 13377 21134 1580 47
2000-01 13651 15.00 21611 1583 3 38
2001-02 13677 21631 1582 -1
2002-03 14065 22253 1582 0
2003-04 14170 22520 1589 7
2004-05 14325 22690 1584 -5
2005-06 14505 23555 1624 40
2006-07 14650 24020 1640 16
2007-08 14730 23820 1617 -23
2008-09 15113 24355 1612 -5
2009-10 15969 17.00 25588 1602 -10 1.2

Source : Rubber Growers Guide

Indian Rubber Statistics

From the above table, it could be noted that the total tapped area had increased

from 5673 ha in 1970-71 to 9700 ha in 1980-81 recording 71 percentage increase over a

decade. Again in 1990-91 tapped area increased to 11873 hectare, resulting in 22.4

89
percentage increase over the previous decade. During the first decade of the post-

liberalisation period the tapped area had increased by 15 percentage as against the previous

decade in 1981-90. From 2001 onwards, a slow but steady increase in tapped area could be

seen as rubber cultivation was started in non-traditional areas during the 1980s and the 1990s.

Likewise, the total production of NR was 4859 tonnes during 1970-71. It

increased to 10446 tonnes in the next decade and has reached the growth level of 115

percentage between 1970-71 to 1980-81. It further raised to 13645 tonnes in the subsequent

period of 10 years and recorded 30.6 percentage growth over the previous decade. In the first

decade of the post-liberalisation period, production of NR increased from 10446 tonnes to

21134 tonnes representing a remarkable increase of 58 percentage. At the same time, it could

be seen from the table a little ups and downs in production during the period from 2001-02.

As shown in table 3.9, in the pre-liberalisation period from 1980-81 to 1990-91

there was 22.4 percentage increase in tapped area followed by 30.6 percentage increase in

production. But in the post-liberalisation period from 1991 to 2001, the increase in tapped

area was 15 percentage followed by 58 percentage increase in production. Moreover, in the

subsequent years, production increased year by year except in 2007-08. The set-back was due

to abnormal leaf fall and unfavourable weather condition. But it could to be noted that

production started to pick up during 2008-09.

The table also shows that the yield per hectare was only 857 kg during 1970-71. It

increased by 220 kg and attained a level of 1077 kg per hectare in 1980-81. It marked a 26

percentage increase over a period of 10 years. In 1990-91, the yield was 1149 kg per hectare

representing seven percentage increase over the previous decade. Again productivity reached

the level of 1583 kg per hectare representing 38 percentage growth in 2000-01. After that a

stagnation in yield could be viewed from the table till 2002-03 and negative growth rate

during 2004-05, 2007-08 and in 2008-09. It created stress and strain to identify the key

factors which depressed the growth in productivity in order to compete in the world market.

3:5 Natural Rubber in Kanyakumari District

90
 In Tamil Nadu, the major area of rubber plantations is in the district of

Kanyakumari. It covers 98 percentage of the area of rubber cultivation in Tamil Nadu.15 In

the district, rubber is extensively cultivated in three taluks namely Thovalai, Kalkulam and

Vilavancode. Alexander of Colombo Commercial Company planted in 1910 at Vaikundam in

Kanyakumari district. 16 In the district, 22 percentage of the cultivated area is used for rubber.

It also accounts for 98 percentage of the NR output of the state. Due to increasing pressure on

land for uses other than cultivation, the structure of rubber plantations has been transforming

from estate to holdings at an average size of 0.45 hectare in the district.17 The area under

rubber in the estates and holdings are given in Table 3.10

Table 3.10
AREA COVERING RUBBER PLANTATIONS IN KANYAKUMARI DISRTICT
(in hectare)
Increase/ Percentage of
year Holdings Estates Total
Decrease Increase/Decrease
1970-71 5117 5992 11039 - -
1975-76 6671 6428 13099 2060 18.66
1980-81 6858 8232 15090 1991 15.19
1985-86 8867 7265 16132 1042 6.90
1990-91 9444 7276 16720 588 3.64
1991-92 9475 7287 16762 42 00.25
1992-93 9446 7366 16812 50 0.29
1993-94 9354 7501 16855 43 0.25
1994-95 9505 7480 16985 130 0.77
1995-96 10639 6927 17563 578 3.40
1996-97 10905 6911 17816 253 1.44
1997-98 11517 6540 18057 241 1.35
1998-99 11738 6465 18203 146 0.80
1999-00 11816 6422 18238 35 0.19
2000-01 11953 6339 18292 54 0.29
2001-02 11953 6344 18297 5 0.02
2002-03 11992 6226 18218 -79 -0.43
2003-04 11832 6372 18204 -14 -0.07
2004-05 11988 6176 18164 -40 -0.21
2005-06 12167 6230 18397 233 1.28
2006-07 12412 6394 18806 409 2.22
2007-08 12501 6478 18979 173 0.91
2008-09 12707 6287 18994 15 0.08
2009-10 13489 6011 19500 506 2.66
Source : Compiled from Rubber Growers Guide &
Indian Rubber Statistics

91
 Table 3:10 shows that the total area of rubber plantation has increased till 2001-02. But a
slight decline could be seen in the subsequent three years. After that due to the hike in rubber
price, the area covering rubber cultivation started to increase. It could also be seen from the
table that the area under holdings is in the increasing trend but that of estates is in the
decreasing trend. The reasons are partition of land among the heritants, disposal of estates
and conversion of the cultivated land for real estate purpose.
3:5:1 NR Production in Kanyakumari District
In Tamil Nadu, More than 98 percentage of NR production is from Kanyakumari
district. So it reflects the position of NR in Tamil Nadu. Table 3.11 shows the tapped area,
production and yield of NR in the district for 20 years before and after globalisation.

Table 3:11
TAPPED AREA, PRODUCTION AND YIELD OF NR IN KANYAKUMARI
DISTRICT

Production Yield Percentage

Tapped Area
Year Increase/decrease of
(in hectares) (in tones) (in kg/ha) Yield
1970-71 5540 4761 859 -
1980-81 9506 10237 1077 -
1990-91 11610 13372 1152 6.96
1991-92 11936 13695 1147 0.43
1992-93 11868 14250 1200 4.62
1993-94 11900 14341 1205 0.42
1994-95 12230 14680 1200 -0.41
1995-96 12153 16396 1349 12.42
1996-97 12455 18105 1454 7.78
1997-98 12708 18746 1475 1.44
1998-99 12877 19475 1512 2.51
1999-00 13074 20657 1580 4.50
2000-01 13345 21128 1583 0.19
2001-02 13378 21160 1582 -0.06
2002-03 13754 21759 1582 -
2003-04 13835 21001 1590 0.51
2004-05 13995 22108 1580 -0.63
2005-06 14257 23031 1615 2.22
2006-07 14292 23486 1643 1.73
2007-08 14424 23291 1615 -1.70
2008-09 14810 23867 1612 -0.19
2009-10 15098 24300 1609 -0.19
Source : Compiled from Rubber Growers Guide and Indian Rubber Statistics

92
 The table presents that the tapped area in Kanyakumari district has been in

increasing trend except in the year 1995-96. The production of NR has also increased in

almost all the years from 1970-71. Decrease in production has been recorded only in 2003-04

due to unfair weather prevailed then. But it could be viewed from the table that though the

yield per hectare was less than 1000 kg during the 1970s, it crossed the level during the

1980s. During the 1990s, increase in yield could be achieved except in 1994-95. Moreover,

when the average yield per hectare reached the level of 1580 kg in 1999-2000, a stagnation

could be seen afterwards from the table. A negative growth rate in yield could also be noticed

in 2004-05 and from 2007 to 2010. It had its say in dragging down the position of NR in

productivity from the national level.

While the availability of land in the district is becoming scarce, the only

alternative is to increase the productivity by adopting scientific technologies from seed

management to latex extraction. It is evident from the table that the area for the crop, tapped

area and even production have been increasing but the rate of productivity that is the yield per

hectare has been decreasing. A comparative statement of yield per hectare in Kerala, Tamil

Nadu and in India are given in table 3:12.

Table 3:12
AVERAGE YIELD PER HECTARE OF NR IN DIFFERENT STATES OF INDIA.

Kerala Tamil Karnataka

Year Others(kg) India (kg)
(Kg) Nadu(kg) (kg)

2000-01 1612 1583 1211 1009 1576

2001-02 1612 1582 1212 1002 1576
2002-03 1636 1582 1211 989 1592
2003-04 1715 1589 1225 981 1663
2004-05 1765 1584 1249 970 1705
2005-06 1865 1624 1271 1022 1796
2006-07 1960 1640 1299 1079 1879
2007-08 1876 1617 1280 1071 1799
2008-09 1948 1612 1406 1172 1867

Source : Indian Rubber Statistics Vol.33

93
 It is evident from the table that in 2000-01, the yield per hectare was 1612 kg in

Kerala. It was 1583 kg in Tamil Nadu which was more than the national average of 1576 kg.

but in Kerala it increased to 1948 kg in 2008-09 recording 21 percentage increase in

productivity. At the same time, in India, it increased to 1612 kg recording just two percentage

more. Moreover, the yield per hectare in Tamil Nadu came down from the national average

yield of 1867 kg per hectare.

Adopting frontier technology is an important factor determining the aggregate

productivity of rubber in the country. Though size constrains, the level of technology among

the small holdings and estates under private sector are appreciable, the important factors

dragging down the State from the yield rank lists are very tiny fragmentation of rubber

plantations and the low and unproductive conditions of the plantations under Arasu Rubber

Corporation (ARC). Table 3.13 shows the tapped area and yield per hectare of ARC for a

period of seven years from 2002-03 to 2008-09.

Table 3:13

TAPPED AREA, PRODUCTION AND YIELD OF NR IN ARC

Tapped Area Production Yield/ha

Year
(in ha) ( in tonnes) (kg)

2002-03 2155 2834 1315

2003-04 2108 2668 1266

2004-05 1995 2037 1021

2005-06 2032 2562 1260

2006-07 2022 2116 1046

2007-08 1990 2003 1007

2008-09 2003 1682 840

Source : Audit Reports of ARC

94
 The table presents a declining trend in the yield except in 2005-06. The secured

position of workers in ARC has negatively reflected in the productivity of rubber.

It has been noticed from the Regional Office of the Rubber Board, Marthandam,

that the normal yield of holdings in the district is at the range of 1750 to 1800 kg per hectare.

Whereas the private estate is between 1800-2000 kg/ha. Though the district has the unique

advantage of having rubber plantation in reserve forests in 4280 hectares under the control of

ARC, the passive attitude of the employees, when compared to the involvement of the small

holdings and estates under private sector, is the main reason for the slowdown in productivity

in the district and in turn in Tamil Nadu. It depicts the impact of privatisation on rubber

plantations in Kanyakumari district.

3:6 Seasonal Pattern in Production

Production of NR in India is characterized by lean and peak periods on the basis

of changes in the climatic conditions in the major rubber producing centres.

i. Lean period

Two lean periods are noticed during which production is at the lowest due to the

adverse climatic conditions. Following are the two such periods.

February – March and June – July

During February and March, the yield comes down due to high temperature. Most

of the growers give rest to rubber trees. When monsoon starts and progresses during June and

July, rubber tapping becomes difficult and production comes down. It is noticed that the yield

is the lowest even though rain guard is used for tapping during rainy season.

In Kanyakumari district several growers do not use rain guards for continued

tapping during rainy days as it is done in Kerala. Rainfall is an important factor that affects

NR production and productivity in the district. Before 1991, rain guard was not

recommended in the district because the average rainfall was less than 350 mm and the

hindrance to tapping by rain was the least. But from 1991, the average rainfall crossed 350

mm in several months. During the Southwest monsoon, there are 40 rainy days and during

the Northeast monsoon, there are 36 rainy days on an average per year. Thus tapping days are

95
affected by rain during the Southeast monsoon for 15 days and during the Northeast monsoon

for 13 days. Thus Kanyakumari district has been losing at an average of 27 tapping days

every year. The average production loss per tapping day is about 91 tonnes and 2457 tonnes

every year which is 11 percentage of the total production in the district. If rubber growers in

the district use rain guard, rubber production can increase by 11 percentage per annum.18

ii. Peak Period

Yield reaches the highest level during the peak period with the most favorable

climate conditions. Two periods are identified as peak. They are months of May and October

to January. Table 3:14 gives month wise production of NR in India for the past five years

(2006-10) to identify the two lean and two peak periods.

Table : 3:14
MONTH WISE PRODUCTION OF NR IN INDIA
(in tones)

Months 2005-06 2006-07 2007-08 2008-09 2009-10

April 48490 54555 53665 57250 51520

May 53010 56500 46485 60115 53550
June 49625 57610 43480 62200 54255
July 53455 65500 39590 62550 50250
August 65210 74495 60850 73250 64750
September 70895 73550 65275 80500 74300
October 81405 82970 89505 84365 88775
November 93505 95525 109480 95550 93500
December 96125 101680 111730 100225 100850
January 93510 96450 103515 91900 97500
February 51505 51455 54520 48295 51500
March 45890 42605 47250 48300 50650
Total 802625 852895 825345 864500 831400

Source : www.rubber board.org.in and Indian Rubber Statistics, Vol.32

96
 From the table, it can be noticed that at an average of 45.72 percentage of annual

production has taken place during the months of October to January. In each year, production

has reached the highest peak in December. During February, March and July production has

reached the lowest.

Figure: 3:14.a

MONTH WISE PRODUCTION OF NR IN INDIA

The graph shows that production of NR is the lowest in the month of July and the

highest in the month of December in all the five years.

3:7 Unregulated Supply of NR

In the Indian market, there is no mechanism available to regulate the supply of NR

in accordance with the demand with a view to stabilize its price. Due to the predominance of

small holders’ in the production of NR by 92 percentage, supply regulation cannot be easy.

The following are the reasons

97
 i. NR can not be stored for more than three months without deteriorating its quality

ii. Small holders do not possess scientific storing facility

iii. Financial needs do not allow them to store rubber for a long period as it is the main

livelihood

Table : 3:15
SMALLHOLDERS’ STORING FACILITY OF NR IN KANYAKUMARI DISTRICT

Growers having Growers not having

Taluk No.of Respondents
Store house store house

Vilavancode 165 3 162

Kalkulam 105 2 103

Thovalai 30 - 30

Total 300 5 295

Source : Sample Survey

Table 3:15 shows the storing facility of small growers. From the table, it can be

seen that only five grower-respondents in the sample survey possess proper storing facilities.

Table : 3:16
REASON FOR IMMEDIATE DISPOSAL OF NR

No.of Financial Storing Price

Taluk Others
Respondents Problem Problem Fluctuation

Vilavancode 165 112 14 37 2

Kalkulam 105 61 8 31 5

Thovalai 30 18 2 10 -

Total 300 191 24 78 7

Source : Sample Survey

98
 From table 3:16 it is clear that 64 percentage of respondents dispose off their

produce immediately under financial compulsions and eight percentage due to lack of storage

facilities though they are ready to withhold their produce and 26 percentage sell their produce

under the pressure due to price fluctuations. Thus supply of NR can not be controlled easily

and efficiently in the district.

3:8 Production of NR In India during Pre-Liberalisation Period

To study the impact of liberalisation on NR, it is necessary to analyze the NR

production during pre-liberalisation period. This part of the study is related to the period of

20 years from 1970 to 1990. NR production grew slowly with many ups and downs since its

inception in 1902. The plantation sector started to develop faster after independence and

Rubber Board of India was formed in 1947 for its orderly development. To attract the

attention of new cultivators and to retain the existing ones and thereby to boost the

production of NR, Rubber Board introduced Replanting Subsidy Scheme in 1957 and

Interest-free Loan Assistance Scheme in 1962 during the pre-liberalisation period19.

99
 Table : 3:17

AREA UNDER RUBBER IN INDIA DURING 1970-1990

Area under Rubber Percentage

Year
(in hectares) Growth

1970-71 217198 -
1971-72 219981 1.28
1972-73 223465 1.58
1973-74 227317 1.72
1974-75 231452 1.82
1975-76 235876 1.91
1976-77 240593 2.00
1977-78 245200 1.91
1978-79 253279 3.29

1979-80 265211 4.71

1980-81 284166 7.15
1981-82 301924 6.25
1982-83 321495 6.48
1983-84 339848 5.71
1984-85 361960 6.51
1985-86 382831 5.77
1986-87 402329 5.09
1987-88 421512 4.77
1988-89 440584 4.52
1989-90 460341 4.48

Average 4.05

Source : Rubber Growers Guide

100
 From the table it can be noted that total area under rubber has increased from

217198 hectares in 1970-71 to 2,84,166 in 1980-81 and to 460341 hectares in 1989-90.

During the 1980s the Rubber Board introduced a new plan called Subsidy-cum-Credit

Scheme to encourage growers. As a result, 195130 hectares of land came under rubber

cultivation in the period. The table shows an average growth rate of 4.05 percentage. The

growth rate has been phenomenal from 1980 as rubber cultivation has started in non-

traditional areas such as Tripura, Mizoram Nagaland, Maharashtra, Orissa and Andra

Pradesh. Moreover, crop shifting to rubber is one of the reasons for the high planting rate

during the 1980s.

3:8:1 Production of NR in India During the 1970s and the 1980s

During the 1970s, increase in price for petroleum products adversely affected the

automobile industry in India. It consequently resulted in low demand for NR. Growers

became investment shy due to poor demand and low price for NR. So production of NR was

not satisfactory in the period. Fall in planting led to a setback in production during 1978-79 to

1984-85, as the gestation period of rubber tree was seven years. Table 3:18 shows the

production and productivity of NR during the pre-liberalisation period.

101
 Table 3:18
PRODUCTION OF NR IN INDIA DURING 1970s AND 1980s
Production Productivity
Year Growth rate
(in tonnes) Kg/hectare
1970-71 92171 - 653
1971-72 101210 9.81 678
1972-73 112364 11.02 725
1973-74 125153 11.38 756
1974-75 130143 3.98 762
1975-76 137750 5.85 772
1976-77 149632 8.63 806

1977-78 146987 -1.77 770

1978-79 135297 -7.95 711
1979-80 148470 9.74 771
1980-81 153100 3.12 788
1981-82 152870 -0.15 779
1982-83 165850 8.49 830
1983-84 175280 5.69 587
1984-85 186450 11.75 886

1985-86 200465 7.52 898

1986-87 219520 9.5 926
1987-88 235197 7.14 944
1988-89 259172 10.19 1029
1989-90 297300 11.71 1076

Average 6.61 807.35

Source : Rubber Growers Guide

Indian Rubber Statistics

Table 3:18 shows the production, growth rate in production and yield per hectare

(i.e.) productivity in the pre-liberalisation period. From the table, it could be noted that the

102
 growth rate was negative during 1977-78 and 1978-79 due to low growth rate in the area for

rubber cultivation seven years before the period. As per the table, the yield per hectare is 653

kg in 1970-71 and 1076 kg in 1989-90 recording an average yield of 807.35kg. The low yield

rate has heavy impact on the overall production during the 1970s. The average growth rate in

production is 6.61 percentage.

3:9 Production of NR in India in the Post-liberalization Period

To study the impact of LPG on the production of NR, data for a period of 20 years

from 1991-2010 has been taken for analysis. The growth of the Indian rubber plantation

industry is phenomenal in the post-liberalisation period (i.e.) from 1990-91 onwards. It has

been third in production and first in productivity during 1990s20. India has become the fourth

largest in production and first in productivity among the major rubber producing countries

during 2009-1021.The dramatic change in production is due to the following reasons:

i. The Research Programmes for Rubber Research Institute of India (RRII)

ii. Evolution and release of high yielding clones namely RRII 105, RRII 414, RRII 417,

RRII 422 and RRII 430

iii. Implementation of plantation development schemes by Rubber Board

iv. Highly responsible farmer community and a well co-ordinated extension service of

the Rubber Board

v. Remunerative price prevailed in the rubber market

vi. Rapid proliferation of new rubber products over the globe.

103
 Table : 3:19
AREA UNDER RUBBER FROM 1991-2010 IN INDIA

Area Growth
Year
(in hectares) Rate

1990-91 475083 -
1991-92 488514 2.83
1992-93 499374 2.22
1993-94 508420 1.81
1994-95 515547 1.40
1995-96 524075 1.65
1996-97 533246 1.75
1997-98 544534 2.12
1998-99 553041 1.56
1999-00 558584 1.00
2000-01 562670 0.73
2001-02 566555 0.69
2002-03 569667 0.54
2003-04 575980 1.10
2004-05 584090 1.40
2005-06 597610 2.31
2006-07 615200 2.94
2007-08 635400 3.28
2008-09 661980 4.18
2009-10 687000 3.77

Average growth rate 1.96

Source : Rubber Growers Guide

Indian Rubber Statistics

From the above table it is visible that the area under rubber cultivation has been

increasing from the beginning of globalisation. The average growth rate is 1.96 and the

growth rate is the highest in 2008-09. As Stephen Evans, Secretary General, IRSG pointed

out, the rise in NR prices during 2005-08 periods had led to a dramatic increase in new

plantation.22

104
 Table 3:20
PRODUCTION OF NR FROM 1991-2010 IN INDIA

Production
Year Growth Rate Yield (in kg)
(in tonnes)

1990-91 329615 - 1076

1991-92 366745 11.26 1130

1992-93 393490 7.29 1191

1993-94 435160 10.59 1285

1994-95 471815 8.42 1362

1995-96 506910 7.44 1422

1996-97 549425 8.39 1503

1997-98 583830 6.26 1549

1998-99 605045 3.63 1563

1999-00 622265 2.84 1576

2000-01 630405 1.30 1576

2001-02 631400 0.15 1576

2002-03 649435 2.85 1592

2003-04 711650 9.57 1663

2004-05 749665 5.34 1705

2005-06 802625 7.06 1796

2006-07 852895 6.26 1879

2007-08 825345 -3.23 1799

2008-09 864500 4.74 1867

2009-10 831400 -3.82 -

Average 5.07 1532

Source : Indian Rubber Statistics Vol.30 &33.

105
 It could be noted from the table that after globalisation production of NR had been

increasing except in 2007-08 and 2009-10. The main reason for the negative growth rate in

production during the above mentioned years was the low planting rate in 2003 and 2004 due

to non-availability of suitable land. Moreover, a host of other factors including climate

change, lower-yield from the new plantations in non-traditional regions and massive

uprooting of aged trees have contributed for the decrease, which could be rectified to some

extent in the coming years with coordinated action of Rubber Board and rubber growers.

3:10 Replantation and New Plantation

Rubber tree may live for a hundred years or even more. It can be productive for

20-25 years. After its economical life, when, the tree stops producing latex, it is disposed off

and a new tree is planted in its place. Slow pace of replanting is a cause for the shortage of

NR output in India. In the last two years, high prices have prompted farmers for retaining

aged trees and postponing replanting. Over-aging leads to decrease in yield. In India, as there

is lack of land in traditional area for NR expansion, cultivation in non-traditional States such

as Tripura, Maharashtra, Andra Pradesh and Goa has been encouraged23.

Table 3:21 shows the area of new plantation and replantation of NR in the pre-

liberalisation period in India.

106
 Table 3:21

AREA COVERING NEW PLANTATION AND REPLANTATION OF RUBBER

( 1970-1990 in hectares)

Year New plantation Replantation Total

1970-71 6655 2089 8744

1971-72 3044 1473 4517
1972-73 3775 1704 5479
1973-74 3975 1576 5551
1974-75 4310 2200 6510
1975-76 4561 3099 7660
1976-77 4882 3172 8054
1977-78 4770 3645 8415
1978-79 8450 4050 12500
1979-80 12300 4065 16365
1980-81 19308 5476 24784
1981-82 18100 4188 22288
1982-83 19884 4963 24847
1983-84 18805 5641 24446
1984-85 22365 5217 27582
1985-86 21222 5759 26981
1986-87 19856 5563 25419
1987-88 19536 6517 26052
1988-89 19471 6998 26469
1989-90 20175 6854 27029

Source : Indian Rubber Statistics

From the above table it is obvious that during the twenty years of pre-

liberalisation, the total area covering new plantation and replantation was 27029 ha. Out of it

75 percentage was newly added to the existing rubber plantations. It showed the surge in new

plantation.

107
 Table 3:22
AREA NEWLY PLANTED AND REPLANTED AREA OF RUBBER IN INDIA
( 1991- 2009 in hectares )

Year New planted Replanted Total

1990-91 15143 7154 22297

1991-92 13851 7100 20951
1992-93 11000 7200 18200
1993-94 9200 6000 15200
1994-95 7500 7000 14500
1995-96 7800 7500 15300
1996-97 10400 7000 17400
1997-98 13300 7500 20800
1998-99 8800 6500 15300
1999-00 6100 5200 11300
2000-01 6780 6640 13420
2001-02 6380 5930 12310
2002-03 5390 7890 13280
2003-04 6980 7350 14330
2004-05 10500 7130 17630
2005-06 14750 7520 22270
2006-07 19250 8380 27630
2007-08 20750 8500 29250
2008-09 27500 9000 36500

Source; Indian Rubber Statistics

It is interesting to note table 3:22 because in the post- libralisation period 75

percentage of the total area of newly planted and replanted natural rubber is shared by new

plantation.

108
3:11 Import of NR

In India, production of NR started in 1902 but rubber goods manufacturing units

came in to existence during the 1930s. The domestic production of NR was not sufficient to

meet the entire demand for the real users. So to meet the shortage, the Government permitted

import of NR. In the 1950s and 60s, the import was about 50 percentage of the total

requirements and in the 1980s, it was only 15 percentage of the consumption24. Import was

channalised through STC since 1968. The policy of the Government was to allow imports for

distribution only during the lean months of rubber production in the country. But as a result

of liberalistion measures, the policy of rubber import through the STC was changed and

direct import by rubber goods manufactures became the policy of the Government. The

import policies for NR had undergone considerable changes from 1992. Some of the

important changes are the following:

i) Categorization of NR under ‘Negative List’ of import (i.e.) the commodity could

only be imported against a license or in accordance with a public notice issued or

through Advance License Scheme (see Chapter-II). NR was an item in the Negative

list for import till March 2001.

ii) The next policy change was the removal of NR from the Negative List and bringing

it under Open General License (OGL) with effect from April 1, 2001, consequent to

the provisions under WTO. By including NR as an item in OGL import control

became irrelevant and consequently the above mentioned control methods were

revoked.

iii) Another important policy change was restoring the facility of duty free import on

NR in July 2003 and reduction of the basic customs duty on NR from 25 to 20

percentage from January 9, 2004.

109
 Though import of NR was allowed to supplement its domestic availability, when

consumption exceeded production. The consuming segment had taken advantage of the

import policy by importing significant volume of NR as a step to artificially depress the

domestic prices. Table 3:23 below shows the total availability, total requirement, surplus/

shortage position and import from 1992-93 to 2009-10. Total availability was arrived at by

aggregating opening stock and production and total requirement by aggregating consumption,

export and the required two months stock (as per government norm).

Table: 3:23
NR AVAILABILITY, REQUIREMENT, SURPLUS/SHORTAGE AND IMPORT
(in tonnes)

Year Availability Requirement Surplus/ Deficit Import

1992-93 474738 489122 -14384 17884

1993-94 506301 525746 -19445 19940
1994-95 548830 568786 -19956 8093
1995-96 576460 614173 -37713 51635
1996-97 652615 656991 - 4376 19770
1997-98 691140 668538 22602 32070
1998-99 752345 691976 60369 29534
1999-00 810230 738784 71446 20213
2000-01 822975 750077 72898 8970
2001-02 815300 751573 63727 49769
2002-03 842505 866640 - 24135 26217
2003-04 829645 915438 -85793 44199
2004-05 834855 928455 -93600 72835
2005-06 913010 1008446 -95436 45285
2006-07 945915 1013568 -67653 89799
2007-08 990635 1065383 -74748 86394
2008-09 1028780 1063926 -35146 77762
2009-10 1027630 1110749 -83119 176756

Source: Compiled from various volumes of Indian Rubber Statistics

Rubber Grower’s Guide

110
 From the above table, it can be noted that though during 1992-93 to 1996-97 the

imports could be justified since there was certain amount of shortage in the domestic market.

It was clear that import resorted was much more than the shortage during 1995-96 and

1996-97. The imports during these years were 51635 tonnes and 19770 tonnes respectively

but the shortage was 37713 and 4376 tonnes only. Whereas during 1997-98 to 2001- 02 the

availability in the market was in excess of the requirement but during these period a

significant volume of imports was resorted. Thus it is apparent that the import of NR was a

conscious tactical effort by the consuming segment to depress the prices.

3:12 Synthetic Rubber (SR)

NR is an elastic material available in botanical sources whereas SR denotes an

elastic material made in factory. Synthetic Rubbers are highly elastic and the articles

manufactured from them are elastic and indistinguishable by visual observation from similar

articles made from NR. Because of this similarity, the raw materials are known as synthetic

rubbers. Synthetic is taken to mean not real, but a substitute. Some of the desirable qualities

of NR have not been duplicated or equaled by any synthetic material but for many uses they

are synthetic materials that are superior to NR. Synthetic materials resist the passage of gases

and cracking due to sunlight. Resistant to solvent are far better than NR25.

A chemist called Fritz Hofmann discovered the elastic material known as Methyl

Isoprene in 190926. Since then industrial revolution, two world wars, progress of motor

transportation, growing demand for rubber products and inability of NR to meet the world

elastomer requirements influenced the development of SR. It is a polymeric substance

obtained by the polymerization between two or more monomers under controlled conditions.

111
These monomers are obtained from petrochemicals such as naphtha, ethane, propane gases,

ethyl alcohol, calcium carbide, benzene, butadiene and so on. There are now over 200

varieties of SR. Almost all of them are manufactured from petroleum derived chemical

intermediaries. SR can be divided into two major groups namely General Purpose SR and

Special Purpose SR. Styrene Butadiene (SBR) is the backbone of the SR industry

commanding nearly 50 percentage of the world SR consumption27. SR can be used in

automotive engineering, energy generation, medicine, sports, aerospace industry, glies, hoses,

fireproof cable- sheaths and so on. SR accounts for nearly 25 percentage of a modern tyre’s

weight. In case of SR, its molecular structure can be changed easily depending upon its final

use requirement. Manufactures of rubber goods all over the world are tempted to use SR in

larger quantity because of this added advantage.

3:12:1 World Production of SR

By 1962 worldwide production of SR equalled that of NR and from 1965 SR

dominated the scene. By the end of 1970, world market share of SR touched 70 percentage.

In 2009, SR output was 11.71 million tonnes against the NR output of 7.8 million tonnes in

the world28. The world production of SR from 2000 to 2009 is given in table 3:24.

112
 Table: 3:24
PRODUCTION OF SR IN MAJOR PRODUCING COUNTRIES
(in 000’ Tonnes).

Countries 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

U.S.A 2397 2062 2164 2270 2325 2366 2606 2586 2314 1933
China 836 1052 1133 1272 1478 1632 1845 2215 2325 2595
Japan 1592 1466 1522 1577 1616 1627 1607 1655 1651 1399
Russian Fed 837 919 919 1070 1116 1146 1219 1210 1139 930
S.Korea 678 663 685 710 720 770 848 1010 970 965
Germany 849 828 869 888 905 855 865 803 742 650
France 669 672 681 718 776 655 664 655 645 575
Taiwan 465 480 523 529 545 575 600 600 552 545
Brazil 373 342 384 407 429 416 418 425 444 367
U.K 286 333 337 327 351 344 305 318 268 210
Italy 285 274 250 244 235 233 235 235 220 188
Mexico 187 173 182 180 188 182 186 204 198 174

Netherlands 200 188 176 176 180 186 192 194 177 150
Poland 102 83 82 85 104 104 120 123 114 93
India 60 69 78 86 95 96 101 104 99 96
Canada 186 146 136 74 84 64 79 93 96 61
Belgium 104 104 104 104 108 106 107 107 94 76
Others 713 629 652 662 744 779 693 786 765 700

World 10819 10483 10877 11379 11999 12136 12690 13434 12813 11710

Growth
- -3.10 3.75 4.61 5.44 1.14 4.56 5.86 -4.62 -8.60
Rate

Average growth rate 1.00

Source: Rubber Asia, January- February, 2011. P .79

113
 As stated in table 3:24 the world production of SR had been on the increasing

trend till 2007. The U.S. continued to be the single largest producer of SR till 2007 when it

produced 2586000 tonnes. In 2008, China emerged as the top producer of SR with 2325000

tonnes while output of the US came down to 2314000 tonnes. In 2009, China established a

lead with 2595000 tonnes as the US output declined to 1933000 tonnes. Japan continued to

be the third largest producer of SR with 1399000 tonnes in 2009, followed by South Korea

with 965000 tonnes. The highest growth rate was recorded in the year 2007. The average

growth rate of SR world production during a period of 10 years from 2000 to 2009 was just

one percentage.

3:13 SR Production in India

Synthetic Rubber is only a supporting polymer in India. Small quantum of SR was

imported to India from the 1950s. In 1962, a synthetic rubber plant was established in the

private sector and commercial production of SBR was started in 1963-64 with 8, 075 tonnes.

The output rose to 75000 tonnes in 1990 and 103900 tonnes in 2009. As domestic production

of SR was only 27 percentage of the total requirement, more SR was routed to India through

imports29.

3:13:1 Production of SR in India During Pre- Liberalisation

In India, the production of SR started in 1963-64 by the first synthetic rubber

plant, Synthetic and Chemicals Ltd. located at Bareillery in Uttar Pradash. There were six

plants producing different varieties of SR in India from 1963-64 to 1989-9030. Table 3:25

shows the production of SR in India during the pre-liberalisation.

114
 Table: 3.25

PRODUCTION OF SR IN INDIA DURING THE PRE- LIBERALISATION PERIOD

percentage
Production
Year Increase
(in tonnes)
over 5 years.

1970-71 29791 -

1975-76 25119 -3.14

1980-81 25293 0.14

1985-86 34758 7.48

1989-90 53482 13.47

Source: Rubber Board Bulletin 2000

Table 3:25 shows that the production of SR increased from 29791 tonnes in 1970-

71 to 53482 tonnes in 1989-90 recording a growth rate of 80 percentage. It is obvious from

the table that the growth rate in production of SR in India had been increasing at the rate of

100 percentage in 1980s.

3:13:2 Production of SR during Post- Liberalisation

Production of SR from 1990-91 to 2009-10 can be seen in table 3.26 below

115
 Table 3:26
PRODUCTION OF SR DURING POST- LIBERALISATION IN INDIA

Production Percentage
Year
(in tonnes) Growth

1990-91 57293 7.13

1991-92 57726 +0.76

1992-93 57892 +0.29

1993-94 49633 -14.27

1994-95 63681 +11.66

1995-96 68223 +7.33

1996-97 64563 -5.36

1997-98 71993 +11.51

1998-99 67590 -6.12

1999-00 60293 -10.80

2000-01 65460 +8.57

2001-02 69653 +6.41

2002-03 80401 +15.43

2003-04 89240 +11.00

2004-05 93854 +5.17

2005-06 97638 +4.03

2006-07 99513 +1.92

2007-08 106626 +7.15

2008-09 96739 -10.22

2009-10 106743 +10.34

Average Growth rate 3.09

Source: Indian Rubber Statistics & Rubber Growers Guide

116
 From the above table, it can be observed that the production of SR is not

progressive. It can be witnessed by the average growth rate during the post liberalisation

period which is 3.09 percentage. The synthetic rubber producing sector is dominated by

countries such as China, United State of America & Japan. As trade barriers were removed

year after year different types of SRs were imported.

3:14 Import of SR

In India, the domestic consumption of SR always exceeds its domestic production.

More SR has been routed to India through imports. In 2009, the domestic production was

only 29 percentage of the total requirement31. The price advantage of imported SR made the

rubber goods manufacturer to import more SR. The table below shows the import of SR in

the pre-liberalisation period.

Table 3: 27

IMPORT OF SR DURING PRE- LIBERALISATION

Import Percentage
Year (in tonnes) Increase

1970-71 5014 -
1975-76 6391 27.46
1980-81 17492 173.69
1985-86 39086 123.45
1989-90 39000 0.22

Source : Indian Rubber Statistics &

Rubber Growers Guide

From the above table, it is clear that import of SR gained its momentum from

1985-86 and continued till the end of pre- liberalisation period.

3:14:1 Import of SR during the Post-liberalisation period

Table 3:28 exhibits the import of SR in the post liberalisation period.

117
 Table 3:28
IMPORT OF SR IN THE POST-LIBERALISATION

Import Percentage
Year
(in tonnes) Increase

1990-91 51715 -
1991-92 39210 -24.18
1992-93 47362 20.80
1993-94 64338 35.84
1994-95 73860 14.80
1995-96 71735 -2.88
1996-97 91050 26.92
1997-98 86389 -5.11
1998-99 97548 12.92
1999-00 104842 7.48
2000-01 106923 1.98
2001-02 111572 4.35
2002-03 129902 16.43
2003-04 104733 -19.38
2004-05 113095 7.98
2005-06 132118 16.82
2006-07 171998 30.19
2007-08 195705 13.78
2008-09 190630 -2.59
2009-10 217295 13.99

Average growth rate 8.95

Source; Compiled from Indian Rubber Statistics

From the above table it is observed that import of SR in the post-liberalisation period

has been increasing with minor fluctuations. Figure 3:28.a discloses the increasing trend of

SR import during the post- liberalisation period. The import reached the highest level in

2009-10.

118
 Figure 3:28.a

IMPORT OF SR IN THE POST-LIBERALISATION

The figure expresses the increasing trend of import of SR in the globalized

era.

3:15 Reclaimed Rubber (RR)

Reclaimed Rubber (RR) is a product obtained by treating the ground scrap and

waste rubber products such as rubber tubes and tyres and chemical agents followed by

intense mechanical workings. It is obtained by converting used rubber from elastic to

plastic state to re-use it in the manufacture of rubber goods. Disposal of waste tyres

and vulcanized scrap rubber are a global problem. The useful way for their disposal is

reclamation of the rubber component and use it along with new rubbers in

manufacturing.

Though production of reclaimed rubber had begun during the 1950s, the

industry could develop fast only from the 1970s. It kept growing in the 1980s and the

119
first seven years of the 1990s. However, the fall in demand for NR in 1998-99 and

crash in its price led to lack of demand for RR too. The industry started to grow from

2002-03. Table 3.29 shows the production of RR in the pre-liberalisation period.

Table 3:29

PRODUCTION OF RR IN THE PRE- LIBERALISATION

Production Percentage Increase

Year
(in tonnes) Over 5 years.

1970-71 15507 -

1975-76 19581 26.27

1980-81 29336 49.82

1985-86 39195 33.61

1990-91 53629 36.83

Source: Compiled from Indian Rubber Statistics

From the above table it could be noted that the production of RR was

15507 tonnes in 1970-71 and increased to 53629 tonnes in 1990-91 recording 245.84

percentage increase over a period of 20 years.

Table 3.30 shows the production of RR during the post-liberalisation

period.

120
 Table: 3:30
THE PRODUCTION OF RR IN THE POST-LIBERALISATION IN INDIA

Production Percentage
Year
(in tonnes) Increase

1991-92 54185 -
1992-93 61490 13.48

1993-94 62780 2.10

1994-95 64425 2.62

1995-96 65780 2.10

1996-97 66670 1.35

1997-98 69840 4.75

1998-99 63980 -8.39

1999-00 64080 0.16

2000-01 62120 -3.06

2001-02 63550 2.30

2002-03 67385 6.03

2003-04 70990 5.35

2004-05 73060 2.92

2005-06 76645 4.91

2006-07 78495 2.41

2007-08 83075 5.83

2008-09 86390 3.99

2009-10 90500 4.76

Average growth rate 2.98

Source: Compiled from Indian Rubber Statistics

121
 Table 3. 30 shows that the production of RR reached 90500 tonnes in 2009-10

from 54185 tonnes in 1991-92. During the post-liberalisation period some ups and downs

could be seen in production of RR till 2001-02 and thereafter steady growth could be seen.

3:16 Conclusion

It can be concluded that the supply of rubber in the Indian rubber market consists

of NR, SR and RR in the ratio of 96:3:1. Asian region dominates in the supply of NR with 93

percentage of the area producing rubber and 92.8 Percentage of world production of NR.

Indonesia, Thailand, Malaysia, China, India and Vietnam are the six major countries which

account for 89 percentage of the total rubber cultivated area. India accounts for 6.4

percentage of the area. It is evident from table 3:3 that the holding sector dominates in NR

production both at the world and national level. In India almost 90 percentage of the rubber

planted area is in the hands of millions of tiny small holders. When we come to the area,

production and productivity of rubber in India during 20 years before and after globalisation,

it is clear from tables 3:17,18,19, and 20 that the average growth rate of area and production

were 4.05 percentage and 6.61 percentage respectively in the pre-liberalisation period and

1.96 percentage and 5.07 percentage respectively in the post-liberalisation period. At the

same time, the average productivity that is yield per hectare was 807.35 kg and 1532 kg

during pre and post-liberalisation periods respectively. There is no proportionate change in

the growth rate of area and production during the two phases. This disproportionate increase

in production is mainly attributed to the increase in average yield. This shows the demand put

forth by LPG on rubber plantations to compete in the global market by increasing

productivity in the context of land becoming so scarce for cultivation and the increasing

momentum of import of NR and SR in the liberalisation era.

122
REFERENCES

1. http://en.wikipedia.org/wiki/Rubber.

2. Rubber Research Institute of India Bulletin Kottayam,2005, p.216.

3. Ibid

4. Yogaratnam.N, “Boost smallholder sustainability through empowerment”, Rubber

Asia, September-October 2010,p.28.

5. India Rubber Statistics. Vol.33, p.64.

6. Rubber Statistical Bulletin of the International Study Group.

7. Report of the Rubber small-holdings Economics Enquiry committee, 1969,P.6

8. Indian Rubber Statistics, Vol.24,2009, pp.2-5

9. Indian Rubber Statistics,Vol.33.p.6

10. Opcit. p.10

11. Asian Rubber Handbook and Directory 2011.p.97.

12. Report of the Rubber small holdings Economics Enquiry committee, 1969, p.6

13. Asian Rubber Handbook and Directory-2011, p.97.

14. Indian Rubber Statistics, Vol.33.p.11

15. Sajeena,H., “Production and marketing of Rubber in Kanyakumari District”,

Ph.D. Thesis, M.S. University, June 2010, p.9

16. Sivaniah.A., Divisional manager, Arasu Rubber Corporation Ltd. Nagercoil,

Kanyakumari District, Rubber Asia, Jan-Feb, 2011,p.138.

17. Report of the Regional Office, Rubber Board, Marthandam.

18. Dr. Sivaniah, “Use rain guards, check output loss”, Rubber Asia, January-February
2011,p.138.

19. John, “ Impact of Economic Liberalisation and Globalisation on the Marketing of NR

in India,” Ph.D. Thesis, Mahatma Gandhi University, Kottayam, June 2002.

20. Asian Rubber Handbook and Directory -2005, p.181

21. Asian Rubber Handbook and Directory-2011, p.61

123
22. “Future of NR, High Prices Though Challenges” Asian Hanbook and Directory 2011,
Dhanam Publications Pvt.Ltd, Cochin, P.58

23. Rubber Asia, July- August 2010, p.43

24. Report of Natural Rubber Conference, Cochin, 1984.

25. Loren. G, ‘Rubber’, Leonard Hill Book Ltd., London, 1992, pp.1- 39.

26. Venugopal. P, “Synthetic Rubber Changing Global Trends”, Rubber Asia, January-
February 2011, p. 77.

27. Ibid

28. Ibid

29. Rubber Growers Guide 2010, Rubber Board p.67

30. John. K.K., “Impact of Economic Liberalization and Globalization on the marketing
of NR in India”, Ph.D., Thesis Department of Commerce, Mahatma Gandhi
University Kottayam, June 2002, p.71.

31. Rubber Asia, Jan- Feb 2010, p.77.

124
 CHAPTER – IV

RUBBER DEMAND -AN ANALYSIS

4:1 Introduction

Natural Rubber (NR) has been in use from time memorial. In the beginning dry

rubber was used to make playing balls by the natives of South America and rubber latex was

used to make bottles. Rubber bottles have ceased to be in use in the civilized society whereas

rubber balls are still popular all over the world. In this chapter we analyze the demand for

NR. Demand for NR is made of consumption, export and stock. Since the aggregate rubber

consumption consists of Natural Rubber, Synthetic Rubber and Reclaimed Rubber, the

demand for SR and RR influences the consumption of NR. With the increasing availability of

different grades of NR, SR and RR, the range of rubber products has been widening year by

year. NR, SR and RR have been used in end- products in the proportion of 70:20:10 in the

1990s1. Export of NR is one of the factors determining the demand for NR in India. India has

not been a regular exporter of NR in the pre- liberalisation period. But export has been

constant since 1991-92. The stock of NR held by the producing segment and the

manufacturing segment also determines the demand for NR in India. Therefore it is essential

to analyze the impact of liberalisation policies on the demand side of NR that affect,

consumption, export and stock. Moreover, as the consumption of SR and RR influences the

demand for NR, this chapter also analyzes the consumption of both SR and RR during the pre

and post- liberalisation period.

125
4:2 Demand for NR in the World

NR had been used for limited applications in Latin America in the past. During

the 1990s, its consumption was a few tonnes. By the turn of the 19th century, the consumption

started picking up. By the end of the century annual world consumption increased to 50000

tonnes. The consumption rose further in the early decades of the 20th century mainly on

account of amazing developments in the automobile industry. NR consumption recorded

significant growth by 1960 when the world consumption was two million tonnes. It crossed

three million tonnes by 1970, 3.76 million tonnes in 1980, 5.21 million tonnes in 1990 and

7.29 million tonnes in 20002. The consumption trend indicates that NR continues to play a

very important role in the world rubber industry.

Rubber consumption is reckoned as a barometer of the progress of a country.

Industrial development has helped Asia to move ahead in NR consumption. In 1981, the

consumption of NR in Asia was only 1.25 million tonnes (i.e.) 33.78 percentage of the global

intake. After a decade, Asia moved faster as the share of NR in products manufacture rose to

2.59 million tonnes, while rest of the world utilized only 2.47 million tonnes. Since then the

use of NR in Asia has successfully increased. World consumption was 9.20 million tonnes in

2005, when the first, third and fourth global consumers were in Asia- China, Japan and

India3. Consumption in other continents also increased over the years, but the acceleration

was faster in Asia. Asia continues to dominate rubber industry in the world. It accounts for 90

percentage of the global NR output and consumption close to 72 percentage4. Almost 50

percentage of the world’s NR production is consumed by China, India and Malaysia5. The

United States of America was the largest consumer of NR till 2000. One of the major

developments in the global consumption of NR is the perceptible shift from developed

countries to developing countries such as China and India. China has surged ahead of USA in

the consumption of NR in 2001. In 2008, India emerged as the third largest consumer of NR

after China and USA6. In 2009-10, India became the second largest consumer of NR in the

world next to China7. Table 4:1 shows the consumption of NR in the major countries.

126
 Table 4:1

CONSUMPTION OF NR IN THE MAIN CONSUMING COUNTRIES

(1000 tonnes)

Year China USA India Malaysia Korea Japan France Germany Others Total

1990 600 808 358 184 255 677 179 209 1948 5210
1991 610 756 375 216 264 690 183 211 1755 5060
1992 640 910 405 249 276 685 179 213 1763 5320
1993 650 967 444 269 271 631 169 175 1854 5430
1994 720 1002 473 292 290 640 180 186 1867 5650
1995 780 1004 517 327 300 692 176 212 1942 5950
1996 810 1002 558 357 300 715 182 193 2003 6100
1997 910 1044 572 327 302 713 192 214 2186 6460
1998 839 1157 580 334 283 707 223 247 2190 6560
1999 852 1116 619 344 333 734 240 226 2176 6640
2000 1080 1195 638 364 332 752 270 250 2432 7313
2001 1330 0974 631 401 332 729 282 246 2408 7333
2002 1395 1111 680 408 326 749 226 247 2412 7554
2003 1525 1079 717 421 333 784 218 258 2617 7952
2004 2000 1144 745 403 352 815 230 242 2787 8718
2005 2266 1159 789 387 370 857 230 259 2883 9200
2006 2743 1003 815 383 364 875 220 269 3005 9677
2007 2812 1018 851 450 377 887 220 282 3247 10144
2008 2940 1041 881 469 358 878 200 247 3159 10173
2009 3467 687 905 470 330 636 109 171 2615 9390

Rank 1 3 2 5 6 4 8 7

Source: Rubber Statistical Bulletin of the International Study Group

Indian Rubber Statistics&
Rubber Growers Guide

127
 It could be noted from the table that the USA was the largest consumer of NR till

2000. Then China took the lead position. In 2009, India became the second largest consumer

of NR but a distant second to China. China’s consumption was 3467000 tonnes whereas

India’s was 905000 tonnes. China is the star performer in the world rubber industry today.

4:3 NR Demand in India

In India, the total demand for rubber includes demand for NR, SR, and RR. NR is

the vital segment constituting 68 percentage of the total demand for rubber followed by SR

25 percentage and RR 7 percentage. Demand for NR is derived from three needs such as

consumption, export and stock. NR consumption by the manufacturing sector consists of

large scale units consuming more than 500 tonnes, medium scale units 51-500 tonnes and

small scale units less than 50 tonnes per year. These units altogether produce more than

35000 varieties of rubber products in India8. Demand arising out of export is low since India

is the net importer of NR. Stock of NR is known as quantity of rubber retained for a short

period of time before its sale, consumption or export. Stock of NR depends upon production,

government policy and stock policy of the manufacturing units.

4:3:1 NR Consumption in India

In India, NR consumption has increased from 10000 tonnes in 1947 to 930565

tonnes in 2009-10. India has become the second largest consumer of NR next to China. It has

recorded a growth rate of 6.75 percentage in rubber consumption in 2009-109. Indian rubber

consuming sector is large enough to absorb 100 percentage of the domestic production of

NR. Table 4:2 shows the production, consumption and the percentage of consumption to

production during the pre and post- liberalisation periods.

128
 Table 4:2
PRODUCTION AND CONSUMPTION OF NR IN THE PRE AND POST-
LIBERALISATION PERIODS (in tonnes)

Pre- liberalisation Period Post – liberalisation Period

Percentage Percentage
Year Production Consumption to Year Production Consumption to
production production

1970 92,171 87,237 94.65 1991 366745 380150 103.66

1975 137,750 125,692 91.25 1995 506910 525465 103.66
1980 153,100 173,630 113.41 2000 630405 631475 100.77
1985 200,465 237,440 118.44 2005 802625 801110 99.80
1990 329,615 364,310 110.53 2010 831400 930565 111.92

Source: Indian Rubber Statistics.

Table 4:2 reveals that India is not an NR surplus country and 100 percentage of

the production is consumed in most of the years. During the 1970s domestic consumption

was less than the domestic production. Since then NR consumption exceeds the domestic

production with the exception in the year 2005.

4:3:2 Consumption of NR in the Pre- liberalisation Period

Before the World War Second, NR produced in India was almost entirely

exported. The first rubber factory, the Bengal Waterproof Ltd., was set up in Calcutta in

192110. After the conquest of Malaysia, Indonesia and other South East Asian countries by

Japan during the early years of the war, the position and prospect of the industry were

transformed drastically. The war efforts encouraged the infant Indian rubber goods

manufacturing units to produce more rubber goods. By the end of the war, a number of

factories were established. By the early fifties, important factories had set up their business

offices in Kottayam, the most notable rubber market in India. Average annual growth rate of

consumption of rubber was relatively high at the end of the 1950s and in the beginning of the

129
1960s. Acute power crisis during the 1970s affected the industrial progress in the country

adversely. Most of the rubber manufacturing units curtailed production. So the 1970s

witnessed surplus of NR in the Indian rubber market. But during the 1980s, NR consumption

increased because eleven tyre companies started their own production units11. It was a

landmark in the history of Indian rubber goods manufacturing sector. Table 4: 3 shows the

consumption and the growth rate for a period of 20 years from 1970- 1990.

Table 4:3
CONSUMPTION OF NR DURING 1970- 1990

Growth Rate
Year Consumption Increase/ Decrease
(persentage)

1970-71 87237 - -
1971-72 96454 9217 10.57
1972-73 104028 7574 7.85
1973-74 130302 26274 25.25
1974-75 132604 2302 1.77
1975-76 125692 -6912 -5.21
1976-77 137623 11931 9.49
1977-78 144967 7344 5.34
1978-79 164524 19557 13.49
1979-80 165245 721 0.44
1980-81 173630 8385 5.07
1981-82 188420 14790 8.52
1982-83 195545 7125 3.78
1983-84 209480 13935 7.13
1984-85 217510 8030 3.83
1985-86 237440 19930 9.16
1986-87 257305 19865 8.37
1987-88 287480 30175 11.73
1988-89 313830 26350 9.17
1989-90 341840 28010 8.93

Average growth rate 7.79

Source: Compiled from different volumes of Indian Rubber Statistics

130
 It can be seen from the table that consumption of NR increased from 7237 tonnes in

1970-71 to 341840 tonnes in 1989-90. The consumption was in the increasing trend except in the

year 1975-76. The growth rate was fluctuating during the 1970s and the same was moderate during

the 1980s. The highest growth rate was recorded in 1973-74. The average growth rate was 7.79

percentage for the period of 20 years before liberalisation. The progress of NR consumption for the

20 years of pre-liberalisation is shown in figures 4.3.a, 4.3.b and 4.3.c.

Figure 4.3 a
CONSUMPTION OF NR DURING 1970- 1990

131
Figure 4.3.b

Figure 4.3.c

132
 From the figures wide fluctuations in NR consumption could be viewed in the first
decade of the pre-liberalisation period under analysis. During the period the highest growth
rate of 25.25 percentage was recorded during the year 1973-74 and the lowest rate of 0.44
percentage was recorded in 1980-81. Afterwards the position started to stabilize throughout
the second phase.

4:3:4 Consumption of NR in the Post- Liberalisation Period

Liberalisation policy of the Government influenced the NR consumption. The

impact of the policy on the consumption and the growth rate during the post–liberalisation
period is shown in table 4.4.

Table 4:4
CONSUMPTION OF NR IN THE POST- LIBERALIZATION PERIOD
(in tonnes)
Year Consumption Increase/ Decrease Growth Rate

1990-91 364310 22470 -

1991-92 380150 15840 4.35
1992-93 414105 33955 8.93
1993-94 450480 36375 8.78
1994-95 485850 35370 7.85
1995-96 525465 39615 8.15
1996-97 561765 36300 6.91
1997-98 571820 10055 1.79
1998-99 591545 19725 3.45
1999-00 628110 36565 6.18
2000-01 631475 3365 0.54
2001-02 638210 6735 1.07
2002-03 695425 57215 8.23
2003-04 719600 24175 3.48
2004-05 755405 35805 4.98
2005-06 801110 45705 6.05
2006-07 820305 19195 3.00
2007-08 861455 41150 2.34
2008-09 871720 10265 1.19
2009-10 930565 58845 6.75
Average growth rate 4.94
Source: Rubber Growers Guide & Indian Rubber Statistics

133
 Table 4:4 reveals that the consumption of NR has been increasing during the post-

liberalisation period. In 1990-91, the quantity of NR consumed was 364310 tonnes. It rose to

871720 tonnes in 2008-09 crowning India as the fourth largest consumer of NR in the world.

The consumption further increased to 930565 tonnes in 2009-10 and India became second

next to China. The average annual growth rate during the 20 years period of post-

liberalisation was 4.94 percentage. The highest growth rate was achieved in 1992-93 (i.e.)

immediately after the implementation of LPG. The growth rate was almost steady up to 1996-

97. But in the year 2000-01, the growth rate came down to 0.54 due to the slowdown of the

economy and in turn the automotive industry. Again the growth rate declined in 2007-08

largely on account of the economic turbulence in the United States. However, the growth rate

was positive throughout the period. The progress of NR consumption during the 20 years of

Post-liberalisation period is shown in figures 4.4.a, 4.4.b and 4.4.c.

Figure 4.4 a

CONSUMPTION OF NR IN THE POST- LIBERALIZATION PERIOD

4.4.a

134
 Figure 4.4 .b

Figure 4.4 c

From the figures it could be viewed that the consumption growth rate of 8.2

percentage during 1995-96 and 6.9 percentage during 1996-97 whereas the growth was only

1.8 percentage during 1997-98 and 3.4 percentage during 1998-99. The reason was the

slackness in the automobile industry, the dominant NR consuming sector in India. This

situation marginally improved during 1999-2000. The year 2002-03 marked the milestone in

the consumption side of NR when the growth rate reached 8.23 percentage.

135
 From the foregoing analysis, it could be noted that the average annual growth rate

of NR consumption was 7.79 percentage during the 20 years of pre-liberalisation and 4.94

percentage during the period of post liberalisation. If the consumption had increased in the

same pace as it was in the pre- liberalisation period, it would have been much more than the

actual consumption reported in the post-liberalisation period. Table 4:5 shows the actual and

anticipated increase at 7.79 growth rate during the post- liberalisation period.

Table 4:5
ACTUAL AND ANTICIPATED CONSUMPTION OF NR IN THE
POST- LIBERALISATION PERIOD (in tonnes)

Year Anticipated
Actual Actual Anticipated Excess /
consumption(at7.79
Consumption Increase increase Shortage
growth rate)

1990-91 364310 22470 390940 26630 -4160

1991-92 380150 15840 408530 28380 -12540
1992-93 444105 33955 473719 29614 +4341
1993-94 450480 36375 485076 34596 +1775
1994-95 485850 35370 520942 35092 +278
1995-96 525465 39615 563313 37848 +1767
1996-97 561765 36300 602699 40934 -4634
1997-98 571820 10055 615581 43761 -33706
1998-99 591545 19725 636090 44545 -24820
1999-00 628110 36565 674191 46081 -9516
2000-01 631475 3365 680405 48930 -45565
2001-02 638210 6735 687402 49192 -42457
2002-03 695425 57215 745142 49717 7496
2003-04 719600 24175 773774 54174 -29999
2004-05 755405 35805 811462 56057 -20252
2005-06 801110 45705 859956 58846 -13141
2006-07 820305 19195 882711 62406 -43211
2007-08 861455 41150 925357 63902 -22752
2008-09 871720 10265 938827 67107 -56842
2009-10 930565 58845 939627 67906 -9062

Source: Calculated from different volumes of Indian Rubber Statistics

136
 From the table it is clear that the actual consumption of NR in the post-

liberalisation period was over and above the anticipated level only in four years with a small

difference. But in the remaining 15 years, the consumption of NR could not reach the average

annual growth rate attained in the pre-liberalisation period (7.79 percentage). The decline in

the consumption rate could be attributed to the high import of rubber products especially the

most NR demanding product namely tyre. Figure 4:5.a shows the actual increase in the

consumption of NR in the post-liberalisation period along with anticipated increase in

consumption at 7.79 percentage growth rate that prevailed during pre-liberalisation period

under analysis.

Figure 4.5.a

ACTUAL AND ANTICIPATED INCREASE IN CONSUMPTION OF NR IN THE

POST- LIBERALIZATION PERIOD

137
 The figure reveals that only in 2002-03 the consumption rate has been remarkably

above the anticipated consumption

4:4 Impact of Import of Tyres on the Consumption of NR

In India, tyres have been imported with the advent of liberalisation policies. It is

estimated that when a truck tyre is imported, there is reduction of NR consumption by 29 kg.

In the case of bus tyre, reduction of NR consumption is 24.70 kg per tyre and it is 4.60 kg

when a motor car tyre is imported4. Table 4:6 shows the import of tuck, bus and car tyres and

its impact on NR consumption during the post-liberalisation period.

4
Due to the non- availability of accurate figures regarding number of truck, bus and car

tyres imported distinctly it is difficult to calculate loss of weight separately. So the

average weight is considered to calculate the reduction of NR consumption.

29 + 24.70 + 4.60
= 19.40 kg
3

138
 Table 4:6

TYRES IMPORTED DURING THE POST- LIBERALIZATION PERIOD AND THE

REDUCTION IN NR CONSUMPTION
Reduction in NR Consumption
Year No of Tyres Imported
(in tonnes)
1990-91 6879 134
1991-92 - -
1992-93 2975 58
1993-94 - -
1994-95 37721 732
1995-96 128111 2485
1996-97 46781 907
1997-98 165668 3214
1998-99 265599 5153
1999-00 - -
2000-01 172203 3341
2001-02 127339 2470
2002-03 274370 4500
2003-04 533630 8752
2004-05 990531 16245
2005-06 1200847 23296
2006-07 2375008 46075
2007-08 2954782 57323
Source: Calculated as per foot note: @ 19.4 kg/ tyre

The table shows that in 1990- 91 the number of truck, bus and car tyres imported

was 6879 and the consequent reduction in NR consumption was 134 tonnes. In 2008- 09, if

the 2954782 tyres imported had been produced in India the consumption of NR would have

been 929043 tonnes instead of the actual consumption of 871720 tonnes. The gap between

production and consumption depends on the surplus of imported tyres. The gap would have

been either narrowed or the consumption would have been exceeded production if the tyres

were not imported.

From the ongoing analysis, it is concluded that the growth rate of consumption for

NR has declined during the post-liberalisation when it is compared to pre-liberalisation

139
period mainly because of import of rubber products especially tyre, the most NR demanding

product.

4:5 NR Consumption Pattern in India

Scientific experiments on rubber and technological developments have

revolutionized the application for natural rubber in an expanding range of products. Over

50000 different products are made out of rubber today. They can be mainly classified in to

two; latex products and dry rubber products. Latex products are made out of latex

concentrates that are classified on the basis of manufacturing process such as dipping,

coating, binding, moulding, foaming and extrusion. Dry rubber products are classified into

two such as tyre products and non-tyre products. About 50 to 60 percentage of the NR

produced in the world is used for manufacturing tyre products. In India, dry rubber based

industries occupy more than 90 percentage of the total rubber products12. The percentage

distribution of NR use in product groupings is shown in Table: 4:7.

140
 Table 4.7
PRODUCT –WISE CONSUMPTION OF NR IN INDIA (in tonnes)
1975-76 1980-81 1985-86 1990-91 1995-96 2000-01 2005-06
Products
Actual Perc- Actual Perc- Actual Perc- Actual Perc- Actual Perc- Actual Perc- Actual Perc-
entage entage entage entage entage entage entage

Auto Tyres& Tubes 62115 49.2 87295 50.28 114031 48.02 161578 44.40 245654 46.80 285275 45.18 422508 52.74

Cycle Tyres&Tubes 15979 12.71 20664 11.90 29915 12.60 50180 13.80 66358 12.60 82592 13.08 91700 11.45

Footwears 12387 9.86 17800 10.25 24194 10.18 37574 10.30 52003 9.90 70547 11.18 67471 8.42

Belts & hoses 8943 7.12 11812 6.80 15870 6.68 25583 7.02 35838 6.82 38220 6.05 41956 5.24

Camel back 5545 4.41 9130 5.26 15047 6.33 25440 6.98 31316 6.15 38104 6.03 42227 5.27

Latex foam 2033 1.62 5753 3.31 11396 4.80 19598 5.38 28633 5.45 31620 5.00 34466 4.30

Dipped goods 3478 2.76 4945 2.85 9050 3.82 15578 4.28 24947 4.75 32081 5.08 34947 4.36

Battery boxes 280 0.22 485 0.28 890 0.37 1265 0.35 1784 0.34 1865 0.30 1807 0.22

Cable wires 590 0.47 779 0.45 1004 0.43 1252 0.35 1494 0.28 1719 0.27 1453 0.18

Others 14342 11.41 14967 8.62 16043 6.77 26262 7.21 36438 6.93 49452 7.83 62581 7.82

Total 125692 100 173630 100 237440 100 364310 100 525465 100 631475 100 801110 100

Source : Compiled from different volumes of Indian Rubber Statistics

141
 From the above table it can be noted that product wise consumption for NR is

more or less stable for all products except latex foam and dipped goods. Both in the pre and

post liberalisation periods around 60 percentage of NR has been consumed by auto and cycle

tyres and tubes. Moreover it is clear from the table that dry rubber based industries and latex

based Industries consume NR in the ratio of 90:10. Figure 4:7.a gives the sharing at a glance.

Figure 4.7.a

PRODUCT- WISE CONSUMPTION OF NR IN INDIA IN 2005-06

The figure exposes that the tyre-sector determines the NR consumption in India.

142
4:6 Rubber Consuming Sector in India

India has become the second largest consumer for NR next to China. China

consumed 30.40 million tonnes of NR in 2009-10 as against India’s 9.30 million tonnes. It

means that there is a wide gap in consumption between the largest and the second largest

consumer for NR. India has recorded a growth rate of 6.8 percentage in rubber consumption

in 2009-1013. Indian rubber consuming sector is composed of small scale units, medium scale

units and large scale units. Manufacturers who consume NR up to 50 tonnes per year are

treated as small scale units, NR consumption from 51 to 500 tonnes are treated as medium

scale and above 500 tonnes are considered as large scale units14.Table 4:8 shows the

composition of Indian rubber consuming sector.

143
 Table 4:8
RUBBER CONSUMING SECTOR IN INDIA

Small scale units Medium scale units Large scale units

Total No. of Total

Year
manufacturers consumption

Percentage
Percentage
Percentage
Percentage
Percentage
Percentage

No. of units
No. of units
No. of units

Consumption
Consumption
Consumption

1990-91 5028 364310 4325 86.02 9460 13.58 626 12.45 75552 20.74 77 1.53 239288 65.68
1993-94 5346 450480 4366 81.66 58254 12.93 888 16.61 89464 19.86 92 1.72 302762 67.21
1994-95 5408 485850 4415 81.64 56058 11.54 898 16.61 92696 19.08 95 1.76 336096 69.18
1995-96 5572 525465 4605 82.64 63125 12.01 869 15.60 102809 19.57 98 1.76 359531 68.42
1996-97 5588 561765 4618 82.64 69831 12.43 872 15.60 110937 19.85 98 1.751 380997 67.82
1997-98 5595 571820 4617 82.52 71821 12.56 879 15.71 113873 19.91 99 76 386126 67.53
1998-99 5494 591545 4497 8185 74149 12.53 892 16.24 124438 21.04 105 1.91 392858 66.41
1999-00 5303 628110 4270 80.52 73371 11.68 926 17.46 126587 20.15 107 2.02 428152 68.17
2000-01 5062 631475 4006 79.14 74245 11.76 943 18.63 126332 20.01 113 2.23 430898 68.24
2001-02 5066 638210 3987 78.70 77369 12.12 970 19.15 128539 20.14 109 2.15 432302 67.74
2002-03 4931 695425 3833 77.73 82766 11.90 988 20.04 128164 18.43 110 2.23 484495 69.67
2003-04 4791 719600 3703 77.29 81074 11.27 971 20.27 125403 17.43 117 2.44 513123 71.31
2004-05 4800 755405 3690 76.88 80449 10.65 1002 20.88 138814 18.38 108 2.25 536142 70.97
2005-06 4840 801110 3699 76.43 76398 9.54 1029 21.26 141379 17.65 112 2.31 582333 72.70
2006-07 4650 820305 3454 74.28 79279 9.66 1084 23.31 153973 33.18 112 2.41 587053 71.57
2007-08 4641 861455 3414 73.56 75429 8.77 1104 23.79 154322 17.91 123 2.65 631704 73.33
2008-09 4617 871720 3420 74.07 70004 8.03 1067 23.11 149206 17.12 130 2.82 652510 74.85

Source : : Indian Rubber Statistics, Vol. 32 & 33

144
 The table reveals that the total number of units had been increasing till 1997- 98

due to the increase of small scale units. When the number of small scale units started to

decrease, it had direct influence on the total number of manufacturing units. It is also seen

from the table that although the small scale units constituted nearly 74.07 percentage of the

total number of units, their consumption was around 8.03 percentage of the total consumption

of the manufacturing units. On the other hand, large scale units were just 2.82 percentage of

the total number of the units but their consumption was 74.85 percentage. With regard to

medium scale units they covered 23.11 percentage of the total number of units and 17.12

percentage of the total consumption in 2008- 09. Figure 4:8.a shows the NR consuming

groups along with their share.

Figure 4.8.a

NR CONSUMING GROUPS (2008-09)

Inner Circle: Manufacturing Units

Outer Circle: NR consumption

145
 The inner circle of the figure represents the number of manufacturing units of

small, medium and large scale units. The outer circle represents the quantity of NR

consumption by the units during 2008-09. It is clear from the figure that the meager number

of large scale units sharing 2.82 percentage of the rubber goods manufactures consumed the

maximum volume of 74.85 percentage of total consumption in 2008-09. Whereas the small

scale units representing 74.07 percentage of the manufacturing units consumed only 8.03

percentage and 23.11 percentage of medium scale units consumed 17.12 percentage of the

total NR consumption in 2008-09.

From the ongoing analysis it is evident that in the Indian rubber market, the

manufactures of large scale units are very powerful on the demand side. A three percentage

of a small group consumes 75 percentage NR. These manufactures are mainly of tyre

companies. They are well organized have been sound finance, political influence, technical

innovation and global information. Their research and development wing are very powerful

to cope up with any environment. They are in a strategic position with associations. In India,

three Indian rubber industries associations account for 99 percentage of rubber consumption

in the country. They are known as All India Rubber Industries Association (AIRIA),

Automotive Tyre Manufactures’ Association (ATMA) and Indian Cycle and Richshaw Tyre

Manufactures’ Association (ICRTMA)15. They have formed a consortium to take up jointly

their issues and concerns with the government. The automotive tyre sector recorded 13.9

percentage growth in consumption of NR in 2009-10 as compared to 2.5 percentage growth

in 2008-09. Whereas the non-tyre sector witnessed 2.7 percentage deceleration in

consumption in 2009-1016. The large scale manufactures also adopt different strategies such

as temporary withdrawal from the market, import of rubber even at a high price and

reduction of stock period to control the market. Thus these manufactures are determining the

demand side for the NR market. On the contrary, the supply side consists of a million small

146
holders with 92 percentage area and 93 percentage NR production in the country. But they

can’t regulate the supply side for NR as they are unorganized. The estate sector produces only

eight percentage of the total NR production in the country. Although they are well organized,

they can’t influence the supply for NR in the country. Thus with regard to the Indian rubber

market it is buyers’ market rather than sellers’ market that plays major role. The demand side

is more powerful and dominating than the supply side. Thus the hypothesis that the supply

side for NR is dominated by tiny small holders and demand side is dominated by large scale

units is confirmed.

4:7 State-wise Consumption for NR in India

Consumption for NR in India is widely spreaded all over the country. There is no

increasing prominence for rubber goods manufacturing units in Kerala and Kanyakumari

District, Tamil Nadu, the traditional regions of rubber cultivation in the country. Increasing

influence of non-traditional regions in rubber consumption is quite apparent from table 4:9.

147
 Table 4:9

STATE-WISE CONSUMPTION OF NR IN INDIA (in tonnes)

States 1975-76 1980-81 1990-91 2000-01 2008-09

No.of Consump Percen No.of Consump Percen- No.of Consu Percen- No.of Consumpt Percen- No.of Consump Percen-
units tion -stage units tion tage units mption tage units ion tage units tion tage
Kerala 221 9268 7.37 391 19283 11.11 816 55365 15.19 891 88221 13.97 748 139288 15.98
Maharashtra 280 28400 22.59 373 33119 19.07 569 47219 12.96 612 68344 10.82 522 109601 12.57
Tamil Nadu 111 20900 16.63 212 17050 9.82 491 21213 5.82 502 32588 5.16 497 64360 7.38
Punjab 183 5743 4.57 339 13232 7.62 538 46158 12.6712 554 82843 13.12 392 81779 9.38
Uttar Pradesh 163 9672 7.70 249 22578 13.00 504 46795 .8411.6 438 55684 8.82 406 51197 5.87
West Bengal 301 27300 21.72 351 27414 15.79 494 42292 11.89 447 43258 6.85 353 30081 3.45
Gujarat 134 2138 1.70 191 3034 1.75 304 6889 6.24 378 35107 5.56 393 65741 7.54
Haryana 114 11110 8.84 181 14974 8.62 252 22728 4.66 289 38638 6.12 362 49982 5.73
Karnataka 51 1920 1.53 90 5770 3.32 221 16978 4.29 229 31233 4.95 210 56331 6.46
Delhi 178 4168 3.32 274 6311 3.63 377 15613 1.71 276 18360 2.91 137 16137 1.85
Goa 5 3483 2.77 6 2409 1.39 24 6214 1.13 25 23552 3.73 22 31950 3.67
Madhya Pradesh 15 NA - 24 NA - 85 4120 - 88 27732 4.39 65 29615 3.40
Orissa 2 NA - 10 NA - 19 - 2.44 14 24072 3.81 10 33855 3.88
Andra Pradesh 42 NA - 80 2223 1.28 158 8907 4.92 139 19906 3.15 157 50939 5.85
Rajasthan 16 NA - 19 NA - 44 17936 1.45 87 35867 5.68 136 53046 6.09
Others 28 1590 1.26 36 6268 3.61 132 5883 93 6070 0.96 118 7818 0.90
Total 1844 125692 100 2826 173630 100 5028 364310 100 5062 631475 100 4528 871720 100
Source : Indian Rubber Statistics different volumes

148
 Figure: 4.9.a

STATE-WISE CONSUMPTION OF NR IN INDIA

Inner circle : No. of Units

Outer Circle: Percentage of NR Consumption

A glance at the state-wise consumption for NR in India reveals that the relative

share of Kerala, the largest producer cum supplier of NR in India, was just 7.37 percentage in

1975-76 and 13.97 percentage in 2000-01. Eventhough the share in NR consumption

increased to 15.98 percentage in 2008-09, the number of rubber goods manufacturing units

decreased from 891 in 2000-01 to 748 in 2008-09. This shows the increasing power of large

scale units with economic liberalisation, privatisation and globalisation and the inability of

small and medium size units in meeting the global demand within their limited scale of

operations.

Tamil Nadu gets nearly 98 percentage of the NR supply from Kanyakumari district,

which is the traditional belt for rubber cultivation. The State accounts for less than 10

149
percentage of the country’s NR consumption. A good number of rubber-based industries has

been in Tamil Nadu from 1990-2001 but it has started to decline afterwards. It shows the

increasing influence of non-traditional regions in rubber consumption in the State.

Maharashtra was the largest NR consuming State in India followed by West Bengal in

the pre-liberalisation period. But there was a decrease in both the States in the share of NR

consumption in the post-liberalisation period. Maharashtra’s share in the total NR

consumption in the country came down a bit from 12.96 percentage in 1990-91 to 12.57

percentage in 2008-09. Whereas West Bengal had a great decrease from 11.61 percentage to

3.45 percentage in the same period. Moreover in Maharashtra, the number of units engaged

in rubber goods manufacturing stood at 569 in 1990-91 and increased to 612 in 2000-01 but

came down to 522 units in 2008-09. West Bengal also showed a declining trend with regard

to number of units. It was observed that in Maharashtra the quantity of rubber consumption

increased but the number of consuming units decreased. It exposed the domination of giants

in the demand sector of NR. At the same time we could see the decreasing trend in West

Bengal both in volume of consumption and in number of units. It shows the competition

prevailing in the NR market both at the national and international level.

It can also be viewed from the table that Punjab, Gujarat, Haryana, Karnataka,

Andrapradesh and Rajasthan are emerging as significant consumers of NR in the country.

The ongoing shift in geographical composition for rubber manufacturing units within the

country shows the impact of LPG in NR sector. Figure 4:9.a visualizes the state wise

consumption of NR.

4:8 NR Export

NR export is one of the factors determining the demand for NR in India. The

demand arising out of NR export is to be evaluated in order to know its influence on the

demand side of NR. The rubber plantation industry was export oriented in India till 1930

since rubber goods manufacturing industry was not existant17. In 1922 India exported 4979

tonnes NR. Then it reached a level of 8027 tonnes in 1929 but came down to 1422 tonnes in

150
193318. The International Rubber Regulation Agreement (IRRA) was framed in 1934 to fix

quota for export to each member country in the Agreement with the view to control the

supply and price of NR in the International Rubber Market19. The Agreement was the first

international plan to control supply and price of NR. All the major NR producing countries at

that time such as Malaysia, Sri Lanka, India, Burma, Indonesia, Thailand and China were the

main signatories to the Agreement. The Agreement was in operation in India from 1934 to

1942. During this period, the exported quantity of NR was less than the quota fixed except in

the year 1937, as the domestic consumption increased considerably. From 1948 onwards

India became the net importer of NR.

4:8:1 Export During the Pre-liberalisation Period

After independence, India exported NR for the first time in 1955-56. During the

35 years period from 1955-56 to 1990-91 only 26517 tonnes of NR was exported. This is

evident from table 4:10

Table 4:10

NR EXPORT AND ITS PERCENTAGE PRODUCTION DURING THE

PRE-LIBERALISATION PERIOD

Export Production
Year Percentage
(tonnes) (tonnes)

19955-56 12 23730 0.05

19956-57 81 24060 0.34
19973-74 2700 125153 2.15
19974-75 350 130143 0.27
19976-77 12296 149632 8.22
19977-78 11078 146987 7.54

Total 26517 599705

Source : Indian Rubber Statistics Volume 24

151
 From the table it can be seen that NR export was not frequent during the pre-

liberalisation period. After 1956-57, NR was exported in 1973-74 after a period of 24 years.

The volume of export was also very low till 1974-75.

4:8:2 NR Export during the Post-liberalisation period

Eventhough the Government of India has removed restrictions on NR export in

1992, India could not make any headway in the export front till 2002-03. Rubber Board is the

designated agency for export promotion of rubber. Besides issuing Registration cum

Membership Certificate and Certificate of Origin, it provides assistance to promote NR

export and rubber products. In spite of it the export quantum remained low because of the

following reasons:

i. India has been a net NR importer

ii. There has been lack of information about overseas NR market

iii. Domestic price has been greater than the international price

iv. Producers have not been interested in maintaining international standards

v. There has been lack of sustained efforts to increase NR export

vi. There has been a dominant share of small holdings in the supply for NR.

In the post liberalisation period, export had been a regular process eventhough the

quantity of export was nominal during the 1990s. Since serious efforts were taken during

2000-01, India exported around 13356 tonnes NR during this period. But in 2001-02, the

export declined to 6995 tonnes, which induced the Government to introduce certain export

incentive schemes. It increased the NR export to 55311 tonnes in 2002-03 and 75905 tonnes

in 2003-04. The major reasons for the higher export were the export promotional activities

taken by the Central and State Governments through Rubber Board. The Board is extending

the following promotional measures:

i. Supplying overseas market information

ii. Identifying importers of different forms of NR

iii. Providing world-wide publicity for Indian rubber

iv. Creating awareness among potential exporters about Export Import Policy matters and

152
v. Creating Indian Rubber Brand to establish the quality of Indian rubber in the

international NR market.

Table 4:11 shows the quantity of NR exported during the post-liberalisation

period and its percentage on the total production.

Table 4:11

NR EXPORT IN THE POST-LIBERALISATION PERIOD

Year Production Export Percentage

(tonnes) (tonnes) to production

1991-92 366745 5834 1.59

1992-93 393490 5999 1.52
1993-94 424471 186 0.04

1994-95 435160 1961 0.45

1995-96 471815 1130 0.24
1996-97 506910 1598 0.32
1997-98 549425 1415 0.26
1998-99 583830 1840 0.32
1999-00 605045 5989 0.99
2000-01 622265 13356 2.15
2001-02 630405 6995 1.11
2002-03 631400 55311 8.76
2003-04 649435 75905 11.69

2004-05 711650 46150 6.48

2005-06 749665 73830 9.85
2006-07 802625 56545 7.05
2007-08 852895 60353 7.08
2008-09 825345 46926 5.69
2009-10 864500 24515 2.84

Source : Rubber Board Bulletin

153
 The table shows that export has been a continuous affair though the quantity of

export is nominal in certain years. However one of the major developments in the NR

industry is the significant volume of export achieved during 2002-03 and 2003-04. The

average quantity of NR exported has been only 3.59 percentage of the production. Thus it is

obvious that the impact of the trade liberalisation policy is not very impressive in the area of

NR export. From the analysis it can be concluded that NR export is the least factor

determining the demand for NR in India. Figure 4:11.a proves this.

Figure: 4.11.a

NR EXPORT IN THE POST-LIBERALISATION PERIOD

4:9 NR Stock

Demand for NR is also attributed to the necessity of having stock of NR by

producing and consuming sectors. As per the norms issued by the Government in 1992, the
quantity must be equivalent to meet the country’s consumption for two months which is the
optimum stock20. Out of the total stock which is equivalent to two months, manufacturers
should hold one-month stock and the other one-month stock has to be maintained by the

154
growers and dealers. Dealers maintain stock only when they can make profit under economic
considerations. Manufactures maintain stock under economic as well as production
considerations. They are compelled to maintain stock due to uneven production and evenly
distributed consumption throughout the year, finance and marketing policies of the
manufacturing concerns, NR availability, price of NR, and so on. Manufactures can control
the rubber market to some extent by increasing or decreasing the period of stock. The most
striking features of the stock pattern of manufacturers is that they keep a relatively higher
stock during the periods of higher prices and lower stock during the periods of lower prices.
This shows that the consuming segment has not followed the existing norms of the stock. The
pattern of stock for producing and consuming segment is shown in Table 4:12

155
 Table 4:12
NR STOCK

Optimum Stock- Stock with Stock in months

Consumptio
Closing stock Government
Year n Total
(tonnes) Norm Growers& Manufacture Growers & Manufacture
(tonnes)
(tonnes) dealers s dealers s
1992- 414105 71140 69018 43416 27725 1.3 0.8 2.1
93 450480 77015 75080 42125 34890 1.1 0.9 2.0
1993- 485850 69550 80975 27490 42060 0.7 1.0 1.7
94
525465 103190 87578 50960 52230 1.2 1.2 2.4
1994-
95 561765 107310 93628 69860 37450 1.5 0.8 2.3
1995- 571820 147300 95303 109225 38075 2.3 0.8 3.1
96 591820 187965 98591 144465 43500 2.9 0.9 3.8
1996- 628110 192570 104685 140470 52100 2.7 1.0 3.7
97 631475 183900 105246 136310 47590 2.6 0.9 3.5
1997- 638210 193070 106368 133490 59580 2.5 1.1 3.6
98
695425 117995 115904 65655 52340 1.1 0.9 2.0
1998-
719600 78340 119933 30660 47680 0.5 0.8 1.3
99
755405 110385 125900 59280 51105 0.9 0.8 1.7
1999-
00 801110 93020 133518 43030 49990 0.6 0.7 1.3
2000- 820305 165290 136718 94710 70580 1.4 1.0 2.4
01 861455 164280 143576 88485 75795 1.2 1.1 2.3
2001- 871720 196085 145287 157845 38240 2.2 0.5 2.7
02
2002-

156
 03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
Average stock in months 1.6 0.9 2.5
Source : Compiled from Rubber Board Bulletins

157
 The above table shows how the producing and consuming segments of NR reacted

to the norms prescribed by the government regarding stocks. On an average, the total stock

hold expressed for the number of months of consumptions was 2.5. It indicated that 5 months

excess stock was retained during the period of analysis. It could be seen from the table that

the growers held on an average of 1.6 months stock and the manufactures held 0.9 month

stock which was against the norm of one month stock. The stock pattern revealed that except

in 1995-96, 2001-02 and in 2007-08 the burden of excess stock was borne by the producing

sector, growers and dealers of NR. In spite of the government norm, the consuming sector

had taken advantage of price for NR. This is clear from the figure 4:12:a.

Figure: 4.12.a

NR STOCK

The figure tells that the burden of excess stock has been borne by the growers and

dealers rather than manufacturers.

158
4:10 Demand for SR :

NR was used for all purposes rubber but due to its shortage during the World War

Second (1939-1947), many types of SR were developed. They are classified as general and

speciality rubbers. Synthetic rubbers are sourced from various petroleum products by

chemical process. SR serves as a substitute for NR in many cases because of its elasticity,

resilience and toughness. These properties make SR useful for manufacturing tyres, machine

belting, electrical insulation, hoses, shoe soles and so on. SR holds air 13 times better than

NR and is excellent at resisting aging21.

4:10:1 Global Consumption of SR:

SR is more in use than NR and has more global demand. Hence there are many

manufactures in the world who are producing and supplying SR. It constitutes a prime

segment in the global rubber consumption. The SR-NR ratio in the world’s total rubber

consumption was 61:3922. Global SR consumption was 13.75 million tonnes in 2010, a robust

15 percentage growth over previous year. China’s share in SR consumption in the world was

nearly one-third of the total, a 4.48 million tonnes. The share of SR consumption was lower

than NR in four of the NR producing countries such as Malaysia, Indonesia, Thailand and

India23. Table 4:13 shows the global SR consumption.

159
 Table 4:13
GLOBAL SR CONSUMPTION

Country 1975 1980 1985 1990 1995 2000 2005 2008

U.S.A 1962 1821 2172 2190 2002 2172

1964 1980
Japan 585 885 948 1133 1085 1138 1156 1085
China 245 340 760 1455 2597 760
55 155
Germany 360 421 411 511 426 632 635 426
France 278 342 312 351 430 482 355 430
Brazil 235 284 280 357 405 280
176 244
Rep.of.Korea 145 279 370 382 344 370
NA NA
Russian Fed 2115 2078 424 539 568 424
NA NA
Spain NA NA 144 166 195 269 254 195
Taiwan NA NA 95 195 284 262 280 284
Italy 220 288 277 310 293 291 242 293
Canada 179 200 173 185 198 233 226 198
32 46
India 70 97 133 171 223 133
U.K 266 248
201 223 226 188 222 226
Maxico NA NA
140 114 132 160 145 132
Others 2913 3976
772 1573 1862 2015 2257 1862

Total 7028 8785 9000 9660 9270 10764 11921 9270

Growth Rate - 25% 2.4% 7.3% -4% 16% 11% -22%

Source : Rubber Statistical Bulletin of the International Rubber Study Group &
Indian Rubber Statistics Vol.24, 30 & 32
NA – Not Available separately.

160
 It could be seen from the table above that the global SR consumption had

increased from 7028000 tonnes in 1975 to 11921000 tonnes in 2005. The growth rate was

very high in 1980. After globalisation, we could find ups and downs in the global SR

consumption. In 2008, a drastic reduction in SR consumption could be viewed. During the

three years, a gap between 2005 and 2008 the global SR consumption came down from

11921000 tonnes to 9270000 tonnes. Moreover, the table shows that the USA was the largest

SR consumer in the world till 2000. China surpassed it in 2005. But in 2008, the USA again

reached the top. The table also reveals wide fluctuations in SR consumption throughout the

world. It is mainly because SR consumption mainly depends upon the availability of NR and

the comparative price of both NR and SR.

4:10:2 SR Consumption in India

In India, SR consumption is to supplement the NR for meeting the demand for the

rubber goods manufacturing industry. The ratio of SR to NR consumption was 20:80 in the

country during the 1980s, while the world pattern was 70:3024. In India, SR production was

started in 1962. Even after the domestic production, a substantial quantity of SR was being

imported in every year.

4:10:3 SR-NR Consumption in the Pre-liberalisation Period

Table 4:14 shows the SR consumption in the pre-liberalisation period and the

percentage of it to NR.

161
 Table 4:14

PATTERN OF SR - NR CONSUMPTION IN INDIA IN THE

PRE-LIBERALISATION PERIOD (in tonnes)

Year SR NR Total Ratio

1970-71 33160 87237 120397 28:72

1971-72 37209 96454 133663 28:72

1972-73 33921 104028 137941 25:75

1973-74 23921 130302 154223 16:84

1974-75 24376 132604 156980 16:84

1975-76 32452 125692 158144 20;80

1976-77 34955 137623 172578 20:80

1977-78 36150 144967 181117 19:81

1978-79 40470 164524 204994 18:82

1979-80 43238 165245 208483 19:81

1980-81 47050 173630 220680 20:80

1981-82 52650 188420 241070 20:80

1982-83 55250 195545 250795 21:79

1983-84 62300 209480 271780 22:78

1984-85 65400 217510 282910 23:77

1985-86 70035 237440 307475 22:78

1986-87 71785 257305 329090 22:78

1987-88 76410 287480 363890 21:79

1988-89 84150 313830 397980 21:79

1989-90 93550 341840 435390 21:79

Source : Indian Rubber Statistics

162
 From the above table it is clear that the SR consumption has recorded a steady

increase from 1973-74 onwards. But when we compared the ratio of SR-NR consumption,

we could see fluctuations between 16 to 28 percentage. The pattern of SR consumption to NR

was 28:72 in 1970-71 but it became 16:84 during 1973-75. In the 1980s, the average SR

consumption was 22 percentage of the total rubber consumption. It showed the relative

importance given to SR in the country during the pre-liberalisation period. Figure 4:14.a

gives a clear picture.

Figure : 4.14.a

SR-NR CONSUMPTION PATTERN IN THE PRE LIBERALISATION PERIOD

The picture shows the composition of the use of SR and NR as 1:4 in most of the

period under analysis.

4:10:4 SR-NR Consumption in the Post-liberalisation Period

SR consumption has a steady growth during the post-liberalisation period. An

average ratio of SR-NR consumption is 20:80 during this period. It is obvious from table 4:15

163
 Table 4:15
PATTERN OF SR-NR CONSUMPTION IN INDIA IN THE
POST-LIBERALISATION PERIOD
Year SR NR Total Ratio
1990-91 104735 364310 469045 22:78
1991-92 105650 380150 485800 22:78
1992-93 108690 414105 522795 21:79
1993-94 113395 450480 563875 20:80
1994-95 122710 485850 608560 20:80
1995-96 134085 525465 659550 20:80
1996-97 142810 561765 704575 20:80
1997-98 160915 571820 732735 22:78
1998-99 156395 591545 747940 21:79
1999-00 167220 628110 795330 21:79
2000-01 170670 631475 802145 21:79
2001-02 174530 638210 812740 21:79
2002-03 194850 695425 890275 22:78
2003-04 210190 719600 929790 22:78
2004-05 224630 755405 980035 23:77
2005-06 237495 801110 1038605 23:77
2006-07 270830 820305 1091135 25:75
2007-08 297155 861455 1158610 25:75
2008-09 292950 871720 1164670 25:75
2009-10 347710 930565 1278275 27:73

Source : Indian Rubber Statistics

From the above table it is clear that in 1990-91 the pattern of SR-NR consumption

was 22:78. In 2009-10, the share of SR increased and NR decreased recorded as 27:73. It is

also shown in figure 4:15 a.

164
 Figure: 4.15.a

SR-NR CONSUMPTION PATTERN IN THE POST LIBERALISATION PERIOD

The figure indicates the slow and steady increase in the use of SR in the post-

liberalisation period.

4:11 Reclaimed Rubber

Reclaimed Rubber (RR) is the third segment of rubber consumption in India.

Reclaiming is essentially a depolymerisation process using heat or pressure or both and

chemical agents. Reclaimed rubber is manufactured by treatment of old and worn-out rubber

articles with certain chemical agents at a high pressure or temperature. The main reclaimed

rubber materials are the scrap rubber, tyre buffing, latex product wastes and chapel waste.

They are classified in to four grades viz. super, fine, medium and coarse25. All these types of

RR are made in India. RR is used in many applications like cycle tyres and tubes, battery

boxes, auto tyres and tubes, footwear, belt and boxes, tread rubber and so on. They are

usually in blends with NR or SR. Disposal of waste tyres and vulcanized scrap rubber are a

global problem. One of the most useful ways for their disposal is reclamation of the rubber

component for use along with new rubbers. Many technologies such as the popular ultrasonic

186
technology are now available for producing RR. Table 4:16 shows the RR consumption and

export in the pre and post-liberalisation periods.

Table 4: 16

RR CONSUMPTION AND EXPORT IN THE PRE AND

POST-LIBERALISATION PERIODS

Pre-liberalisation Period Post-liberalisation Period

Consum Consum-
Growth Export Growth Growth Export Growth
Year -ption Year ption
Rate (tonnes) Rate Rate ( tonnes) Rate
(tonnes) (tonnes)

1970-71 14348 - .259 - 1990-91 52500 13.4 985 31

1975-76 19342 34.81 141 -45.56 1995-96 65775 25.3 2078 111

1980-81 26850 38.82 1127 699 1999-00 63450 3.5 2184 5

1985-86 38215 42.33 201 -82.17 2005-06 76535 20.6 18270 737

1989-90 46300 21.16 752 274 2009-10 92250 20.5 36477 100

Source : Indian Rubber Statistics

It could be viewed from the above table that RR consumption was in and

increasing trend but there was fluctuations in the RR export during the pre-liberalisation

period. RR consumption had been increasing in the post-liberalisation period, except in 1999-

2000. But the RR export had a steady increase throughout the period. It also appears to be

bright in the wake of a predicted shortage of rubber.

4:12 Impact of the WTO on the Rubber Industry

The World Trade Organisation (WTO) was set up in 1995 to establish a fair,

equitable, rule-based and transparent multilateral trading system. The organization acts as a

permanent watchdog on international trade. Rubber industry which consists of NR, SR, RR

and rubber products has the impact of WTO.

187
4:12:1 Impact of WTO on NR

NR is classified as industrial raw material in WTO codes and its bound rate is

much less than the rates for agricultural commodities like tea, coffee, cotton and so on. In

case of agricultural products, the bound rates are 100 percentage for primary agricultural

products, 150 percentage for processed products and 300 percentage for edible oil26. The

rates fixed for different marketable forms of NR in the major producing countries, including

India are below 40 percentage that can be seen in Table 4:17

Table 4:17

BOUND RATES IN MAJOR NR PRODUCING COUNTRIES

Countries RSS TSR Latex

Indonesia 40 40 40

Brazil 35 35 35

India 25 25 -

Malaysia 5 5 5

Source : Asian Rubber Handbook And Directory-2011

Classification of NR as industrial raw material and leaving bound rate unfixed or

fixed at low level affects the NR producing countries, unless they have become globally

competitive. High production cost resulting from high wages and rising opportunity cost

erode the competitive edge. It has been observed that WTO regulations make it possible for

some countries to benefit depending on their competitiveness.

4:12:2 Impact of WTO on SR

The synthetic rubber producing countries are China, Japan & USA. SR industry is

facing serious problems mainly due to high raw material cost. First as trade barriers have

188
been lowered year after year SR grades have moved from one country to another more freely.

Second there is the closure of small capacity SR factories using out dated technology owing

to cost escalation. And third severe competition from large factories in the US and Japan

make it difficult for new SR units to survive, particularly in developing countries.

4:12:3 Impact of WTO on RR

The reclaimed rubber industry mostly concentrated in China and in India may find

it easy to compete due to higher availability of discarded rubber products, mainly tyres.

4:12:4 Impact of WTO on Rubber Products

Rubber products manufacturing may get a boost in the developed and fast

developing countries under the WTO regime by following minimum trade barriers. With fast

communication system, multinationals are outsourcing and sub-contracting rubber products

to cut the cost. NR based industries operating in developed countries have shifted their

operations to countries where the price is competitive. World Tyre Majors Bridgestone and

Goodyear have production units in India. Michelin has sales outlets in India and a production

unit is being established in Tamil Nadu27. With fast movement of products more freely across

the national borders, Indian rubber goods manufactures, especially small scale units find it

difficult to survive. This leads to a closure of units which fail to reap large scale operation.

All these could lead to a total overhaul of the rubber based industries in the coming years.

4:13 Conclusion

The domestic consumption of NR was less than the domestic production during
the 1970s. Since then NR consumption exceeds the domestic production. According to
analyzes, the average growth rate of consumption for 20 years during pre-liberalisation was
7.79 percentage but during the post-liberalisation, the consumption of NR had been

189
increasing. The average growth was just 4.94 percentage. The decline in growth rate in
consumption of NR could be attributed to the high import of rubber products from countries
under WTO regime following minimum trade barriers. It exposes the impact of liberalisation
and globalisation on rubber products.

Today there are over 50000 rubber products. They can be classified as latex and
dry rubber products. About 50-60 percentage of the NR produced in the world is used for
manufacturing tyre products. In India, dry rubber based industries occupy more than 90
percentage of the total rubber products. International markets need internationalised products
and quality. Advanced processing is crucial to ensure product quality and to explore global
market. In the Indian rubber market the manufactures of large scale units are more powerful
in the demand side since they are well organized with sound finance, technological
innovation and global information. Just being three percentage of the manufacturing group,
they consume 75 percentage of NR. It is due to the impact of privatisation on NR and NR
based industries in India. In India, NR consumption is spread all over the country irrespective
of geographical concentration of production in Kerala and in Kanyakumari district, Tamil
Nadu. Increase in the volume of consumption and at the same time decrease in number of
manufacturing units, in the country portrays the strength of giants on the demand for side NR
in a globalized world. Although the demand for NR in India is made of consumption, export
and stock to be held by producing and consuming sectors, it is much influenced by
consumption. The aggregate rubber consumption in India consists of NR, SR and RR in the
ratio of 68:25:7. (as per tables 4:15 and 4:16)

REFFRENCES

1. Unny, R.G, and Haridasan, V, The Indian Rubber Economy, Rubber Board, 1995,
P.P.103-104.

2. Asian Rubber Handbook and Directory – 2005, p.50.

3. Tijo, Rubber Asia 20th Anniversary Issue. p. 89.

4. John S. Powath, Executive Director, Rubber Asia.

190
5. Kurian Abraham, Editor and Managing Director, Rubber Asia, Asian Rubber
Handbook and Directory-2011.

6. Indian Rubber Statistics, Vol. 32, 2009, p.ix.

7. Parthasarathy, “Distress call from Indian Rubber Industry”, Rubber Asia, July-
August 2010, p. 8.

8. Murrali,” Chennai is to boom in automotive and related sector”, Rubber Asia, Indian
Rubber Expo Special, January 2011, p.39.

9. Rubber Asia, July- August 2010, p.8. and Indian Rubber Statistics, vol.33, p. 28.

10. Unny, R.G, and Haridasan, V, The Indian Rubber Economy, Rubber Board, 1995, pp. 101.

11. John, “Impact of Economic liberalization and Globalisation on the marketing of the
NR in India”, Ph.D.Thesis, Mahatma Gandhi University, Kottayam. p.9.

12. Asian Rubber Handbook and Directory 2005, p.57 and 109. Rubber Asia, July-
August- 2010, p.8. 113.

13. Rubber Asia, July- August- 2010, p.8 and 113.

14. John, “Impact of Economic liberalization and Globalisation on the marketing of the
NR in India”, Ph.D. Thesis, Mahatma Gandhi University, Kottayam, June 2002, p.89.

15. Rubber Asia, July-August-2010, p.113.

16. Ibid.

17. Sajeena, “Production and Marketing of Rubber in Kanyakumari District.”

Ph.D.Thesis, M.S.University, June 2010, p.162.

18. John, K.K., “Impact of Economic Liberalisation and Globalisation on the Marketing
of NR in India.” Ph.D.Thesis, Mahatma Gandhi University, Kottayam, June 2008,
p.103.

19. Ibid.

20. Desalphine, chairman, Rubber Board, Planter’s Chronicle, October, 2004.p.7

21. http : // www.indiamart.com/arihantoils/rubber-products.html.

22. Rubber Asia, May –June 2011, p.76.

23. Ibid.

191
24. Natural Rubber Conference 1989, Indian Rubber Growers’ Association, Cochin, p.18.

25. Abraham, P.O., “Problems and prospects of Rubber-based Industries in Kerala,”

Ph.D Thesis, Dept.of Commerce, University of Kerala, September 2001.

26. Damodaran, “WTO Agreement on Agricultural and Plantation Commodities,” Paper

No:1, submitted to UPASI, 2000, p.14.

27. Asian Rubber Handbook and Directory -2011, p.98.

192
 CHAPTER – V
PRICE FOR NATURAL RUBBER

5:1 INTRODUCTION

Natural Rubber is an agro commodity, which is used in manufacturing industrial

products. It is the only agricultural commodity which provides a profit margin of 300

percentage.1 NR has become the highest yielding plantation crop in India. The price for NR is

a sensitive issue. The various stakeholders – planters, dealers, processors, consumers and

politicians - often battle over its cost of production and fair pricing especially when prices

crash or boom. They are eager to work a mechanism out where the growers can get a fair

price for their produce and the consumers can buy with an affordable price. Many efforts

have been taken over the years to arrive at a fair price agreeable for both the producer and

consumer but have not been succeeded, since the cost of production varies from country to

country, region to region and plantations to plantations due to the topography, weather,

management style, labour cost and the like.2 Rubber being a plantation crop with a long

gestation period, growers cannot respond to changing prices by reducing production or vice-

versa. Since farmers have made a huge investment in the initial period, switching to other

crops in the middle of the economic life of their plantation would involve huge losses. The

prime concern of a consumer shall be the availability of NR at a globally competitive price.

NR prices have ever been a matter of serious dispute between the growers and the

manufacturers in India and the world. Good price is the best incentive for planters to stick on

to NR cultivation and its further expansion amid many other options available today. The

remunerative price for NR demanded by the growers is often considered too high and

unaffordable by the manufacturers. The dispute continues creating rivalry between these two

important stakeholders of the rubber industry. A mutual co-operation is essential for the

industry’s growth, especially in these years of global economic competition. Price is the most

193
important factor which reflects the whole developments taking place in the respective

commodity market. Therefore an analysis on the NR price movement is necessary to have a

clear picture of the rubber market. The purpose of this chapter is to analyze the behavior of

the price with and without the centrally imposed price policy.

5:2 Rubber Trade in India

Way back in 1990, the area covering rubber plantation was 12000 hectares and

production was 800 tonnes. The price was very high then paying US$ 2 per kg. This attracted

the Indians to invest in rubber cultivation.3 World War First (1914 – 18) generated great

demand for rubber but the Indian rubber trade did not benefit because the British Government

had banned rubber export from India. Those who engaged in exports had to confine

themselves to buying rubber from growers and selling to the Indian agents of manufacturing

units in U.K. Later, by 1925, as NR output increased, price crashed but NR was considered

remunerative since land cost was very low and labour cost was very cheap. More and more

investment in rubber cultivation brightened the prospects for higher production. But the Great

Depression (1929 – 33) inflicted a severe blow to the rubber market. By 1930, the price went

down considerably. The producing countries including India signed the International Rubber

Regulations Agreement (IRRA) in 1934. It imposed restrictions on new planting and

replanting rubber and a quota system was introduced for export. The Indian Government set

up the Indian Rubber Licensing Committee in 1934 to enforce the IRRA in India.4 In India

the domestic manufacturing industry and the rubber plantation stood to gain with the steady

price for rubber about rupees 595 per tonne compared to international price about rupees 733

in 1935.

5:3 Statutory Control

During the World War Second demand for rubber was very high. The price was

brought under the statutory control by the Rubber Control and Production Order in 1942

194
which required all available rubber to be supplied to the Central Government or to units

nominated by the Government at prices fixed from time to time. This monopoly, lasted till

April 1946. It dampened the prospects for rubber trade. 5 During the post-war period, rubber

price tumbled all over the world. To protect the local growers from this free-fall, import

restrictions were introduced. In April 1947, the Rubber Production and Marketing Act was

passed by which the Indian Rubber Board was constituted. The Act stipulated that no person

should possess, buy or dispose rubber without a special licence issued by the Board. But

permission was granted to all growers to sell and all consumers to buy rubber not exceeding

68 kilos without a licence. Dealership licence was introduced with annual fee of rupees 100

per licence.6

5:4 Statutory Price

After independence, India followed a policy of maintaining the rubber market at a

remunerative level. In 1947 Minimum and Maximum Prices were notified for different

grades of sheet rubber and latex. The rates were periodically revised based on the cost of

inputs. Initially, the price was notified for 100 lb.7 When the metric system of weights and

measures came into force in India, the prices were fixed for 50 kilos from 1961 to 1967 and

then for 100 kilos. The ceiling on price was in force from 1947 to 1970. As per a notification

on October 20, 1967, the maximum and minimum prices were revised. The difference

between minimum and maximum price was one rupee for all grades for 23 years. From

September 1970 to September 1981, only the minimum price was notified. Initially, the

prices were revised 14 times during the 23 years based on input costs assessed by the Indian

Tariff Board and then by the Cost Accounts Branch of the Central Ministry of Finance from

1967. By 1981, the statutory price fixation came to an end largely due to the market

maintaining a remunerative price.

5:5 Payment of Price Differential

195
 The price in India for NR was generally higher than the international price. In

1956, the Government of India had ordered that the manufacturers should pay to the Rubber

Board the difference between the price of imported rubber and indigenous NR so that

manufacturers would get NR at the same cost in India irrespective of the source of supply. It

was also to prevent the tendency of manufacturers going in for imported NR. It was in

accordance with the policy of price protection given to the NR industry. This system of

payment of the price difference for imported and indigenous rubber by manufacturers to the

Rubber Board continued until the close of the 1960s.7

5:6 Import Duty

In 1957, the Government of India introduced an import duty on NR in accordance

with the general import policy. Initially, the duty was five percentage which was enhanced to

10 percentage in March 1961 and again to 22 percentage in April 1963. In February 1965, the

duty was further enhanced to 32 percentage which included a regulatory duty of 10

percentage.8 As per the provisions of GATT 1994, each WTO member county was bound to

limit its import duty within a ceiling called bound rate, which was fixed by each member

country for different product lines and was notified in its national schedule submitted to the

WTO in the same year. The bound rate committed by India was 25 percentage for all forms

of NR except for NR latex to which India did not commit any ceiling on import duty.9 NR

could be imported to India without licence from April, 2001 on payment of prevailing import

duty. The basic import duty fixed on January 9, 2004 was 20 percentage for all forms of NR

except NR latex for which it was 70 percentage. It was further reduced to 13.1 percentage in

August 2010 and further to 7.5 percentage in December 2010 as a temporary measure to help

consumers.10

5:7 Entry of STC in NR Market

196
 During the 1950s and 1960s, manufacturers of rubber goods were allowed to

import rubber directly to the extent indicated by the licenses issued to them. However, it was

found to be not very effective due to various reasons such as the difficulty in estimating the

actual gap in advance, variations in the international price and untimely import by

manufacturers. Consequently at the end of 1968, the State Trading Corporation (STC), a

public sector enterprise which engaged in foreign trade transactions of a number of

agricultural commodities, was introduced into the NR market. Its task was to import NR and

to regulate supplies so that the gap between indigenous supply and demand could be bridged

without damaging the interest of domestic producers11 Initially, the STC functioned more or

less as an advisory body for monitoring and regulating imports from 1978–79. The country

then became a net importer and the STC had been authorized to import and distribute NR to

actual users. The STC had a monopoly on NR import till 1982. It used to import and

distribute NR during the low production season when domestic production would be less than

consumption. With the establishment of the STC, the government had a firm hold on the

impact of the world market on the domestic NR economy. In 1982, a separate scheme had

been established for large rubber goods exporters, mainly tyre manufacturers, so that these

exporters were allowed to import duty-free NR for manufacturing export goods. It enabled

the manufacturers to compete the international market. Thus import under Advance License

Scheme became common in 1991 with liberalisation and STC stopped rubber import from

October 1991 onwards.

5:8 Bench Mark Price (BMP)

In 1981, the statutory price fixation came to an end. There after a Bench Mark

Price was fixed for two grades-RMA4 and RMA5 based on the cost study done by Cost

Accounting Department of the Union Finance Ministry. 12 RMA4 was the major traded grade

and market quotation of this grade determined the price difference of other grades from time

197
to time. Though RMA5 bench mark price was periodically revised, its volume of transaction

was very low. Upper and lower limits of the bench mark price were also evolved. Initially the

BMP was fixed at rupees 1650 for 100 kilos with a lower limit of rupees 1600 and upper

ceiling of rupees 1700. The BMP and the upper and lower ceilings were revised from time to

time based on cost factors.13

5:9 Buffer Stock Scheme (BSS)

The STC’s operations were thought to be sufficient to regulate the prices but

fluctuations in prices were witnessed subsequently. During the low production period there

were occasions for the price to flare up. So the rubber goods manufacturers depended upon

the Government to device a mechanism to ensure an affordable price in the market for

copying with violent fluctuations. As a positive response to the plea of the consuming sector

and on the recommendation of the Rubber Board, the Government introduced Buffer Stock

Scheme in February 1986. Under the scheme, when the market dipped below the lower limit,

rubber would be purchased on the stock and when the market surged above the ceiling, NR

from the stock would be released. The objective of the scheme was to ensure the stability of

the market price so that rubber producers would be assured of a reasonable return on their

investment. The State Trading Corporation was given the responsibility to operate. The bench

mark and both the ceiling prices were revised from time to time based on cost factors. The

scheme was in operation for 16 years and the rubber goods manufacturers were assured of an

adequate supply at a reasonable price. It was dropped in 2001 when the Government notified

Minimum Support Price. The changes in bench mark price, domestic price and international

price between 1986 and 2001 are presented in table 5:1.

Table 5:1

BENCH MARK, DOMESTIC AND INTERNATIONAL PRICES OF NR / 100 kg.

Year Lower Bench Upper Domestic International

198
 ceiling Rs mark Rs ceiling Rs Price Rs price Rs
1986 1600 1650 1700 1670 985
1987 1650 1700 1750 1766 1214
1988 1730 1780 1830 1811 1600
1989 1730 1780 1830 2040 1486
1990 1730 1780 1830 2147 1424
1991 2095 2145 2195 2128 1796
1992 2095 2145 2195 2463 2457
1993 2295 2345 2395 2546 2538
1994 2440 2490 2540 3107 3455
1995 2440 2490 2540 5057 5030
1996 2440 2490 2540 5122 4764
1997 2440 2490 2540 3988 3614
1998 3355 3405 3455 3013 2884
1999 3355 3405 3455 2997 2644
2000 3355 3405 3455 3125 3007
2001 3144 3209 (MSP) 3109 2735

Source : Asian Rubber Handbook and Directory.

It is observed from the table that the BMP has increased from Rs. 1650 to Rs.

3405. The mechanism of BSS is that the NR price should not go beyond the upper ceiling

price and should not fall below the lower ceiling price. Accordingly the scheme was

effectively in operation only up to 1989. The domestic price was more than double the bench

mark price fixed in 1994 and 1995 and for another four years from 1998 to 2001, the price

was lower than the BMP. This was mainly due to South-East Asian Economic Turmoil, as it

was pointed out by Mahesh in his study on “Natural Rubber Prices Movement in India”. 14

5:10 Minimum Support Price (MSP)

In September 2001, the Government announced Minimum Support Price (MSP)

related to the landed cost of imported rubber and not to the cost of inputs whereas the bench

mark fixed was Rs.34.05 per kilo for RSS4 and the MSP was only Rs. 32.09 in 1998.

199
5:11 NR Price Policy During the Pre-liberalisation period

In India, NR had been under protected price regime policy since 1942. Statutory

control price support schemes, buffer stock, import duty and so on were devised by the

Government to maintain a protected environment for the growth of NR production in the

country. Section 13 of the Rubber Act provides statutory right to the government to fix

minimum or maximum or both the prices for various goods of rubber from time to time.

Statutory minimum price had come into existence in May 1942 under the Rubber Stock

(Control) Order and it continued till November 1947. In December 1947, the Government

declared minimum and maximum prices for NR and this continued till December 1963. As a

measure towards the protected price regime policy, the Government had issued an order in

1956 to effect that the rubber goods manufacturers who import NR should pay the difference

between the price of imported rubber and the domestic price to the Rubber Board if the

former price was lower than the latter. It was effected with a view to equalize both the

domestic and international prices to discourage the import of NR. The Government started to

impose import duty in 1957 by levying five percentage duty. In December 1968, STC was

brought into the Indian rubber market to import rubber and to regulate its supply without

affecting the domestic price. There was no effective control on the domestic price for NR

from September 1981 to February 1986 with the understanding that the operations of the STC

were sufficient to regulate the prices. Table 5:2 shows the price policy of NR during the pre-

liberalisation period.

Table 5:2

NR PRICE POLICY DURING THE PRE-LIBERALISATION PERIOD:

Period Policies

May 1942 to Sep 1946 Minimum Price

October 1946 to Nov 1947 -

200
 December 1947 to Dec 1963 Minimum and Maximum Price

January 1964 to Sep 1967 Minimum Price

December 1968 Entry of STC

December 1968 to Aug 1981 Minimum Price

September 1981 to Jan 1986 -

Feb 1986 to April 1987 Bench Mark Price & Buffer stock scheme

May 1987 to Aug 1988 Bench Mark Price – Revised

September 1988 to Dec 1989 Bench Mark Price - Revised

Source : Burger at. al (1995)

5:12 Actual NR Price During the Pre-liberalisation period

In this section, the actual NR price during the pre-liberalisation period from 1970-

1990 is analysed. Table 5:3 shows the actual price along with the percentage changes for a

period of twenty years before liberalisation. It is the period when Indian rubber market has

been protected from price fluctuations by controlling the price through different measures.

Table 5:3
NR PRICE DURING THE PRE-LIBERALISATION PERIOD (Rs per 100 kg)
Minimum
Percentage of actual
Actual Percentage Notified /
Year price over protected
Price Change Bench Mark
price
Price
1970 444 - 468 94.87
1971 465 4.73 520 89.42
1972 493 6.02 520 94.81
1973 798 61.89 520 153.46
1974 827 3.63 520 159.03
1975 653 -21.03 520 125.57
1976 630 -3.52 520 121.15
1977 885 40.47 520 170.19

201
 1978 1024 13.57 655 156.34
1979 1154 12.69 825 139.88
1980 1423 23.31 - -
1981 1460 2.60 - -
1982 1440 -1.37 - -
1983 1752 21.67 - -
1984 1655 -5.53 - -
1985 1732 4.65 - -
1986 1670 -3.58 1650 107.03
1987 1766 5.75 1700 106.52
1988 1811 2.55 1780 114.61
1989 2040 12.64 1780 120.62
1990 2147 5.25 - -
Source : Compiled from Rubber Statistics & Asian Rubber Handbook and Directory.

From the above table it could be noted that annual growth rate of NR price

fluctuated widely during the pre-liberalisation period. The percentage of change varies from

61.87 to -21.03 percentage even in the midst of statutory price control measures. The price

was not stable even during the period from 1981-86, when there was no strict control over

NR price. It could also be seen from the table that the actual price was more than the notified

price except during 1970–72. Moreover, the correlation between the actual and notified prices

was 0.979. It revealed that the actual and statutory prices were highly correlated during the

pre-liberalisation period.

5:13 NR Price During the Post-liberalisation Period

During the pre-liberalisation period, statutory prices were fixed to control the

price for NR and thereby to protect the growers and consumers. The insulated status of the

Indian rubber sector had been undergoing significant changes since 1991-92 from the

implementation of liberalized economic policies. The major change was the dilution in the

extent of protection given to the NR sector. In the wake of liberalisation, STC stopped rubber

import. Then import under Advance License Scheme became common. Liberal policy of

202
fixing only Bench mark price was followed up to September 2001. But on September 13,

2001, the government again declared minimum support price after 21 years under the direction

of the court15. Table 5:4 shows the NR price policies during the post-liberalisation period.

Table 5:4
NR PRICE POLICES DURING POST-LIBERALISATION PERIOD
Period Policies Rs/100Kg (RSS4)

1-1-1991 to 31-12-1992 Bench Mark price (BMP) 2145

1-1-1993 to 31-12-1994 BMP-Revised 2345

1-2-1994 to 27-9-1998 BMP-Revised 2490

28-9-1998 to 12-9-2001 BMP-Revised 3405

13-9-2001 onwards Minimum Support Price 3209

Source : John K.K; Ph.D Thesis (2002)

The table shows that the price policies prevailed in the post-liberalisation period

though they were not strictly followed. It could be observed from the table that the BMP was

revised four times between 1-1-1991 to 12-9-2001 and the price ranges from Rs.2145 to 3405

for the highly traded grade of rubber namely RSS4. In September 13, 2001 the BMP was

replaced by MSP and for the first time the notified price fell below the just preceding notified

price from Rs.3405/- to Rs. 3209/-

5:14 Bench Mark Price, Domestic Price and International Price

While the pre-liberalisation period was characterized by the protective price

regime policies such as Minimum Statutory Price, Bench Mark Price, Buffer Stock Scheme,

entry of STC in import and so on, the post-liberalisation was marked for diluting these

measures in the liberalized and globalized economy. The government felt that price

protection was not an adequate policy in the open market and it involved in lifting up of

protective measures gradually. Table 5:5 shows the timely revised BMP along with the

domestic and international prices.

203
 Table 5:5
BENCH MARK PRICE, DOMESTIC PRICE AND INTERNATIONAL PRICE FOR
NR (Rs./100 kg)

Year Bench Mark Price Domestic Price International Price

1986 1650 1670 985

1987 1700 1766 1214

1988 1780 1811 1600

1989 1780 2040 1486

1990 1780 2147 1424

1991 1780 2128 1796

1992 2195 2463 2457

1993 2195 2546 2538

1994 2345 3107 3455

1995 2490 5059 5030

1996 2490 5122 4764

1997 2490 3988 3614

1998 2490 3013 2884

1999 3405 2997 2644

2000 3405 3125 3007

2001 3209 (MSP) 3109 2735

Source : Different volumes of Indian Rubber Statistics

Figure 5:5.a

204
 BENCH MARK PRICE, DOMESTIC PRICE AND INTERNATIONAL PRICE FOR

NR

The figure shows that the protective measures don’t count much in the liberalized

market.

5:15 Actual NR Price During the Post-liberalisation Period

Since the opinion of the Government was that the protection of any kind would
not increase the potentialities of any industry in an era of globalisation it started to withdraw
the rigid protective price regime policies. Here we analyze the movement of price during the

205
post-liberalisation period. Table 5:6 shows the actual NR price and its percentage year on
year change.
Table 5:6
ACTUAL NR PRICE DURING THE POST-LIBERALISATION PERIOD
Percentage change
Year Actual price (Rs/100kg)
YoY
1990-91 2129
1991-92 2141 0.56
1992-93 2550 19.10
1993-94 2569 0.75
1994-95 3638 33.08
1995-96 5204 43.05
1996-97 4901 -5.83
1997-98 3580 -26.95
1998-99 2994 -16.37
1999-00 3099 -3.51
2000-01 3036 -2.03
2001-02 3228 6.32
2002-03 3919 21.41
2003-04 5040 28.60
2004-05 5571 10.54
2005-06 6699 20.25
2006-07 9204 37.40
2007-08 9085 -1.30
2008-09 10112 11.30
2009-10 11498 13.71
Source : Indian Rubber Statistics

From the above table, it is clear that the NR price in India has been under wide

fluctuations in the post-liberalisation period. The Asian Currency Crisis and the high stock

position led to crash in prices putting rubber growers under enormous stress in 1997-98 and

1998-99. It would be observed from the table that the increase had been rather steep in last

two years. In spite of such increase, protection is still being given to NR sector by way of

206
import duties of 20 percentage on dry rubber and 70 percentage on latex, inspection of

imported consignments, all grades not being permitted for import, severe licensing control

and so on.

5:16 Indian Vs International Prices

Since India became a member of the WTO, the domestic market had been moving

more or less in tune with the world price during the post-liberalisation period. A fall in

international price for rubber resulted a fall in prices of domestic rubber and consequently a

fall in the income of growers. Since rubber is a plantation crop with long gestation period of

six to seven years and has a economic life of about 32 years, the growers have made huge

investment in the initial period. Thus switching to other crops in the middle of the economic

life of their plantation would involve huge losses. Under these circumstances, it is important

to look in to the economics of rubber production in the country and to examine whether it is

remunerative to the growers and could absorb a further fall in prices. In order to examine

whether Indian rubber could withstand the imports in the liberalized scenario, Nominal

Protection Co-efficient (NPC) is calculated. NPC measures the discrepancy between the

domestic price and international price of the commodity. That shows the ratio of domestic

and international price. If NPC is more than one, the commodity is being protected and under

free trade, price of the commodity will be lower. If the NPC is less than one, then the

competitive advantage of domestic product can compete with imports17.

Table 5:7 shows the domestic price, international price and the Nominal

Protection Co-efficient for Indian rubber for a period of 20 years from 1990-91 to 2009-10.

Table 5:7

DOMESTIC PRICE, INTERNATIONAL PRICE AND NPC

Domestic price International price

Year NPC
(Rs/100kg) (Rs/100kg)
1990-91 2129 1425 1.49
1991-92 2141 1796 1.19

207
 1992-93 2550 2457 1.04
1993-94 2569 2538 1.01
1994-95 3638 3455 1.05
1995-96 5204 5030 1.03
1996-97 4901 4764 1.03
1997-98 3580 3614 0.99
1998-99 2994 2884 1.04
1999-00 3099 2644 1.17
2000-01 3036 2958 1.03
2001-02 3228 2793 1.16
2002-03 3919 4110 0.95
2003-04 5040 5278 0.95
2004-05 5571 5833 0.96
2005-06 6699 7432 0.90
2006-07 9204 9779 0.94
2007-08 9085 9374 0.97
2008-09 10112 10379 0.97
2009-10 11164 11498 0.97
Source : Compiled from Indian Rubber Statistics

It is seen from the table that up to 2001, the Nominal Protection Co-efficient

(NPC) was more than one which indicated that the commodity was protected to some extent.

Afterwards, the NPC had been less than one which indicated the competitiveness of NR

under free trade. During the past eight years, domestic price was less than international price.

Since the competitiveness of the crop depended on international prices, freight rate and

handling charges and a change in any of these factors would make positive or negative

repercussion on Indian prices. Therefore it was not possible to follow a strict tariff policy.

Hence a tariff band should be fixed to protect the growers without compromising the interest

of the consumers. The upper and lower bound might be in force depending on the

international price, freight and handling charges. Figure 5:7.a shows the movement of

domestic and international price after globalisation.

208
 Figure 5:7.a

DOMESTIC PRICE AND INTERNATIONAL PRICE

From the above figure, it is clear that the domestic price moves in tune with the

international price after globalisation. This is also proved by Karl Pearsons Co-efficient of

Correlation (Appendix-IV) r = 0 .996.

The prime concern of a consumer shall be availability of NR at globally

competitive price. During the 1980s, the price of RSS4 in India was about 50 percentage

higher than the international price for RSS3. During the 1990s, the domestic price was only

six percentage higher than the international price and during the past ten years the domestic

price was around 3.5 percentage less than international price.

5:17 Once a Bane and Today a Boon

Rubber cultivation can no longer be considered as an unviable economic position.

Once it has been considered a bane but today it is a boon not only for the growers but also for

the government. Whatever way the growers spend their windfall from rubber on luxury goods

like cars or even further investment in land, it brings in revenues to the State exchequer by

way of taxes. The prices have been showing a steady increase since 2009. Today the prices

209
have risen sharply to unprecedented heights raising along with it the standard of living of the

growers. There is a visible change in the lifestyle of the growers. One such example is that

they spend liberally in their children’s education.

Booming NR prices are having positive impact on NR cultivation by rejuvenating

the interest in new-planting. Extension of the area for rubber cultivation depends on sustained

attraction in terms of price. The price boom triggered focus on new planting but replanting

has not picked up and likely to slow down as long as the prices remain high. Since the

growers like to get the maximum out of the existing trees, they retain aged trees by

postponing replanting. Thus over aging further declines in yield. The replanting old and

exploited trees are much slower in individual small holdings than on estates. While large

farmers could replant their holdings in sections, so as to minimize the disturbance to income

flow, the farmer who has only one or two hectares of rubber faces a great loss in income

when it is replanted. At least seven long years might elapse before any income is seared from

the new trees. The small farmer has to seek work elsewhere as a tapper or laborer. Many

small holders, who dislike risk, prefer a slow declining income in the present to the promise

of increased returns in the distant future18.

NR prices are soaring to unprecedented high levels. High price is indeed a boon to

the growers. Higher price while it is providing higher income to the growers, exerts pressure

on price of products using rubber as an input. Rubber consumers are worried over the

successive rise in the price of rubber. While the significant increase in NR price is a matter of

concern for rubber consuming sector in general and the tyre industry in particular, it is the

wide price fluctuations within a short time that have caused uncertainty for tyre industry. For

a product like tyre, which is raw material intensive, such steep price swings are difficult to

absorb. Each rupee increase in the price of rubber caused financial burden of Rs 490 million

210
on the tyre industry as the annual NR consumption of the tyre sector was 491500 tonnes in

2007-0819.

The price fluctuations and the drop in supply due to policies which restrict imports

due to low production levels in India will severely cripple the consuming industry because as

the pattern of consumption of the Indian rubber industry is 70 percentage NR, 21 percentage

SR and 9 percentage RR. This leads to extreme sensitivity in the price movement of NR20.

However to some extent the current high NR prices are likely to stimulate further expansion

of new planted area around the world and the trees that are currently in the ground will

continue to be productive over their due lifetime.

5:18 Factors Influencing NR Price

Generally factors influencing NR price are seasonal changes and irregular events.

In most of the NR producing countries, climate change has caused eight to fifteen percentage

fall in production21. Irregular events like unseasonal rains, unexpected drought, forest fire,

economic meltdown, sudden spurt in demand following high consumption and so on, also

cause price fluctuations. In the South East Asian region such as. India, Thailand,

Malaysia,Srilanka, Indonesia and Vietnam where more than 80 percentage of the world NR

supply takes place, the peak production season ends by January. This is followed by three

months of summer and winter when production becomes low22.

5:18:1 Seasonal Variation in NR Price

In India, winter starts in the rubber growing tracts towards the end of January.

Generally, rubber production would be low in February and March on account of climate

factors. These months are considered as the lean months for NR production. Many rubber

plantations would give tapping rest to the trees during these months. Generally consumers

make huge purchases in January to stock some quantum for lean months. Prices normally rise

at this time. By June- July production would normalize, but rains would follow and last for a

211
couple of months. During rainy season tapping trees would be disrupted and production

would fall which leads to rise in price. Low supply in the market has been the cause for

rising prices. Torrential rain in 2009-10 made rubber tapping difficult because tappers could

not go out to tap trees and overall output decreased considerably. As a result flow of rubber

to the market dropped further. Low supply in the market brought a further price spurt to the

level of Rs.170 a kilo for RSS4 towards the end of May 201023. Table 5:8 shows the average

monthly price for NR from 2005-06 to 2009-10 .

Table 5:8
MONTHLY PRICE OF NR [RSS4] (Rs/100 kg)
Months 2005-06 2006-07 2007-08 2008-09 2009-10

April 5840 8634 8979 10965 9488

May 6214 9641 8685 12248 9805

June 6173 10692 8093 12708 9913

July 6562 9821 7943 13340 9819

August 6084 9182 8742 13782 10250

September 6034 8169 8856 13536 10651

October 6555 8709 9424 9074 10898

November 6566 8260 9603 7681 11302

December 6886 8615 9221 6488 13430

January 7360 9716 9432 7034 13772

February 8045 9757 9687 6903 13700

March 8069 9057 10354 7583 14948

Average 6699 9204 9085 10112 11498

Source : Rubber Statistical News

Table above shows that the NR price in the Indian rubber market is marked with a

regularity in reaching the highest price when there has been a low supply in the market.

212
5:18:2 Demand Supply Imbalance

It is common that the price is determined by the interaction of demand and

supply in a free market economy. The rubber goods manufacturing industry’s enhanced

consumption has played a major role in price rise. Consumption of NR is increasing at a rate

between 10 to 12 percentage while the production is declining due to various factors24. When

the NR production was 825345 tonnes during 2007-08 the consumption moved upto 861000

tonnes. At this period 89700 tonnes of NR was imported to bridge the gap. But it was

inadequate because 60280 tonnes of NR from indigenous production was exported in the

same time. Having a gap of 35655 tonnes between production and consumption, only 29240

tonnes could be bridged by import. Although the shortfall was less at 6415 tonnes, it was

large enough to engineer price rise25.

5:18:3 Stock Vs Hoarding Impact on Market Mark up

Hoarding is also cited as a factor contributing to the price rise in India. Generally,

traders operating in the village market keep the procurement for a month for accumulation in

to a marketable load. No dealer can dispose of the procurement the next day. Of the total

stock of 175000 tonnes on March 31, 2008 the dealers have had only 56000 tonnes with

them, about 6.8 percentage of the rubber output of 825000 tonnes. On a monthly basis, the

average stock with them was around 4700 tonnes. Considering that there are more than 10000

rubber dealers in India the average stock with a dealer would not be even half a tonne.

Matched on a monthly consumption of around 72000 tonnes, this can hardly influence a

market mark up. Obviously, the talk about hoarding rubber at the dealers’ level is not

supported by ground realities.

Regarding the alleged hoarding by the growers, a vast majority of them, more

than 90 percentage are small holders. They do not keep rubber in stock as they find money

for day-to-day expenses from the sales realization of the crop. Only large growers numbering

213
267 have the capacity to hold stock. Their rubber area was a total of 65,600 hectares and their

production was around 66000 tonnes in 2007-08 which was around eight percentage of the

total production of 825000 tonnes. At the same time, the small growers were around one

million with a total area of 533000 hectares contributing 759000 tonnes to the total output.

The large growers generally keep a stock of one month’s production prior to sale. The

component of stock with the growers was 57,000 tonnes, of which the share of large growers

was only 5,500 tonnes. The monthly average was nearly 460 tonnes which was less than two

tonnes on average per large grower. This much quantum keeping the supply off chain could

make only a neglible impact on the market.

5:19 Futures Trade-Bane or Boon

The rubber market used to move up and down based on the demand and supply

situation. The role of speculators in bringing about price swings had been more talked about

since the introduction of Futures Trading. Futures Trade was introduced in India in 2003.

People believed that there had been attempts of profiteering by sale of futures contracts at

lucrative margins, noticing the overall shortfall in supply. The price swings abroad have

helped them to confidently make higher or lower quotes. Most of the transactions were paper

transactions as the futures contract purchased was often sold before the delivery date. No

transfer of physical stock was involved. Trading without exchange of commodities often

resulted in violent fluctuations.

Some had the view that the spurt in NR price was due to the role played by

speculators. According to N.Radhakrishnan, President, Cochin Rubber Merchant Association,

it was speculation by dealers traded rubber and took part in futures trading that had been

driving up the prices. Automotive Tyre Manufacturers Association (ATMA) and All India

Rubber Industries Association (AIRIA) had identified speculative elements in futures trade

and insisted the Central Government to suspend it. Accordingly, the Forward Market

214
Commission suspended futures trade in rubber from May 7 to December 2008. It did not have

any considerable impact on domestic NR price movements. But the suspension had a sudden

effect on the price of RSS4 that ruled at Rs.120 a kilo on May 7, came down to 116 per kilo

the next day. At the same time the fall did not last long. The next market bounced back to

Rs.120 per kilo within a week.

According to Sajen Peter, Chairman, Rubber Board speculative activities in

domestic physical market for NR were present even before the introduction of Futures

Trading in 2003. He had also pointed out that the Indian NR growers got the best farm-gate

price, as much as 95 percentage which was much higher compared to other NR producing

countries26. The trade margin of rubber traders who numbered around 10,000 was very

meager. As such, rubber futures had only a limited scope. Rubber price has been rising in

recent times. It is not because of any deliberate attempt on the part of the producers to hold

stock and create artificial scarcity. The reason is that the crop produced has been coming in to

the market and it is not sufficient to meet the demand of the user industry completely. The

immediate alternative is the import of sufficient quantum. However, the short supply and

high price in abroad has been deterrent factors against import of sizable quantum. In such

situation a sustainable domestic supply would make a lasting solution. Enhancing supply is

the best way to maintain market at a fair level.

However, after the introduction of the Future Trade, price fluctuations have been

wide and frequent. Annual averages of the price for 8 years prior to and after introduction of

the future trade are given in table 5:9

Table 5:9
PRICE OF NR BEFORE AND AFTER FUTURES:
Eight years prior to FT Eight years after to FT

Year RSS4(Rs/kg) Year RSS4(Rs/kg)

215
 1995 50.59 2003 48.14

1996 51.22 2004 55.71

1997 39.88 2005 60.68

1998 30.13 2006 87.83

1999 29.97 2007 90.06

2000 31.25 2008 107.75

2001 31.09 2009 97.56

2002 36.21 2010 114.98

Source : Rubber Asia, March-April, 2007, Indian Rubber Statistics

The above table shows that while the price variation had been low during the pre-

futures trade period. It can also be observed from the table that during pre-futures trade

period, the fluctuation in price had been between one rupee to 9.75 rupees per kilo. Whereas

the post-futures trade period it was Rs.2 to 28/kilo.

The stability in prices does not mean a fixed price to rule for a given period of

time. It only means that the demand factor would be made stable to match the supply side of

the rubber economy27. In other words, when the supply increases, there would be a number

of factors working to the advantage of the market to push up the demand. It may be at home

or abroad. In the era of globalisation, the basic determinant of price changes is not only the

conditions of supply and demand, but it is also the international price prevailing in the

liberalized market.28 Thus though price is essentially decided by demand-supply balance or

imbalance the international price has a say in influencing the NR price during the post-

liberalisation period. Since price is a factor determined by the dynamics of the market and

since it may fluctuate from one extreme to the other, the industry should not lose its focus on

216
these issues29. Timely action to redress these concerns would further strengthen the country’s

position as a major producer of rubber in the world.

5:20 Competitiveness of Indian Rubber Under WTO

India is one of the major producers of rubber but the demand for rubber is more

than supply. Despite tremendous increase in production of NR, India has been a net importer

of NR. In 1965-66 import was 25 percentage of consumption and then declined to 20

percentage in 1979-80, 13 percentage in 1989-90 and 9.5 percentage in 1998-99. However,

most of the years imports had been in excess of the shortfall of production resulting in

considerable stock of rubber. In 1984-85, the stock of rubber with various agencies was

55630 tonnes. It increased to 86430 tonnes in 1990-91, 103190 tonnes in 1995-96 and

187965 tonnes in 1998-99. The Asian Currency Crisis and the high stock position led to crash

in prices putting rubber growers under enormous stress30. NR was in the Restricted List up to

April 1997. Import was allowed against licence or in accordance with a Public Notice and to

exporters of rubber products against Quantity Based Advanced License or Special Import

License. However, because of excess availability of NR in the domestic market, import

against Public Notice was not allowed during 1997-98 and 1998-99. Further imports against

Advance License was banned with effect from February 20, 1999. As an alternative

arrangement, exporters of rubber products are allowed to purchase locally procured rubber

from the State Trading Corporation of India at the international price after surrendering

import license. According to WTO Agreement, rubber was placed under Open General

License (OGL) on April 1, 2001 which made import easier. Since then the domestic market

had been moving more or less in tune with ramifications in the world market with slight

changes. Some times the price was moving a little lower and at other times a little higher than

the world price.

REFERENCES

217
1. Vohra, M.F., President, All India Rubber Industries Association, Rubber Asia, May-
June 2008.

2. Tiyo, “ NR Prices cross the dream level”, Rubber Asia May – June 2008, pp.
110-111.

3. Asian Handbook and Directory – 2005. p 183 – 184.

4. John k.k., “ Impact of Economic Liberalisation and Globalisation on the Marketing of

NR in India, Ph.D.Thesis. Dept of commerce, Mahatma Gandhi University Kottayam,
June 2002.p.103.

5. “Rubber Trade in India”, Asia Handbook and Directory 2005.p.185.

6. Ibid.

7. 1kilo is equal to 2.205 lb.

8. Unny.R.G., Haridasan.V, Kees Berger, The Indian Rubber Economy, History,

Analysis and policy perspectives, Manohar.1995.p.171.

9. Ibid. p.172.

10. Rubber Growers’ Guide 2010.p.108.

11. Ibid.

12. Wouter Zant, “Stabilizing Prices in Commodity market”, Economic and social
Institute of the Free University, Netherland, 1996, pp. 254-255.

13. RMA4 refers to a specific quality grade of NR which was used in India. It is now
equivalent to RSS4 in India and RSS3 in the world market.

14. Mahesh.M.P., “NR prices movement in India”, Journal of Humanities and Social
Science, Vol.1 No.1, June 2009.p.15.

15. Mahesh.M.P., “NR Prices Movement in India”, Journal of Humanities and Social
Science, Vol.1 No.1, June 2009. p.15.

16. The Rubber Producers Society Edamaruku and the Independed Farmers Association
had filed writ petitions in the Kerala High Court seeking direction from the
Government of India for fixing a minimum price for sale of NR.

17. Gurdev Singh and Asokan, “ Competitiveness of Indian Rubber under WTO”,
Productivity, Vol.42, No.2, July – Sep, 2000.pp. 332-336.

218
18. Colin Borlow,” The Natural Rubber Industry”, Kualalumpur Oxford University Press,
1976, p.347.

19. Tiyo,” Prices will stay ligh on supply shortfall”, Rubber Asia, July- August 2008, pp
105-107.

20 Ibid.

21. Asian Rubber Handbook and Directory 2010, p.58.

22. Asian Rubber Handbook and Directory 2005, p.131.

23. Tiyo, ‘Spectre of price rise haunts consumers,’ Rubber Asia , July-August, 2010,
p.77.

24. Rubber Asia, July-August, 2010, p.75.

25. Tiyo, “Prices will stay high on supply shortfall,” Rubber Asia , July-August 2008,
pp.105-107.

26. Sajen Peter, “ NR prices will remain high in next two or three years.” Rubber Asia ,
July-August 2010, pp.43&44.

27. Sundar P.S., How to achieve stability in NR prices?”. Rubber Asia, Sep – Oct 1999,
p.261.

28. Colin Burlow, The National Rubber Industry, Kualumpur, Oxford University, Press,
1976 p.347.

29. Vibin V. Nair, Rubber business back in lime light. The Hindu Business Line, June 17,
2004.p.1.

30. Asian Rubber Handbook and Directory – 2011,p.57.

219
 CHAPTER – VI

RUBBER PLANTATIONS AND RUBBER- BASED

INDUSTRIES IN KANYAKUMARI DISTRICT

6:1 Introduction

The present study is conducted in Kanyakumari district of Tamil Nadu, India. The

district occupies a unique position in the State of Tamil Nadu with the highest density of

population, highest rate of literacy, best infrastructural base and plenty of resources. One such

unique renewable resource of nature is rubber. Kanyakumari district is blessed with

geographical features more suitable for rubber cultivation. It has the required soil, climate

and topographic factors suitable for the cultivation of rubber trees. It is a fact that standard

quality of rubber is available in Vilavancode and Kalkulam taluks of the district. Natural

rubber is an important raw material for a number of industries. Although the district accounts

for nearly 98 percentage of latex production in the State of Tamil Nadu, there is non-

proliferation of industries manufacturing rubber products. It seems to be against the principle

of localization of industries. Here an attempt is made for identifying and overcoming the

factors impeding the growth of rubber based industries in the district which has the potential

for abundant supply of raw latex. This chapter provides a background by way of a brief

description of the profile of the rubber plantations and rubber-based industries in the district

with the purpose of analyzing the feasibility for growth in the globalized era.

6:2 Rubber plantations in Kanyakumari District

Kanyakumari district is called the pet - child of nature. It has a number of natural

resources to its credit including natural rubber. The regional location of the rubber plantation

186
has a significant influence on the productivity of rubber. In Tamil Nadu, rubber plantation

was first started by Alexander of Colombo Commercial Company in 1910 in Kanyakumari

district at Vaikundam.1 Then private plantations were started under the names of Vaikundam,

Sivalokam, Maruthi, Kamathenu and Bethani estates. In the year 1956, political parties

started to force the Tamil Nadu Government to start government plantation with the objective

of providing employment opportunity. In 1959, the then Chief Minister of Tamil Nadu,

Kamaraj permitted to conduct a research regarding the feasibility of rubber cultivation in

Kanyakumari district. Nearly 5000 hectares of land from Keeriparai to Maruthemparai was

acquired on lease during the period 1961-1976.2 Government plantations had 10 divisions

upto 1990, which provided employment to nearly 3000 workers. In 1991, these divisions

were merged into five to reduce the administrative expenses. After 1991, the agriculturists

with 10 hectares or less started to replace their coconut gloves and paddy fields with rubber

because they became aware of the good income from rubber plantation. Now the situation is

that people even with five cents start to cultivate rubber mainly due to the yield from it. Thus

rubber plantation adversely has affected the cultivation of other plants such as coconut,

paddy, banana and tapioca. Now out of 91807 hectares of total crop area, rubber is cultivated

in 19500 hectares. Nearly 24000 tonnes of natural rubber is produced per annum in the

district. The district has the unique advantage of having rubber plantations in reserved forests

in 4280 hectares under the control of Arasu Rubber Corporation. But the public sector’s

contribution to rubber production and processing is low when we compared it to the small

holdings and estates under private sector. This shows the impact of privatisation and

globalisation on rubber plantation in Kanyakumari district. The prospect of getting high

income drives the farmers to plant rubber in all kinds of land from the mountain areas to the

forest and from the forest area to inland. Anyhow, rubber cultivation has moved towards the

187
areas of other crops and gradually replacing crops like coconut, paddy, banana and tapioca. It

can be explained further.

6:3 Influence of Rubber on other crops

Basically Kanyakumari district is an agrarian economy. The demand for land for

purpose other than agriculture is continuously increasing. Land in the district has acquired

new dimensions with economic development. The hectic infrastructural developments like

road, railways, transport, educational institutions and industries have increased the residential

requirement. Changing life-style of the people is competing with agricultural usage of land.

Agriculture sector in the district is passing through a difficult time. In the mean time, crop

shifting poses another dimension to the existing problem. Though rubber is extensively

cultivated in the district, paddy, coconut banana and tapioca are other major crops of the

district. Since rubber is an important raw material for a number of industries, the growth of

rubber plantation boosts the industrial sector. In a globalized era, there is a high potential for

developing of rubber–based industries. In the prevailing market situation, international rubber

price takes over the domestic price, which is conducive to export. The ever increasing

demand for natural rubber paves way for crop shifting in the district. Table 6:1 shows the

influence of rubber on the area of cultivation of the other major crops namely coconut,

banana, tapioca and paddy.

188
 Table 6:1
CROP AREA OF MAJOR CROPS IN KANYAKUMARI DISTRICT (in hectares)
Total
Growth Growth Growth Growth Growth
Year Paddy Tapioca Coconut Rubber crop
Rate Rate Rate Rate Rate
Area
1990-
91
41228 - 10030 - 23230 - 15731 - 90219 -
91-92
40572 -1.59 9393 -6.35 18498 -20.37 21249 35.08 89712 -0.56
92-93
38794 -4.38 9683 3.08 18717 1.18 21198 -0.24 88392 -1.47
93-94
38491 -0.78 9598 -0.88 19177 2.45 21406 0.98 88672 0.32
94-95
38481 -0.03 9514 -0.88 19241 0.33 21663 1.20 88899 0.26
95-96
36020 -6.40 9255 -2.72 20719 7.68 22089 1.97 88083 -0.92
96-97
33659 -6.55 8297 -10.35 21100 1.84 19478 -11.82 82534 -6.30
97-98
31224 -7.23 9715 17.09 21197 0.46 18063 -7.26 80199 -2.83
98-99
32135 2.92 9337 -3.89 18408 -13.16 18155 0.51 78035 -2.70
99-00
31475 -2.05 9683 3.71 18717 1.68 18238 0.46 78113 0.10
2000-
28594 -9.15 9598 -0.88 19177 2.46 18292 0.30 75661 -3.14
01
28229 -1.28 9514 -0.88 19241 0.33 18297 0.02 75281 -0.50
01-02
26052 -7.71 9255 -2.72 29719 54.45 18218 0.43 83244 10.58
02-03
17092 -34.39 8297 -10.35 21100 -29.00 18204 0.08 64693 -22.29
03-04
22416 31.15 9715 17.09 21197 0.46 18164 0.22 71492 10.51
04-05
21709 -3.15 9453 -2.70 21517 1.51 18397 1.28 71076 -0.58
05-06
21158 -2.54 8568 -9.36 21670 0.71 18806 2.22 70202 -1.23
06-07
20350 -3.82 8412 -1.82 22586 4.22 18979 0.92 70327 0.18
2007-
08
Source : Compiled from Annual Credit Plan, Kanyakumari District, 2008-09

The Table shows that except during 1998, all other years under reference , a
negative growth rate of the total crop area has been highly influenced by paddy, coconut and
tapioca.

Table 6:2
TREND VALUES OF RUBBER AREA AND TOTAL CROP AREA

Year Trend Value of Rubber Trend value of Total crop

1990-91 20174.5 91523.75

91-92 20053.5 90134.25

186
 92-93 19932.5 88744.75

93-94 19811.5 87355.25

94-95 19690.5 85965.75

95-96 19569.5 84576.25

96-97 19448.5 83186.75

97-98 19327.5 81797.25

98-99 19206.5 80407.75

99-00 19085.5 79018.25

2000-01 18964.5 77628.75

01-02 18843.5 76239.25

02-03 18722.5 74849.75

03-04 18601.5 73460.25

04-05 18480.5 72070.75

05-06 18359.5 70681.25

06-07 18238.5 69291.75

2007-08 18117.5 67902.25

Source: Compiled from Table 6:1

Trend values in table 6:2 make it clear that the total crop area of few major crops of

the district has been decreasing at 1389.5 hectares. Whereas rubber has been decreasing at

121 hectares. This shows the relative importance of rubber plantations in the district.

6:4 Profile of the sample respondents – in relation to Rubber Plantation in

Kanyakumari district:

This part of the study is based on the survey conducted between September and

December 2010 covering three taluks namely Vilavancode, Kalkulam and Thovalai in

187
Kanyakumari district. A stratified random sampling has been used to draw samples for the

survey. The sample size is given in table 6:3.

Table 6:3
SAMPLE SIZE

Sl.No Taluks No. of Holdings Sample size

1 Vilavancode 16638 165

2 Kalkulam 10587 105

3 Thovalai 3025 30

Total 30250 300

Source: Primary Data

6:4:1 Age–wise classification

Physical condition of the workers is the basic requirement for manual work. There

is also a correlation between age and physical condition of the workers. Age of the

respondent has an important bearing on cultivation policies. The age-wise distribution of the

sample growers is given in table 6:4

Table 6:4

AGE-WISE DISTRIBUTION

Age in Years Number of Respondents Percentage

Below 30 8 2.7

30–40 82 27.0

40–50 34 11.3

Above 50 176 59.0

Total 300 100

188
 Source: Primary Data

It is evident from the table that 59 percentage of the respondents belong to the age

group of above 50, which indirectly tells that they are well experienced in rubber cultivation.

At the same time rubber growers in the age group between 30–40 years constitute 27

percentage of the respondents which gives the hope for continuous rubber cultivation in the

district.

6:4:2 Education Status

Education is an important factor influencing the human capital of a country. There

is direct relationship between education and efficiency of the workers. Literacy levels of the

rubber growers influence the production, productivity, processing and marketing of natural

rubber. Table 6:5 shows the literacy levels of the sample respondents.

Table 6:5
LITERARY LEVEL

Literary Level Number of Respondents Percentage

Uneducated 9 3

Upto S.S.L.C 152 50

Under Graduation 80 27

Post Graduation 59 20

Total 300 100

Source: Primary Data

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 The table shows that 97 percentage of the respondents are educated and as much as

47 percentage has attained higher education. This is the basis for adopting scientific methods

of cultivation in the sample area.

6:4:3 Family size

The workers’ job satisfaction, status in the society and their earnings are directly

influenced by their family size. At the same time, larger is the number of members the greater

will be the chance of continuing the traditional form of work. Table 6:6 shows the family size

of the respondents.

Table 6:6
FAMILY SIZE OF RESPONDENTS
Size Number of Respondents Percentage
Less than 5 201 67
5 to 7 84 28
Above 7 15 5
Total 300 100

Source: Primary Data

The table tells that 67 percentage of the respondents has nuclear family of less than

five members. It is posing threat to rubber plantations in the sample area by way of labour

shortage in the coming years.

6:4:4 Occupation

The choice of occupation in one way or other depends on the demand that is put

before a person to lead his or her family. If the contribution from primary occupation is not

sufficient, people move towards secondary occupation. Table 6:7 shows the occupation of the

sample respondents.

Table 6:7

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 OCCUPATION OF RESPONDENTS

Occupation Number of Respondents Percentage

Farming 93 31

Farming & Business 142 47

Employment & Farming 65 22

Total 300 100

Source: Primary Data

The table shows that the low farm income has driven 47 percentage of the

respondents to sort business as secondary occupation. It also tells that 22 percentage of them

has opted farming secondary to job in organized or unorganized sector. Only 31 percentage

of the respondents are contented with the farming activity.

6:4:5 Ownership of Holdings

It is known from the survey that many have inherited their holdings while some

have purchased and few have partly inherited holdings. Table 6:8 shows the ownership of the

holdings of the respondents.

Table 6:8

OWNERSHIP OF HOLDINGS

Ownership Number of Respondents Percentage

Inherited 187 63

191
 Purchased 91 30

Both 22 7

Total 300 100

Source: Primary Data

From the above table it is clear that majority of the rubber growers, 63 percentage,

has completely inherited their holdings and only 30 percentage of them has purchased. This

shows the scarcity of fresh land for rubber cultivation.

6:4:6 Holding size

Size of holdings influences the production and productivity of natural rubber. In

the sample area size of holdings is becoming smaller year by year due to partition, disposal

and conversion of agricultural land into residential, business and institution centres. Table 6:9

shows the holding size of the sample respondents.

Table 6:9

HOLDING SIZE

Holding size
Number of Respondents Percentage
(in cents)

Below 50 60 20

50 – 100 157 52

100 – 200 65 22

Above 200 18 6

Total 300 100

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 Source: Primary Data

It is clear from the above table that 52 percentage of the respondents are having

less than one acre (100 cents) holdings. Only a meager two percentage of the sample have a

sizable area of two to nine acres of land for rubber cultivation.

6:4:7 Planting

Table 6:10 below indicates planting materials used, ways of planting, density of

planting, interest of the rubber growers in replanting and new planting and their involvement

in registering their holdings with the Rubber Board to avail the assistances extended.

Table 6:10
PLANTINGS INDICATORS
Particulars Number of Respondents Percentage
Planting Materials:
Budded 297 99
Ordinary 3 1
300 100
Ways of Planting:
Fresh 172 57
Removing other crops 128 43
300 100
Planting Density:
200 – 300 trees/acre 70 23
More than 300 trees 230 77
300 100
Interest in:
Replanting 116 39
New Planting 184 61
300 100
Enrollment with R. Board:
Registered 223 74
Unregistered 77 26
300 100

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 Source: Primary Data
Table 6:10 reveals that among the 300 rubber growers, a 99 percentage cultivate
their holdings with budded planting material and just one percentage with ordinary plants. 57
percentage have planted in fresh land and the remaining 43 percentage have removed other
crops like coconut, paddy, tapioca and banana. More over, 61 percentage of them are
interested in new planting rather than replanting. Mainly because they have to go for other
work during the six to seven years long gestation period for their daily bread and butter. The
table also expresses that 74 percentage of the respondents are availing the monetary benefits
such as loans and subsidies and non-monetary benefits such as technical and managerial
advices from the Rubber Board by enrolling their holdings under the Board. All these
information disclose the strength of rubber plantations in the district. On the other hand, in
spite of the repeated efforts taken by the officials of the Rubber Board, the attitude of the
growers towards dense planting could not be changed. Through experience and field study,
the standard number of trees fixed for optimum yield is 250 trees per acre. But 77 percentage
of the sample respondents go with more than 300 trees per acre. They are ignorant to the fact
that increase in number of trees increases the cost of production but not the yield.

6:4:8 Tapping

Tapping counts much in the productivity and economic life span of rubber trees.

Table 6:11 speaks more about this major task

Table 6:11
TAPPING PROCESS
Particulars Number of Respondents Percentage
Tappers :
Family Members 111 37
Paid-Trained 16 5
Paid-Untrained 173 58
300 100
Frequency of Tapping:
Daily 261 87
Alternative days 29 10
Twice a week 9 3

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 300 100
Rain - guards:
Using 13 4
Not - using 287 96
300 100

Source: Primary Data

The above table indicates that the direct involvement of family members is getting

reduced in the tapping task in the selected plantations. Among the respondents 37 percentage

are tapping themselves. Only 5 percentage are having paid tappers who are trained by the

Rubber Board and the remaining 58 percentage have employed untrained tappers without

knowing the fact that inefficient tappers can pull down the yield to 50 percentage. Adding

fuel to this adverse effect, the paid tappers opt for daily tapping even though alternative

tapping is recommended by the Board for maximum result. In the selected area, 87

percentage of the growers are following daily tapping schedule. Moreover, it is known from

the table that only four percentage of the growers are having the practice of using rain-guards. It

brings down the output by 11 percentage because nearly 27 tapping days get spoiled by rains in

Kanyakumari district.3

6:4:9 Resources and Processing of Latex

The resources owned by the growers decide the processing forms followed by and

then the quality of the processed latex. Table 6:12 shows the infrastructure facilities owned

by the respondents and their form of output.

Table 6:12

RESOURCES AND PROCESSING FORMS

Number of
Particulars Percentage
Respondents
Resources:
Rollers 98 33.4
Smoke House 9 3.0
Store House 5 1.6
Centrifuging machine 0 0
Devoid of any 188 62.0
300 100.0

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 Forms of Processing:
Sheet (RSS) 300 100
Crepe - -
Latex concentrate - -
Mode of Drying sheets:
Sun drying
Kitchen drying 240 80
Smoke house drying 48 16
12 4
300 100
Source: Primary Data

Table 6:12 shows that among the sample respondents only 33 percentage of the

growers have own rollers necessary for processing rubber sheets even though all of them are

processing latex in the form of sheets. The remaining 67 percentage respondents hire rollers

at one rupee per sheet. Although the quality of the sheets produced mainly depends on the

mode of drying, only four percentage of them are having smoke house to dry the sheets. The

rest are adopting sun drying or kitchen drying. Moreover, as most of them are having the

practice of making immediate sale just five respondents have store house. For a graded sheet

not only standard raw latex is sufficient but also the rubber must be free from dust, rust,

blemishes and free from other foreign effects.

6:4:10 Mode and Period of Sale

The district is having a wide net work of rubber dealers of both licensed and

unlicensed. Table 6:13 shows the marketing channel used by the sample growers and the time

lag between production and sale.

Table 6:13
MODE AND PERIOD OF SELLING

Particulars Number of Percentage

Respondents

Mode of selling:
To Licensed dealers 85 28
To Unlicensed dealers 215 72

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 To manufacturers - -
300 100
Period of sale: 218 73
Immediately 55 18
Weekly 27 9
At high price 300 100

Source: Primary Data

It is observed from the above table that 73 percentage of the respondents are selling

their sheets immediately and mostly to unlicensed dealers who are neighbors. About 18

percentage of them are making weekly sale. Only 9 percentage are waiting for higher market

price.

6:4:11 Problems Identified

In the selected area of study, the rubber growers are encountering problems on

cultivation, finance and marketing. Problems such as labour shortage, climate changes and

diseases are rubber cultivation problems. Whereas, more formalities, fluctuations in rate of

interest, inadequate finance and frequency of repayment are identified as the financial

problems. It has been identified that price fluctuation, visual grading and lack of storage

facility are the major marketing problems.

6:4:12 Inter Cropping

Rubber which has a long immaturity period provides ample scope for cultivation of

short duration crops in the interspaces. Since rubber is planted at a wide spacing sufficient

land and light is available in the inter row areas during the initial years for inter cropping.

During the first two years banana, pineapple, ginger, turmeric and vegetables are grown.

Among the matured rubber cocoa, coffee and coconut are planted by the sample respondents.

At the same time, Rubber Board is insisting that the growers are to have inter cropping

without adversely affecting the growth and yield of rubber. Growers have been deprived of

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both monetary and non-monetary assistances from the Board if the rubber area falls short of

20 cents or if it is densily intercropped.

6:5 SWOT ANALYSIS OF RUBBER PLANTATIONS IN THE CONTEXT OF

GLOBALISATION IN KANYAKUMARI DISTRICT

6:5:1 INTRODUCTION

Rubber cultivation in India is traditionally confined to Kerala State and in

Kanyakumari district, Tamil Nadu. These traditional areas have contributed 81 percentage of

the total area of 661980 hectares cultivated with the crop in 2008–09. In Tamil Nadu, the near

monopoly position of NR production is with Kanyakumari district. It accounts for nearly 98

percent of the NR output of the State. In this context, let us have a SWOT Analysis5 of

rubber plantations in the context of globalisation with a review to make the sector globally

competitive. This analysis is done on the basis of interview with the officials of the Rubber

Board Regional Office, Marthandam, Kanyakumari District and the data collected from 300

sample respondents. Moreover, secondary data are also used to substantiate the findings.

6:5:2 STRENGTHS

Strategy remains fantasy without the resources to back it. Strengths of rubber

plantations denote the resources that the plantation sector controls and the activities it

5
SWOT Analysis is an analysis of a sector’s strength, weakness, opportunities and

threats.

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performs well. The tremendous strength of rubber plantations in Kanyakumari district is the

composite of regional, infrastructural, organizational, occupational and educational strength.

The following pages deal with each strength separately.

i. Regional Strength

Kanyakumari District is an agrarian society. The climate, soil, temperature,

rainfall and moisture content are suitable for the cultivation of rubber. The soil requirement

for the plant is well drained weathered soil consisting of lateritic type, sedimentary type non-

lateritic red or alluvial soil. The climate condition for optimum growth of rubber tree consists

of rainfall at least 100 rainy days per annum, temperature ranging about 200c to 340c, high

atmospheric humidity of around 80 percentage, bright sun shine amounting to about 2000

hours per annum at the rate of 6 hours per day and absence of strong wind. In the district,

except Agastheeshwaram taluk, the other three taluks namely Vilavancode, Kalkulam and

Thovalai posses all the above ecological and climate condition, fertile soil and rainfall

conducive for the growth of rubber plantation. It has been reported by the officials of the

Rubber Board that Kanyakumari district is the ideal place for rubber cultivation in the world.

Kanyakumari district covers a geographical area of 167200 hectares. The

major area of the soil is red and alluvial. Rainfall is the primary source of water. In the

district rubber plantation was started in 1960. Since the initial efforts have been successful,

planting has been extended to large areas and it is still continuing. Out of 91807 hectares of

total crop area, rubber is cultivated nearly in 20000 hectares. Nearly 24000 tonnes of NR is

produced per annum and about 30250 small holders are growing rubber in 13489 hectares.

The district has a unique advantage of having rubber plantation in reserve forests in 4280

hectares within the control of Arasu Rubber Corporation. It is good to have its own nursery

for ensuring quality, fresh and timely availability of planting materials. Quality planting

materials reduce the gestation period (normal period is 7 years), increase the yield potential

and prolong the economic life span of the tree. By virtue of favourable climate and seed

quality, such requirements are also met by the plantations in the district.

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ii. Infrastructural Strength

Infrastructure development is the positive factor for the development of rubber

plantation in the district. The measures for infrastructure development relating to rubber

plantations are irrigation, road, railways, ports, airports and electricity. Irigation is the

artificial application of water to soil for the purpose of crop production. The district is

irrigated by dams, canals, tanks and wells. Power is indispensable to make any industrial

sector powerful. Kanyakumari district has one hydro-electric project at Kadayal. This project

has two plants catering to the power requirement of rubber plantations. The wind mills in

Muppandal generate enormous power. Road developments stimulates enhanced traffic,

especially commercial vehicles. It generates more demand for rubber. The district has a good

network of roads connecting important villages and towns. The length of the road in the

district per 1000 sq.km is 110 km compared to the State average of 30km. The district has

better access to other cities in the country by means of railways. Thus roads, railways, port

and airports in and around the State ensure quick movement of goods and services.

iii. Organizational Strength

As it is mentioned earlier, Natural Rubber is a prominent plantation crop in the

district. The Central Government has set up a Rubber Board to provide all allied services to

make the commodity extremely marketable. The organizational strength of rubber plantation

in general are the development and extension services, financial assistance from the Rubber

Board, favorable export import policies of the government, encouraging scientific,

technological and economic research, giving training to the rubber growers for planting,

mannuring, spraying and tapping, giving technical advice to rubber growers, production and

supply of planting material, involvement of Rubber Producers Societies in cultivation,

processing and marketing of NR. Kanyakumari District is also privileged to have a regional

200
office of Rubber Board in Marthandam, which is the centre of rubber plantations in the

district. There are 35 Rubber Producers Society which ensure the viability of small holders,

the dominating NR sector in the district, by implementing the schemes of the Rubber Board

regarding plantation development. There is also a Rubber Marketing Society in the district.

iv. Occupational Strength

Occupation in rubber plantation refers to all activities in connection with

cultivation, maintenance operations, tapping, processing and marketing. In the district 66

percentage of the rubber growers are having agriculture as their main occupation. About 27

percentage engaged both in agriculture and business. The remaining 7 percent are involved

in agriculture and are also employed in organized or unorganized sector. Among the sample

respondents, 78 percentage give importance to farming and are having 20–25 years of

experience in rubber cultivation. The occupational experience in the field has also

strengthened the rubber plantations in the district.

v. Educational Strength

Literacy of the rubber growers influence the production, productivity, processing

and marketing of NR. In the district 84 percent of small growers and 100 percent of the

estate holders are literate. Among the 300 samples studied, the educated are 293. Their

education has an impact on the participation in local rubber small holders groups, in the

community adjustment of growers to changing farm production and processing systems and

accessibility to government assistances and the sources of information. The impact of formal

education is reflected from the fact that 99 percent of rubber is planted with high yielding

variety. The productivity, the yield per hectare per year is 1887 kilo in private estates which

has outweighed the national average of 1807kg in 2010.

6:5:3 WEAKNESS

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 It refers to lack of activities that do not encourage rubber plantations. Following

are some of the weaknesses that are not conducive to plantations in the district. They are to be

eliminated or reduced to make it more competitive.

i) Limited scope for expansion

The scope for expansion of NR in the district is limited. Even though the price

for NR is at peak, there is growing pressure to spare the area covering rubber for real estate.

In the selected area of study, it is evident that 63 percentage of the holdings are completely

inherited. It shows that there is limited scope for utilizing fresh land for rubber cultivation.

ii) Uneconomic size holdings

The Planning Commission norm of poverty line in rural areas shows that a

farmer having less than 0.64 hectare area would be under poverty. Since the average size of

small holdings in the district is 0.45 hectare, the work force has involved in non-farm

activities too for generating adequate income and sustaining livelihood. In the district, the

small holdings are becoming smaller due to partition and disposal. The study reveals that

only two percentage of the respondents have more than 100 cents of rubber area.

iii) Incessant rains

The growers are not able to reap the advantage of rising prices due to the adverse

impact on climate. Untimely heavy rains are disrupting tapping operations. In 2009–10 an

average 27 tapping days were lapsed by rains in the district because less than 7 percent of

the small holdings use rain guards. It is almost like experiencing poverty in the midst of

plenty. The sample survey shows that only 4 percentage of the respondents are using rain

guards.

iv) Poor Resource among Growers

202
 In the district, 70 percent of the growers are small holders. Only 10 percent of them

are having their own rollers and not even one percent is having smoke house or store house.

Among the 300 rubber growers surveyed, only 98 of them are having their own rollers and

only 5 are having smoke house. Others are deprived of any resource. Due to poor resource,

the growers are forced to sell their produce as raw latex without value addition or as

ungraded sheets.

v) Attitude of the growers

A crucial problem in the attitude of the growers towards adoption of conventional

manual practices in all stages of cultivation & production processes in spite of the strenuous

efforts forwarded by the officials of Rubber Board. Moreover, the maximum number of

trees prescribed per hectare is 500, but the actual practice planting in the district is 750-

1000 trees. The growers fail to understand that when the number of trees increases, the

production cost increases but yield decreases.

vi) Absentee Owners

In the district, 20 percent of the plantation owners are absentee owners as they have

migrated towards urban areas. They have entrusted the hired labourers to decide and execute

the decisions on planting, replanting, upkeeping, tapping, processing, storing and disposing.

The labourers take advantage of the owners absence weakening the plantations for undue

gain in the short run by way of intensive tapping without maintaining the plantation properly.

vii) Rubber Producers Societies

In Tamil Nadu, Rubber Producers Societies (RPS) are registered under the

Societies Act. Accordingly, the societies have to submit annual audited accounts within a

year. Defaulters are not permitted to prolong. But in Kerala, RPS are registered under the

203
Charitable Institutions Act and a nominal amount is imposed as fine for delay in submission

of accounts. The net effect is that number of RPS is increasing in Kerala but decreasing in

TamilNadu. In Kanyakumari district, only 35 RPS are functioning and nearly 25 RPS have

been forced to close down due to rigid formalities. Some relaxation is needed to reap the

fruits of organizational structure in rubber plantation which is dominated by small holdings.

These weaknesses can be either removed or reduced to some extent by active

participation of Rubber Board officials through the networking of Rubber Producers Societies

and with the willing co-operation of the growers.

6:5:4 OPPORTUNITIES

These are the positive environmental factors that enrich rubber plantations in the

district.

i) International Market

In 1991 the Indian Economy was opened to trade with other countries. Then the

need for competing with the global market has become imperative. The market access

provided by the WTO is an opportunity to explore the international market although it is a

challenge.

ii) Industrialisation

Increasing pace of industrialization in growing economies such as India, China,

Malaysia and Thailand is an opportunity for the rubber plantations.

iii) Private Sectors

The driving force in the globalisation process inevitably is the private sectors. In the

district, the private sector is responsible for the existing export oriented rubber based

204
 industries engaged in dipped goods such as gloves and condoms. These are the

opportunities to the rubber plantations.

iv) Rubber Expos

Rubber expos held since 2001 have grown considerably in size and put the Indian

rubber industry on global scene. It is an opportunity for the rubber plantations in the

globalised era.

v) Rubber-based Industries

India is emerging as a major manufacturer of rubber-based products. All the big

automobile industries are having their manufacturing units in India. Thus the demand for NR

is well seared and is continuously increasing at a rate of three to four percent per year which

is in line with the improved living standards. Rubber in the form of sheet or latex

concentrate is the raw material for producing more than 50000 different articles. The

number is still increasing steadily since new applications are being discovered from it. So

there is much scope for rubber plantations in the years to come.

vi) Recycling Rubber Wastes

Rubber wastes are not waste any more. To convert the waste in to various uses

machines such as Rubber Waste Grinder, Chopping Machines, Sieving Machines and so on

are designed. Retread Tyres have proven themselves a good value because 30 to 50

percentage cost could be saved when we compare to new tyre, environmently a good thing as

reducing the use of petrochemicals when we compare to the manufacture of new tyres and

reducing the number of scrap tyres that need disposal.

vii) Ecofriendly

There is a renewed interest in NR cultivation not only due to the price but also

environmental reasons. Planting rubber trees is the best investment for the average person to

205
provide effective solution for absorbing carbon dioxide and to reduce climate change as

pointed out by Worldview Impact, an international organisation.

6:5:5 THREATS

These are negative environmental factors thrusting the rubber plantation sector.

i) Traditional Form of processing

With the liberalized trade policies, the challenge on rubber plantation has been

increasing from imports of processed rubber. Small rubber growers in the district market 98

percent of their produce in the traditional form of Ribbed Smoked Sheets (RSS). All the 300

sample respondents are processing rubber in the form of RSS. In the globalised era, in rubber,

there is a need for bringing in changes in the pattern of processing.

ii) Lack of manpower

The district which is crowned with the highest literacy level, is growing in service

sector at a faster pace. Manpower for top and middle management is fairly sufficient but

there is dearth of skilled manpower at the shop floor work or farm. Non- availability of

trained and efficient tappers to maintain the lead position in the rubber yield over the world is

a threat because inefficient tappers could bring down yield up to 50 percent. In the sample

group, 67 percentage of the respondents are having less than five members in their family.

With regard to literacy, 47 percentage have higher education. The nuclear family and literacy

pose threats.

iii) Intensive Tapping

With the high price for NR in recent times, some growers have put off replanting

and have taken advantage of high price by prolonging tapping with frequency. The standard

tapping frequency is twice a week but in the district daily tapping is done nearly in 65 percent

of the plantations. Among the selected samples, 87 percentage have opted for daily tapping.

206
It has a negative impact on the economic life span of the trees and augment the shortage of

rubber in future.

iv) Conflict in Wage Settlements

Improvement in price level is not giving much solace to the plantation sector on

account of conflict in wage settlements. In fixing or revising wages, the ability of the

plantations to pay the particular wage need to be given due consideration. If not, it is then in

the long run, the sector where large number of people are depending on, will not be able to

survive.

6:5:6 Conclusion

Since Kanayakumari district in TamilNadu is the traditional area of rubber

cultivation accounting for more than 98 percent of the rubber production in the State, it has to

face the challenges of globalisation in a pragmatic way. The Rubber Board has to move

towards empowering the small holders with modern knowledge, rehabilitating the old rubber

plantations, providing common collection and processing centre at all villages, organizing the

growers under Rubber Producers Societies to enhance productivity and to promote agro-

processing. In conclusion, globalisation is laying stress on competition. Therefore it is

essential to reduce the cost of production and promote exports. Rubber plantations have to

concentrate on modernization and value addition to raw rubber. Since the majority of rubber

growers in the district are small holders, the government has to take the initiative to convert

the raw material into finished products in order to explore the global markets in the

globalised era.

6:6 Profile of Rubber-Based Industry

Rubber is a product which is familiar to everybody. From early infancy through

life all civilized people make use of this resilient material. People make use of it in work,

207
play, travel and at rest. Rubber’s physical properties like flexibility, versatility, durability,

elastibility, mouldability and waterproof have made it a material of choice for end users.

Natural rubber is not a pure material but contains a complex of chemicals and impurities. The

non-rubber constituents reported by Hauser are proteins, sugar, resins, ash, gums, glucose,

starches, silica, magnesium, calcium and potassium. These are associated with rubber in the

plant and are collected along with the rubber. Others are impurities such as dirt, stones, trash

and bark shavings that are added to the rubber accidently. Hevea latex has a smaller

proportion of non-rubber constituents than any other type of natural latex. This is the main

reason for using Hevea as the commercial source of rubber4.

6:7 Rubber as Raw material cum Finished Product

Rubber in one terminology is a raw material, a crude material for use in

manufacturing but by extension of the term it is also called manufactured product. In general,

the composition of hevea latex is 30-40 percentage rubber, 1-2 percentage resin , 2-2.5

percentage protein, 1-1.5 percentage sugar, 0.7-0.9 percentage ash and 55-65 percentage

water 5. The major constituent of rubber from the hevea latex is hydrocarbon (90 percentage).

This hydrocarbon is responsible for the resilience and elasticity which is chemically known

as polyisoprene and usually referred to rubber6. Rubber content of a plant refers to the

proportion of the pure hydrocarbon. Rubber content of a tyre or other manufactured article

refers to the proportion of the crude rubber added to the compound. Natural rubber is used as

raw material for producing various rubber products. As a raw material, it is available in

different forms such as centrifuged latex or concentrated latex, rubber sheets, block-rubber,

skim-crepe, pale latex crepe, pre-vulcanised rubber and compounded latex. Pale crepe latex is

the purest of all grades. From these different forms of raw-rubber more than 50000 different

articles are produced in the world and the number is increasing steadily as new applications

are being discovered7.

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6:8 Ancient Uses

The earlier use of rubber in South America dated back to more than a millennium.

Aztec wall paintings from the 6th century AD indicated its use as votive offerings to God. In

1496, Christober Columbus introduced natural rubber in to Europe as bouncing balls. It was

Joseph Priestly, an English Chemist coined the term rubber in 1770 after discovering its

erasing capacity8. The first use of rubber was to make playing balls and the first use of rubber

latex was to make bottles by the South Americans9

6:9 Technological Developments

Before attracting the attention of European Scientists, practical uses of rubber

included crude footwear and waterproofing for rain caps. Then as a result of the scientific

research in Europe in the 18th century, more and more practical uses of rubber were invented.

The technical base for large-scale industrial uses of rubber was established in 1839. Charles

Good Year found a method of permanently altering its physical properties by heating it in

combination with sulphur. This process is called Vulcanisation10. At the turn of the 19th

century, a series of technical developments in rubber processing revolutionized the uses and

applications of rubber. The most important is the discovery of rubber solution spreader.

Advances in the processing technology were made in the field of compounding . In the 20th

century, S.C.Mote found the use of Carbon Black as an effective reinforcing material in

compounding11.

6:10 Rubber Products

Thomas Hancock of United Kingdom, is hailed as the father of modern rubber

products manufacturing. He initially made threads cut from rubber blocks12. Owing to its

amazing multiplicity of uses, rubber has now become the base material for manufacturing an

incredible variety of products. Rubber products can be classified mainly into two; Latex and

209
dry rubber products. Latex products made out of latex concentrates are classified on the basis

of manufacturing processes. Common manufacturing process are dipping, coating, binding,

molding, foaming and extrusion. Dipping is the process of immerging a former into the latex

compound. Most important of dipped goods are gloves, condoms, balloons, catheters, latex

tubing, teats and soothers. The coating process involves spraying and spreading of latex

compound to form a film on drying for backing of the product. In the binding process, latex

compound is used as a binder. Coir and other fibers are bound with latex compound. The

molding process is used in producing hollow rubber shapes and casts latex rubber products

like toys. There are two foaming processes, such as the Durlop and the Talalay. In the

former, latex is foamed and gelled by adding sodium silica fluoride, poured into the mould

and then heated for vulcanization. In the latter, the latex is partially foamed and put into the

sealed mould, where the latex expands to fill the mould. The mould is then heated for

vulcanization. Important applications of foam are mattresses, pillows, vehicles seats and

cushions. Extrusion process involves extrusion of a suitable latex compound through

capillary tubes into an acid bath. This process is mainly employed for producing elastic

thread.

6:11 Dry Rubber Products

Dry rubber products are classified into two; tyre products and non-tyre products.

About 50-60 percentage of the rubber produced in the world is used for manufacturing tyres

and tubes. Non-tyre products constitute the majority of rubber products. They are belts,

footwear, rubber cables and wires, battery boxes, sheet and so on.

6:12 Modern Rubber Products

Today, the rubber industry comprising rubber plantation as well as factories that

manufacture the end products, machinery and chemicals is the second largest in the world

next to iron and steel13. Rubber industry is one of the key sectors of the Indian economy. The

210
history of the Indian rubber industry dates back to 1921 with the setting up of the first rubber

goods manufacturing unit in Kolkata, Dixie Aye Rubber Factory (now Bengal Water Proof

Ltd.) for water proofing fabrics. The Bengal Water Proof Ltd. is now a leading manufacturer

in the non-tyre rubber sector under the trade named Duck Back14. The industry has been

progressing tremendously. Now the Indian rubber industry manufactures around 35000

different rubber products employ more than five million people15. A unique feature of the

Indian rubber products manufacturing sector vis-à-vis the world rubber products industry is

the pattern of rubber consumption. The NR-SR ratio in India’s total rubber consumption is

80:20 compared to 39:61 in the world rubber consumption16. The per capita consumption of

rubber at one kilo against global average of 3.28 kilos and 10 to 12 kilos in developed

countries provides abundant scope for rubber industry in India17. India is well placed to be a

hub of the global rubber industry.

6:12:1 Automobile Goods

At present, the most important use of rubber is in the field of transportation.

Rubber is an essential element for all forms of modern transportation. It is used for making

tyres, tubes, engine mountings, brakes radiator hoses, oil seals, beadings, mattings, linings,

and cushions that are necessary for the automobile industry. A modern automobile has more

than 300 components consuming atleast 70 kilos of rubber in one way or other18. Use of

rubber is indispensable in other forms of transportation like bi-cycles, ships, animal drawn

vehicles, hand carts, railways and aero planes. In the developed countries, nearly 60

percentage of rubber is consumed in the automobile tyres and tubes19

6:12:2 Mechanical Goods

211
 Rubber also plays a significant role in the manufacture of mechanical goods such

as belting, packing, molded goods and hoses, which are very essential for running most of the

industries.

6:12:3 Communications

Rubber plays a vital role in communication and transmissions, mainly in the form

of insulation for wires and cables, flexes, fitments and switches.

6:12:4 Health care

In health care and family planning, rubber plays an important role in making

catheters, hospital sheets, dipped goods such as surgical gloves, examination gloves,

condoms and a host of other products indispensable for patient care.

6:12:5 Personal Uses

A large quantum of rubber is used in making goods for personal use in the form of

boots, shoes, raincoats, proofed fabrics, sheets, flooring mats, mattresses and bands, which

are essential for the day-to-day life of the people.

6:12:6 Household Usages

Household usages require a considerable quantity of rubber such as electrical fixers

and appliances, plumbing fixtures and appliances, cleaning equipments and children’s

amusements. Each requires the use of dozens of rubber articles.

6:12:7Rubberisation of Roads

Rubber has even entered into the construction of the floor that man walks on and

the roads on which he drives.

6:13 Rubber -Based Industries in India

212
 In 1922, the Indian rubber goods producing industry found its roots in West Bengal

when the first ever rubber factory was established to produce rubberized fabrics. Since then

the industry has been growing. It has today 4528 licensed rubber goods manufactures in

different states of the country2. They manufacture over 35000 rubber products. Even though

the raw material is produced mainly in Kerala and Kanyakumari district in Tamil Nadu, the

major units are situated in Maharashtra, Punjab and West Bengal. The reasons for the

development of rubber based industries in other states are that they have necessary

infrastructure facilities such as well developed roads, railways, airports, ports, industrial

credit servicing and skilled man power.

In India, the growers and processors are mainly focusing on sheet rubber (Ribbed

Smoked Sheets). Almost 80 percentage of latex is converted in to sheet rubber. Only 10

percentage of latex is converted into latex concentrate and 10 percentage is converted in to

crumb rubber. Latex concentrate finds immediate market in India. Its major user is the foam

products sector. There are 154 units producing latex foam. The next comes the gloves making

sector with 272 producing units, out of which 105 units make industrial gloves, 76 units

make surgical gloves and 24 units make examination gloves21. There are over 70 latex

centrifuging factories in India. The capacity utilization of the centrifuging plant in almost all

the units is around 50 percentage. This is mainly owing to the non-availability of enough field

latex for centrifuging. A good number of these units obtain field latex from their own rubber

plantations. But the supply capacity is quite insufficient for economic operation of the

processing factory. In these circumstances import is the only alternative for the survival of

the latex products industry. But this is unviable for most of the units as the import duty for

latex is as much as 70 percentage compared to 20 percentage for other forms of rubber.

However in the liberalized era, there is an avenue to import latex without duty. Products

manufacturing units in the Export Processing Zones can import raw material without duty.

213
Dipped goods producers in such zones imported around 4000 tonnes of latex concentrated in

2009 taking advantage of the duty exemption. India is the second largest consumer of rubber

a distant second to China. There is a vast potential for further development of tyre and other

rubber-based industries in India. Indian rubber products manufacturers have to imbibe new

technology and upgrade plant and manufacturing practices and remains globally competitive.

They should form joint ventures, take part in global expos and conferences and take their

products to the global market.

6:14 Rubber-Based Industries in Tamil Nadu

In Tamil Nadu, rubber goods are manufactured both in the organized and

unorganized sectors. There were 111 licensed rubber goods manufactures in the State during

1975-76. The number of units increased to 326 by 1985-86 and rosed to 561 during 1993-94.

Thereafter the rubber goods manufacturing industries in the State had not recorded an

impressive growth rate. In 2009-10, there were 497 licensed manufacturing units producing

rubber products such as tyres, tubes gloves, belts, hoses, foot wear, sheets and so on22. Table

6:14 shows the number of registered rubber goods manufacturing units in Tamil Nadu and the

percentage of increase or decrease.

Table 6:14
NUMBER OF RUBBER GOODS MANUFACTURING UNITS IN
TAMIL NADU

Number of Percentage
Year
manufacturing units Increase/ Decrease

214
 1975-76 111 -
1980-81 212 +91
1985-86 326 +54
1990-91 491 +51
1991-92 524 +6.7
1992-93 549 +4.8
1993-94 561 +2
1994-95 546 -2.7
1995-96 537 -1.6
1996-97 533 -0.7
1997-98 545 +2.3
1998-99 523 -4
1999-00 506 -3.3
2000-01 502 -0.8
2001-02 503 +0.2
2002-03 486 -3.4
2003-04 483 -0.6
2004-05 483 0
2005-06 514 +6.4
2006-07 495 -3.7
2007-08 522 +5.5
2008-09 523 +0.2
2009-10 497 -5

Source : Indian Rubber Statistics Vol. 23, 30, 32 and 33

From the above table, it is obvious that the growth rate of number of rubber based
units was impressive upto 1990-91. Afterwards it was slow except few years. The setback is
mainly because the small scale units could not survive the external competition due to the
liberalized import of rubber products.

6:15 Rubber Based Industries in Kanyakumari District

Growth of rubber plantation in Kanyakumari district has been dramatic. In the

district, NR is cultivated over an area of 20000 hectares producing around 24000 tonnes of

rubber latex. The district has the potential for a steady and abundant supply of latex which

215
contributes the major raw material for a variety of rubber products. The latex available in the

district has the international standard. So there is much scope for rubber based industries in

the district. Although rubber cultivation in Kanyakumari district was started in the beginning

of the 20th century, the rubber based industries were started only in 196523. Almost 98

percentage of the NR produced in TamilNadu is from Kanyakumari district. However it

could not achieve progress in the development of rubber-based industrial units. The increase

in rubber production had been one of the reasons for the development of rubber based

industries in the district in the pre-liberalisation period. The present practice of the rubber

growers is selling their produce as raw rubber or sheet rubber. The upgradation of the district

from the supplier of Ribbed Smoked Sheet (RSS) and latex concentrate to the producer and

supplier of rubber products is significant in the globalized era.

The two broad groups of the Indian rubber products industries are the tyre and the

non-tyre sectors. The former is mostly promoted by large industrial houses and multinational

companies. The latter is mostly by small and medium scale units. While India produces

nearly 35000 different rubber products, rubber based industries in Kanyakumari district

produce only limited items like rubber bands, rubber footwear, rubber sheets, cycle tubes and

gloves which results in unhealthy competitions. The rubber product mix in India is based

mostly on dry forms of rubber but in Kanyakumari district it is based on latex concentrates.

The post-liberalisation has witnessed a steady expansion of the latex-based industry in the

district. The bulk of the consumption of rubber was accounted for by a few large export

oriented units under Kurian Abraham Private Ltd. Even though 90 percentage of raw latex is

processed in to dry rubber form RSS, there is no large scale units on dry rubber. So it is sent

to the units outside the district in the state as well as in other states for manufacturing tyres

and tubes and other rubber goods.

216
 Although the number of rubber based industries in Tamil Nadu exceeds 497 units,

hardly seven industries are in Kanyakumari district. The district has not succeeded in

transforming NR into finished products and exploit the domestic, national and international

markets eventhough it produces major share of NR in State. The mainstay of the district’s

latex products industry is the gloves industry. The demand for industrial gloves is quite large

because of the fact that there are half a million industrial units operating in the country.

Demand for surgical and examination gloves is also high because the network of hospitals

meets the healthcare needs of the country’s explosive population growth. Even though there

has been good potential for the export of rubber products to the world market in the

globalized era, rubber based industrial units have not been progressive over the years except

in the line of gloves manufacturing. There is no association between the growth of rubber

plantation and rubber based industries in the district. There has been a drastic reduction in the

number of rubber goods manufacturing units in the district from 1991-92 and the growth rate

has been mostly negative in the post-liberalisation period. Table 6:15 shows the number of

registered rubber goods manufacturing units and the percentage of increase or decrease

during the pre and post-liberalisation period.

Table 6:15

RUBBER BASED INDUSTRIAL UNITS IN KANYAKUMARI DISTRICT

Number Percentage Number of Percentage

Year Year
of units Increase/Decrease units Increase/Decrease

1985-86 16 - 1998-99 82 -27

1986-87 36 125 1999-00 79 -4

1987-88 42 17 2000-01 62 -22

1988-89 61 45 2001-02 54 -13

217
 1989-90 78 28 2002-03 32 -41

1990-91 103 32 2003-04 14 -56

1991-92 108 9 2004-05 12 -14

1992-93 115 7 2005-06 11 -8

1993-94 119 4 2006-07 11 0

1994-95 121 2 2007-08 9 -18

1995-96 126 4 2008-09 7 -22

1996-97 117 -7 2009-10 7 0

1997-98 112 -4

Source : District Industries Centre, Nagercoil

The above table tells the impact of LPG on rubber based industries in Kanyakumari

district. In 1985-86 there were 16 rubber based industries in the district. Although it showed

an increasing trend upto 1995-96, the growth rate was impressive in the pre-liberalisation

period. After globalisation, the large and even medium size industrial units do not face much

threat compared to the small scale units. Today, the major challenges for small scale sectors

are cost and quality. They could not survive because of the external competition by means of

liberalized import of rubber products. Almost all the registered small scale units have become

sick and have been closed down. In 2009-10, only seven large and medium scale units could

survive inspite of the external competition posed by free trade.

Backwardness in the development of rubber based industries in the district can be

attributed to the concentration of rubber goods in a few items, lack of enterprising

entrepreneurs, lack of technical know- how and training, non-availablity of sufficient power,

labour problem, difficulties in arranging finance, non-cooperative attitude of the government

officials, pollution problems, competition from global market and so on. The high class are

not interested in making investment in rubber based industries on account of production and

218
marketing problems. Considering the availability of good quality of rubber in the district

there is much scope for the development of the following rubber based industries;

i. Bicycle tyres and tubes

ii. Tyres and tubes for automobiles

iii. V-belts and Fan belts

iv. Rubber molded goods

v. Battery containers

vi. Rubber pipes

vii. Hoses

viii. Latex cement

The setting up of new industries would provide faster economic growth in

Kanyakumari district. The already underdeveloped industrial sector in the district would get a

boost by setting up new rubber based industrial units. It would remove the regional imbalance

in industrial development to some extent. More industries could provide more revenue to the

district. By developing the rubber based industrial sector, remunerative and secured market

for NR could be assured. Export oriented industries would provide foreign exchange earnings

to the country. By import substitution, drainage of foreign exchange could be prevented. The

progress of rubber-based industries would ultimately lead to extensive rubber cultivation and

increase in productivity of NR.

Manufacture of rubber products is an area suitable for further investment with the

new economic policies being pursued by the Government and market integration brought

about by the WTO with the opening up of the economy and considering the size of the Indian

market. Moreover the Government should come forward to create a favourable industrial

climate in the district with the easy availability of raw material, moderate requirement of

capital, employment potential for skilled, semi-skilled and unskilled personnel, suitability to

219
middle class entrepreneurs, possibility for diversification of products and heavy demand for

rubber goods all over India and abroad.

6:16 Industrial Areas

Although a number of products are produced and utilized in various fields, private

sectors have not initiated for automobile tyre unit in Kanyakumari district. Since nearly one-

forth of the rubber plantation in the district is owned by the Government of Tamil Nadu under

Arasu Rubber Corporation Ltd., the government has to plan to start a large scale rubber unit

in the district. It should notify more industrial areas like Common Facility Centre with

centrifuging machine to supply rubber mix to number of small scale units to manufacture

various rubber products. Since it is not within the means of individual small entrepreneurs to

equip their units with centrifuging machine, a laboratory with testing equipment shall be

provided in the common facility centre so as to enable the units to ensure quality production.

It is worth to set up a Functional Industrial Estate for rubber based industries which is

accessible by road and railways and where good water supply and power are available at

reasonable cost. Government of Tamil Nadu has decided to implement the long pending

demand of the rubber growers in the district to set up a Rubber Industrial Park and has

acquired land at Chenbagaramanputhur but it remains a dream even after five years24. The

decision must become a reality in the near future.

With the development of the multinational trading system, the rubber products

manufacturing industries get a boost in the developed countries. The large scale units in

developing countries may suffer since they take time to make their industries globally

competitive. But the small scale units in the developing countries have no option but to wind

up because they lack the economies of scale and the art of technical know-how. Although

natural rubber is a good industrial raw material and is available in plenty in Kanyakumari

district, it still remains less attractive in the region for rubber factories. The rubber based

220
industries in the district have to undergo many favorable changes in the age of liberalisation

and globalisation. If liberalisation has brought the hope of better opportunities and greater

entrepreneurial freedom, they have posed a challenge to the rubber based industries to stand

up to the international competition for their survival. Quality is the essential for rubber goods

for export which cannot be achieved through conventional method of production. So the

Rubber Board has to take initiation for a Rubber Research Institute in Kanyakumari district

which can facilitate the growth of the rubber industry in the years to come. The Board must

insist the Central Government to promote the export of rubber goods by providing incentives

and assistances for quality improvement. Unless efforts are made to overcome the factors

impeding the growth of such industries in the district, there is no doubt that the growth of the

rubber plantation would depend on export of latex in the future.

6:17 Conclusion

Although the world economy has a history, in recent years there has been a rapid

acceleration in the age of globalisation. Boundaries have collapsed. Industrial organizations

and forms of competitions are changing due to increasing globally integrated production

chains, international trade, investment and capital flows. We are in the era of flexible

specialization. It involves splitting production process in to simple routine tasks that could be

either carried out by unskilled workers or through the use of specialized machinery. The

structure of world trade is changing and firms have become trans-national and have set up

linked production across numerous countries. The notion of production chains has thus

become popular in which a string of firms is linked for producing a complex product. With

the development of an information technology, the ability of firms to effectively adapt to

changing market conditions, identifying and capitalizing new opportunities and successfully

responding to new challenges have gained importance not just for competitive advantage but

also for economic survival. Rubber based industries are not an exemption to this thrush.

221
 REFERENCES
1. Sivaniah, “Use rain guards, check output loss”, Rubber Asia, January – February
2011, P.P.138 & 139.

2. Valsakumar, ILO Workers’ Information Centre, Kulasekaram.

3. Sivaniah, Rubber Asia, January – February 2011, p.138.

. Loren, G., Rubber, Interscience Publishers, New York, 1962, pp. 300-309.

5. Rubber Growers’ Guide, Rubber Board, Kottayam, 2010, p.45.

6. Opcit.

7. Gorden cook. J., Rubber, Somaiya Publications Pvt. Ltd; Bombay, 2005, pp. 83-92.

8. http:www.azom.com.

9. Ibid.

10. Rubber Asia 20th Anniversary Issue, p.75.

11. Rubber Asia 20th Anniversary Issue, p.29.

12. Asian Rubber Handbook and Directory 2011,P.24.

13. Latha, “ The Rubber Industry no looking back,” Industrial Economist, May 1996,
p.17.

14. Saj Mathews, “ SMES the worst victims of rubber price spiral,” Rubber Asia,
May–June 2011, p.76.

15. Ibid.

16. Asian Rubber Handbook and Directory – 2011, p. 98

17. Rubber Growers’ Guide, Rubber Board, Kottayam, 2010, p.66

18. Rubber Growers’ Guide, Rubber Board, Kottayam, 2010,p.66

19. Indian Rubber Statistics, Vol.33, 2010, pp. 42 & 43.

222
20. Saj Mathew, “ Latex Industry: reeling under shortage and price volatility”, Rubber
Asia, May – June 2011, pp. 61-62.

21. Indian Rubber Statistics, Vol. 33, p.42

22. Paul Vinaya Lal Wilson, “: A study on the performance of rubber-based industry in
Kanyakumari district”, Ph.D. Thesis, Department of Commerce, University of Kerala,
January, 1999.

23. “Rubber Industrial park to come up in Kanyakumari”, The Hindu, September 15,
2006. p.2.

24. Ibid.

223
 CHAPTER – VII

SUMMARY OF FINDINGS AND SUGGESTIONS

The Indian economy is undergoing tremendous changes with Liberalisation,

Privatisation and Globalisation (LPG) policies initiated in 1991. In India, the prime sectors

such as agriculture and agro-based industries are facing serious problems as globalisation is

laying stress on competition, reduction in cost of production and promoting exports. Rubber

plantations and rubber-based industries have been undergoing significant changes consequent

to the implementation of liberalized economic policies. The dilution in the extent of

protection to the natural rubber production and the rubber goods manufacturing sector has its

impact on the growth prospects of the industry as a whole. This chapter summarises the

findings of the study together with the suggestions to face the challenges posed by the LPG

policies of the Government of India.

7.1 Summary of Findings

The supply side of Indian rubber market comprises production and import. Rubber

production in India consists of three segments namely Natural Rubber (NR) Synthetic Rubber

(SR) and Reclaimed Rubber (RR). Natural Rubber (NR) is an elastomer and an elastic

hydrocarbon polymer derived from the latex, a milky white dispersion of rubber in water,

found in the sap of some plants. Hevea Brasiliensis is the prime source of latex, which is

commonly known as rubber tree. SR is made in factory from petroleum derived chemical

intermediaries. RR is obtained by treating the ground scrap of natural rubber and waste

rubber products such as tyres and tubes.

In the global scenario there are 23 countries that produce NR in the world. Asia

accounts for 92.8 percentage of the world production, Thailand, Indonesia, Malaysia, India,

China and Vietnam are the major NR producing countries. They together account for 89

percentage of the total area of rubber cultivation and 90 percentage of the world NR
production. Thailand ranks first in production followed by Indonesia, Malaysia, India, China

and Vietnam.

The important feature of the Indian rubber plantation industry is the regional

concentration of the crop area. Kerala and Kanyakumari district in Tamil Nadu constitute the

traditional regions of rubber in the country. These accounted for 95 percentage of the total

area under rubber in the 1970s. As a result of Rubber Board’s policies and programmes for

the promotion of rubber cultivation in the non-traditional regions the relative share of

traditional regions came down to 81 percentage in 2008-09.

World-wide production of Synthetic Rubber (SR) equaled that of NR by 1962 and

from 1965 onwards SR dominated the scene. The U.S. continued to be the largest producer of

SR till 2007. Since then China emerged as the top producer of SR. In India SR is only a

supporting polymer. The domestic consumption of SR always exceeds the domestic

production. The import of SR gained momentam from 1985-86. As per the commitment with

WTO, import duty on Synthetic Rubber has drastically reduced from 141.5 percentage to

49.43 percentage in 1994. The rubber goods manufactures are in a favorable position to

import more synthetic rubber rather than to produce or procure it from the domestic market.

In the post-liberalisation period import of SR has been increasing year on year with minor

fluctuations. Reduction in import duty has resulted in import of 50 to 70 percentage of the SR

consumption.

The production of Reclaimed Rubber (RR) was 15507 tonnes in 1970-71. It increased

to 53629 tonnes in 1990-91, 246 percentage increase over a period of 20 years. During the

post-liberalisation period production of RR increased from 54185 tonnes in 1991-92 to 90500

tonnes in 2009-10.

The General Agreement on Tariff and Trade (GATT) framed in 1947 by 23

countries was transformed into World Trade Organisation (WTO) on January, 1995 with 136
member countries. It envisages open market without discrimination and global competition in

international trade. Since India is a signatory to the WTO, the country is bound to honour its

commitments to the organization. NR is one of the commodities under the influence of WTO

Agreement. According to the Agreement natural rubber is classified as an industrial raw

material and not as an agricultural produce. So it has lost the protection applicable to

agricultural commodities given in the WTO Agreement on Agriculture. In case of agricultural

commodities like tea, coffee, cotton and the like, the bound rates are 100 percentage for

primary agricultural products, 150 percentage for processed products and 300 percentage for

edible oil. But NR is classified as an industrial raw material in WTO codes and its bound rate

is 25 percentage.

Indian rubber market enjoyed the shield of a number of protective measures

related to price, production and import of rubber. But these protective measures were lifted

one by one since 1991-92 under the liberalisation policies. The new measures such as

reduction in import duty of SR, import of used and new tyres, withdrawal of STC from

market intervention, liberal import of natural rubber, fixing of bound rate, removal of NR

from Negative List, removal of restriction on export and the like are the outcome of

liberalized policy.

In India in 1950s and 60s the import of NR was about 50 percentage of the total

requirements and in the 1980s it was only 15 percentage of the consumption. State Trading

Corporation was brought into rubber sector in 1968 for the effective market intervention to

control wide price fluctuations. It was helpful to avoid heavy price crash by procuring excess

rubber from the market in the pre-liberalisation period. During 1970s the entire surplus had

been procured. It came down to 23 percentage in 1999-2000. The scheme was gradually

suspended in accordance with the liberalisation policies. Import was channelized through

State Trading Corporation to allow imports for distribution only during lean months of
production. But as a result of liberalisation measures direct import by rubber goods

manufactures became the policy of the Government. The consuming segment started to

import NR even when the availability is in excess of requirement to depress the domestic

price.

Domestic price of NR had been statutorily controlled by the Government of India

from May 1942 to January 1991 by fixing minimum and maximum prices. In the post-

liberalisation period it is not the policy of the Government to control price of NR but leave it

to the forces of demand and supply. In the liberalized era the domestic price of NR moves in

tune with the international price.

In the pre-liberalisation period import of rubber was controlled by Public

Notification Scheme, Special Import License and by Advance License scheme. In 1998 the

Government of India introduced value Based Advance License Scheme (VBLS) in the place

of Quantity Based Advance License Scheme (QBLS). Under VBLS there is no ceiling on the

quantity of material that could be imported by a license holder. Moreover NR import in India

was permitted only through the customs port of Kolkotta and Visakhapatnam. The restriction

on port entry was removed on August 6, 2004 by Open Channel Import. Consequently,

rubber goods manufactures have more opportunities to import rubber in larger quantities to

take advantage of the international price.

It is because of the provision of GATT 1994, each WTO member country is

bound to limit its import duty within a ceiling called bound rate. The rate committed by India

was 25 percentage for all forms of natural rubber except NR latex, for which India did not

commit any ceiling on import duty. By liberalizing the rubber sector in 1991, the import duty

was reduced from 60 to 30 percentage. The duty was fixed at 25 percentage in 1999-00, as

per the WTO Agreement. In 2010 it was reduced to 7.5 percentage as a temporary measure to
help rubber consumers. The drastic reduction in import duty resulted in 127 percentage

increase in NR import.

Mutual agreements and understanding among the members of the trade blocks and

regional associations, such as Bangkok Agreement and SAARC Preferential Trading

Agreement (SAPTA) influence the NR consumption in India as it is in the list for giving tariff

and non-tariff concessions to the participating countries. The preferential import duty in India

under provisions of Bangkok Agreement is 16 percentage for all forms of natural rubber

except NR latex for which it is 40 percentage. It agreed to allow concession on import duty

ranging from 15 percentage to 20 percentage on rubber related goods under the SAPTA.

Indian rubber market is flooded with large quantity of imported rubber products with the

relaxation of import regulations. While raw rubber is imported at 20 percentage tax the

finished products are taxed at 10 percentage. This inverted duty structure favours import for

finished products. Which resulted in shut down of a number of rubber based industries in

India.

Import of used tyres was permitted in the Export Import policy with effect from

1-4-1997. A nine fold increase in used tyres import has the detrimental effect for natural

rubber sector in India. New tyres import reduced the average growth rate of NR consumption

to 4.94 percentage in the post-liberalisation period from 7.79 percentage in the pre-

liberalisation period. There is no association between the average growth rate of consumption

of NR in the pre and post- liberalisation periods.

The commodity in the Negative list can be imported only against licence or

against public notification. The removal of NR from the list on April 1, 2001 permitted the

rubber goods exporters to use Duty Entitlement Pass Book (DEPB) scheme to avail credit for

payment of customs duty for future imports of NR. This has an adverse effect on the

domestic natural rubber growers.

 Government of India as a measure of liberalisation permits Export Oriented Units

and units in Export Processing Zones and Special Export Zones to import natural rubber duty

free. Inspite of the removal of restrictions on export for NR in 1992 India was not a regular

NR exporter and the export quantities remained low till 2002. During the 20 years of post-

liberalisation the highest export was 75905 tonnes in 2003-04, when the international price

was more than the domestic price. Duty Free Import Authorization scheme (DFIAS)

introduced by the Government of India from April 30, 2006 exempted the imports made

under the scheme from basic customs duty, additional customs duty, antidumping duty and

safe-guard duty. The scheme allowed exporters to import the required inputs in advance.

In India during the 20 years of pre-liberalisation from 1970 to 1990, the total area

under rubber cultivation has increased from 217198 hectares in 1970-71 to 460341 hectares

in 1989-90. During the 20 years period of post-liberalisation, from 1991-2010, the total area

under rubber cultivation has increased from 475083 hectares to 687000 hectares.

During the 20 years of pre-liberalisation out of the total area covering replanting

and new planting 75 percentage was newly added to the existing rubber plantations. Same is

the case in the post-liberalisation phase too. It shows the surge in new planting and delay in

replanting. Replanting subsidiy scheme was introduced 1957 to boost the production of

natural rubber in India. In 1980 Rubber Plantation Development Scheme was introduced and

thereby subsidy was given for both planting and replanting. The subsidy scheme has been

subjected to number of modifications. The planted area is more when the financial assistance

is high.

In India up to 1925 plantations of 40 hectares and below were treated as estates.

From November 2009 onwards plantations of below 10 hectares are considered as holdings.

The ratio of holdings to estate was 69:31 in 1970-71 and 90:10 in 2008-09. The average size

of holdings in India is 0.53 hectares.

 During the 20 years of pre-liberalisation the total area under rubber cultivation

increased by 112 percentage but production increased by 223 percentage. During the 20 years

of post-liberalisation area increased by 45 percentage but production increased by 152

percentage. The disprotionate growth in production is due to the increase is productivity that

is yield per hectare, in the post-liberalisation period. The growth of the rubber plantation

industry is phenomenal from 1990-91 onwards. India has become the fourth largest in

production and first on productivity (yield per hectare) among the major rubber producing

countries during 2009-10.

Production of NR in India is characterized by lean and peak periods on the basis

of changes in the climate conditions. February- March and June-July are the two lean periods.

Months of May and October to January are the two peak periods. In each year, production has

reached the highest peak in December and lowest in the month of July.

In Tamil Nadu the total tapped area had increased from 5673 hectares in 1970-71

to 9700 hectares in 1980-81 recording 71 percentage increase over a decade. Again in 1990-

91 tapped area increased to 11873 hectares resulting in 22.4 percentage increase over the

previous decade. During the first decade of the post-liberalisation period, the tapped area had

increased by 15 percentage. From 2001 onwards, a slow but steady increase in tapped area

could be seen as rubber cultivation was started in non-traditional regions during the 1990s.

The trend value for the area covering rubber cultivation in Tamil Nadu has

increased from 16474 hectares in 1970-71 to 18238 hectares in 2008-09. It confirms the

scope for expansion in future. In the State the area under holdings has been increasing

steadily. Rubber crop area under holdings increased from 9696 hectares in 1990-91 to 13344

hectares in 2008-09. While the area under estates decreased from 7454 hectares to 6011

hectares in the same period. The dilution of estates is due to partition among heritants,

disposal of land for construction of buildings and crop shifting.

 The notable characteristic feature of rubber plantation in Kanyakumari district is

marginal and tiny size of the individual units in the dominant small holding sector. The

average size of the holdings in the district is 0.45 hectares. Highly remunerative price of

rubber attracted many small agriculturists to go for rubber cultivation.

In Tamil Nadu, Kanyakumari district accounts for 95 percentage of the tapped

area and 98 percentage of NR output of the state. In the district rubber is cultivated

extensively in three taluks namely Thovalai, Kalkulam and Vilavancode. In 1970-71 rubber

was cultivated in 11039 hectares. It increased to 18297 hectares in 2001-02. There was a

slight decline in the subsequent three years. Afterwards due to the hike in rubber price the

area covering rubber plantation started to increase.

In Kanyakumari district tapped area and production of NR has increased in almost

all the years from 1970-71. The yield per hectare was above the national average yield up to

2001-02. But negative growth rate in yield could be seen in 2004-05 and from 2007-2010.

The important factors dragging down the district from the yield rank lists are very tiny

fragmentation of rubber plantations and the low and unproductive conditions of the

plantations under Arasu Rubber Corporation (ARC) and the passive attitude of the

employees, when compared to the involvement of the small holders and estate owners under

private sector. It depicts the impact of privatisation on rubber plantations in Kanyakumari

district.

The demand put forth by LPG on rubber plantations to compete in the global

market is to increase productivity. In the context of land becoming very scarce for cultivation

and the momentum of import of NR and SR is increasing in the liberalisation era, it is the

productivity which will decide the competitiveness of the rubber plantations.

In the Indian rubber market there is no mechanism available to regulate the NR

supply in accordance with the demand to stabilize its price. Supply regulations can not be
easy as 92 percentage of the NR production is from small holders. The obstacles identified in

supply regulation in the sample survey are-small holders don’t have scientific storing facility

and financial needs do not allow them to store rubber for a long period as it is the main

livelihood.

The supply of rubber in Indian rubber market consists of NR, SR and RR in the

ratio of 96:3:1.

Consumption of rubber is reckoned as a barometer of the progress of a country. In

India the aggregate rubber consumption consists of Natural Rubber (NR) Synthetic Rubber

(SR) and Reclaimed Rubber (RR). They were used in end products in the proportion of 70:

20: 10 in the 1990s. Now the ratio of consumption of NR: SR: and RR is 68:25:7. The

demand for SR and RR influences the demand of NR. Demand for NR is made of

consumption, export and the stock required to be maintained as per the Government norms.

NR has been in use from time memorial. The first use of dry rubber was to make

playing balls by the South Americans. While the first use of rubber latex was to make bottles.

Scientific experiments with rubber and technological developments have revolutioned the

application of NR over 50000 different products. They can be mainly classified into latex

products and dry rubber products. Latex products made out of latex concentrates are

classified on the basis of manufacturing process such as dipping, coating, binding, moulding,

foaming and extrusion. Dry rubber products are classified into tyre products and non-tyre

products. About 50 to 60 percentage of the world NR production is used for manufacturing

tyres. Dry rubber based industries and latex based industries consume NR in the ratio of

90:10.

NR consumption had recorded significant growth by 1960, when the world

consumption was two million tones. It crossed three million tonnes by 1970, 3.76 million

tonnes in 1980, 5.21 million tonnes in 1990. World consumption of NR was 9.20 million
tonnes in 2005, when the first, third and fourth global consumers were in Asia-China, Japan

and India. Asia continues to dominate the world rubber industry. It accounts for 72

percentage of the global NR consumption. About 50 percentage of the world’s NR production

is consumed by China, India and Malaysia.

In India consumption of NR increased from 7237 tonnes in 1970-71 to 341840

tonnes in 1989-90. Liberalisation policy of the Indian Government influenced the NR

consumption. In 1990-91 the quantity of NR consumed was 364310 tonnes. In 2008-09 India

emerged as the fourth largest consumer of NR of the world by consuming 871720 tonnes.

The consumption further increased to 930565 tonnes in 2009-10 and reached the second

place next to China.

The average growth rate of NR consumption was 7.79 percentage during the 20

years of pre-liberalisation and that of in the post-liberalisation period is 4.94 percentage. In

this regard the hypothesis taken is that there is no difference between the average growth rate

of consumption of NR in the pre and post-liberalisation period. This is tested with the help of

t-test. At 5 percentage level of significance and at 18 degrees of freedom the calculated ‘t’

value is -0.91. Its tabulated value is 2.1, which is greater than the calculated value. Hence the

null hypothesis is rejected.

The decline in the average growth rate of NR consumption can be attributed to the

high import of rubber products especially tyres, with the advent of liberalisation policies. In

1990-91 the number of various types of tyres imported was 6879 and the consequent

reduction in NR consumption was 134 tonnes. In 2008-09 the number of tyres imported was

2954782 and the consequent reduction in consumption of NR consumption was 57323

tonnes. The gap between production and consumption of NR would have been either

narrowed or the consumption would have been exceeded production if the tyres were not

imported.
 The composition of Indian rubber consuming sector is composed of small,

medium and large scale units. Manufactures who consume NR up to 50 tonnes per year are

considered as small scale units, 51-500 units are medium scale units and that consuming

above 500 units are considered as large scale units.

The total number of manufacturing units had been increasing till 1997-98 due to

the increase of small scale units. When the number of small scale units started to decrease it

had the direct influence on the total number of manufacturing units.

In the Indian rubber market the manufactures of large scale units are very

powerful in the demand side. Being not even 3 percentage of the manufacturing group they

consume 75 percentage of NR. These manufactures are mainly of tyre companies. They are

well organized with sound finance, political influence, technical innovation and global

information.

In India three Indian rubber industries associations account for 99 percentage of

rubber consumption of the country. They are All India Rubber Industries Association

(AIRIA), Automotive tyre Manufactures’ Association (ATMA) and Indian Cycle and

Rickshaw Tyre Manufactures’ Association (ICRTMA). They have formed consortium to take

up jointly their issues with the government. The automotive tyre sector recorded 13.9

percentage growth in consumption of NR in 2009-10 as compared to 2.5 percent growth in

2008-09. While non-tyre sector witnessed 2.7 percentage deceleration in consumption in

2009-10.

The large scale manufactures adopt different strategies such as temporary

withdrawal from the market, import of rubber even at high price and reduction of stock

period to control the market. Thus they are determining the demand side of the NR market.

On the contrary to this, the supply side of the market consists of a million of small holders

with 92 percentage of area and 93 percentage of NR production in the country. The estate
sector produce only 7 percentage of the total NR production of the country. Due to the

meager contribution through they are organized, they can’t influence the supply of NR in the

country. Thus with regard to the Indian rubber market it is buyers market rather than sellers

market that plays a major role. The demand side is more powerful and dominating than the

supply side. Thus the hypothesis that the supply side of the NR is dominated by small

holdings and demand side is dominated by large scale units is proved.

In India consumption of NR is widely spread all over the country. There is no

increasing prominence for rubber goods manufacturing units in Kerala and Kanyakumari

district of Tamil Nadu, the traditional regions of rubber cultivation in the country.

The relative share of Kerala, the largest producer cum supplier of NR in India, in

the consumption of NR was just 7.37 percentage in 1990-91 and 13.97 percentage in 2000-

01. Even though the share in NR consumption increased to 15.98 percentage in 2008-09, the

number of rubber goods manufacturing units decreased. This shows the increasing power of

large scale units under economic liberalisation, privatisation and globalisation and the

inability of small and medium size units in meeting the global demand because of their

uneconomic scale of operation and outdated technology in production.

Maharashtra was the largest NR consuming state followed by West Bengal in the

pre-liberalisation period. Both the States have shown decrease in the share of NR

consumption in the post-liberalisation period. At the same time Punjab, Gujarat, Haryana,

Karnataka, Andra Pradesh and Rajasthan are emerging as significant consumers of NR in

India. The ongoing shift in geographical composition of rubber goods manufacturing units in

the country shows the impact of LPG in NR sector.

In Tamil Nadu there were 111 licensed rubber goods manufactures during 1975-

76, consuming 20900 tonnes of NR, 16.63 percentage of the total consumption of India. The

number of units increased to 491 in 1990-91 and consumption to 21213 tonnes. The state’s
share in the total consumption of the country was 5.82 percentage. This Shows that from

1975 to 1991 the number of manufacturing units increased by 342 percentage but the quantity

of NR consumption increased just 1.5 percentage. So it is clear that in the pre-liberalisation

period the maximum number of units were small scale units.

In Tamil Nadu in 2000-01 the number of rubber goods manufacturing units were

502 and their NR consumption was 32588 tonnes, 5.16 percentage of the total consumption

of India. In 2009-10 the number of units decreased to 497 but the consumption increased to

64600 tonnes. This shows the increasing power of large scale units under economic

liberalisation. Privatisation and globalisation and the inability of small scale units to

withstand the global competitions under liberalized trade policies.

Moreover increase in volume of consumption and at the same time decrease in

number of rubber-based industries in the country portrays the strength of giants in the

demand side of NR in the globalisation era. As international market needs internationalized

products and quality, advanced processing is crucial to ensure quality product and to explore

global market. In the Indian rubber market large scale units could meet the global demand as

they are organized and modern. It is the impact of LPG on NR and NR-based industries in

India.

Kanyakumari district has the potential for steady and abundant supply of latex

which contributes the major raw material for a variety of rubber products. Almost 98

percentage of NR produced in Tamil Nadu is from this district. But it could not achieve

progress in the development of rubber-based industrial units. The growth rate of number of

rubber-based units was impressive up to 1990-91. The increase in rubber production in the

district was one of the reasons for the development of rubber-based industries in the pre-

liberalisation period. But after globalisation a good number of units were downed their
shutters. In 2009-10 out of 497 units in Tamil Nadu only seven units are in Kanyakumari

district.

The rubber product mix in India is based mostly on dry form of rubber but in

Kanyakumari district, it is based on latex concentrates. In the district even though 90

percentage of raw latex is processed into dry rubber form of Ribbed Smoked Sheet (RSS)

there is no large scale unit based on dry rubber form. While automobile industry is expanding

and Chennai has become the hub of automobiles, there is not even a single unit in the district

producing tyres, the product highly demanding NR. The district has not succeeded in

transforming the raw material in to finished products and exploit the domestic, national and

international markets. Even though there has been good opportunities for the export of rubber

products to the world market in the globalized era, except in gloves and condoms based on

latex concentrates. The bulk of the NR consumption of the district is made by a few export

oriented units under Kurian Abraham Private Ltd.

There is a drastic decrease in the number of rubber-based industries in

Kanyakumari district in the globalisation era. There is no association between the growth of

rubber plantation and rubber-based industries in the district under LPG.

Export of NR is one of the factors determining the demand of NR in India. In the

pre-liberalisation period NR export was not frequent. The volume of export was also too

small till 1974-75. Only 350 tonnes of NR, 0.27 percentage of production, was exported in

1974-75. In the post-liberalisation period export has been a continuous process but the

quantity of export was nominal during the 1990s. In spite of the removal of restrictions on

export of NR in 1992, India could not make any headway in the export front till 2002-03.

Afterwards with the export promotional activities taken by the Central Government through

Rubber Board, quantity of NR export started to increase. During the 20 years period of post-

liberalisation the average quantity of NR export was only 3.59 percentage of the production.
The impact of liberalized trade policy is not very much impressive in the area of export of

NR. Thus export of NR is the least factor determining the demand of NR in India.

The demand of NR is also attributed to the necessity of having stock of NR by

consuming and producing sectors that is manufacturers of rubber goods and growers and

dealers of NR. As per the norms of the Government of India issued in 1992, the quantity

equivalent to two months consumption is the optimum stock to be maintained jointly by both

the sectors. Manufacturers have to maintain stock due to evenly distributed consumption and

uneven production. Dealers maintain stock under economic considerations that is only when

they can make profit. So the burden of excess stock has to be borne by the growers. In spite

of the government norms the average stock maintained for a period of 20 years, by the

consuming sector was 0.9 month consumption and the producing sector was 1.6 months

consumption. The burden of excess stock worth 0.5 month consumption was borne by the

growers.

Thus in India even through the demand for NR is made of consumption, export

and stock, it is much influenced by consumption. Anyhow its demand is more than its supply

during post- liberalisation.

Natural Rubber is the only agricultural commodity which attract high profit

margin. Good price is the best incentive for planters to stick on to NR cultivation and its

further expansion. Rubber being a plantation crop with seven years of lengthy gestation

period, growers cannot respond to changing prices by increasing or decreasing production. As

growers have made huge investment in the initial period switching over to other crops in the

middle of the economic life of their plantation would involve huge losses.

In the pre- liberalization period Indian rubber market was protected from price

fluctuations by controlling the price through different measures. Independent India followed a

policy of maintaining the rubber market at remunerative levels. So minimum and maximum
prices were notified in 1947 to 1970. From September 1970 to September 1981 only

minimum price was notified. By 1981, the statutory price fixation came to an end largely

because the market maintained a remunerative price.

As the Indian price of NR was generally higher than the international price, in

1956 the Government of India ordered the manufactures of rubber goods to pay to the Rubber

Board the difference between the price of imported and indigenous rubber. So that the

manufacturers could get NR at the same cost in India, irrespective of the source of supply and

also to prevent the tendency of manufacturers going in for imported NR. This system

continued up to 1960.

In spite of the various measures taken by the Government of India NR price

fluctuated widely during the pre- liberalisation period. The percentage of change varies from

61.87 to -21.03 percentage even in the midst of statutory price control measures.

The price was not stable even during the period from 1981- 86, when there was no

strict control over NR price. The actual price and statutory prices were positively correlated (r

= 0.979) during the pre- libralisation period.

The insulated status of the Indian rubber sector has been undergoing significant

changes since 1991-92, consequent to the implementation of liberalized economic policies.

The major change is the dilution in the extent of protection given to the NR sector. Only

Bench Mark Price was followed up to September 2001. The government felt that price

protection is not an adequate policy in the open market and involved in lifting up of

protective measures gradually.

NR price in India in the post- liberalization period has been under wide

fluctuations. The Asian Currency Crisis and the high stock position led to crash in prices in

1997-98 and in 1998-99. The increase in prices was steep in 2008- 09 and 2009-10. In spite
of such increase, protection is still being given by way of import duties, inspection of

imported consignments, restrictions on grades permitted to import and licensing control.

The domestic price has been moving more or less in tune with the world price

during the post- libralisation period. A fall in international price of rubber resulted in fall in

domestic price. There is positive correlation between the domestic and international price

(r=0.996) in the post- liberalisation period.

In order to examine whether Indian rubber could withstand the imports in the

liberalized scenario, Nominal Protection Co- efficient (NPC) is calculated. NPC measures the

discrepancy between the domestic price and international price of the commodity. It is the

ratio of domestic price and international price. NPC more than one means the commodity is

being protected and under free trade price of the commodity will be lower. NPC less than one

indicates competitive advantage so that domestic product can compete with imports. NPC

was more than one up to 2001, which indicates that the commodity was protected to some

extent. Afterwards NPC has been less than one which indicates the competitiveness of NR

under free trade.

To analyze whether rubber plantations in Kanyakumari district are globally

competitive or not, SWOT Analysis was done and the strength, weakness, opportunities and

threats were identified. The climate, soil, temperature, rainfall and moisture content

prevailing in the district are the regional strength crowning the district as the ideal place in

the world for rubber cultivation.

In the district 84 percentage of small growers and 100 percentage of the estate

owners are literate. Among the sample respondents 97 percentage are educated. Impact of the

length of formal education is reflected from the fact that 99 percentage of the area under

rubber is planted with high yielding variety. The productivity in private estates outweighed

the national average.

 The occupational experience, the number of years working in the field, also have

strengthened the rubber plantations in the district. Among the sample respondents 78

percentage give importance to farming and are with 20-25 years of experience in rubber

cultivation.

Rubber plantations in the district have some weak points which are to be

overcome to make it more competitive. There is limited scope for expansion of NR

cultivation in the district. There is growing pressure to spare the rubber area for real estate

purpose. In the selected area of study 63 percentage of the holdings are inherited. This shows

that there is limited scope of fresh land for rubber cultivation.

The average size of holdings in the district is 0.45 hectare. The planning

Commission norm of poverty line for rural areas shows that a farmer operating less than 0.64

hectare area will be under poverty. Due to uneconomic size of holdings they have to involve

in non-farm activities too for generating adequate income.

In the district growers are not able to reap the advantage of rising prices due to the

untimely heavy rains. In the sample survey only four percentage of the respondents are using

rain guards. At an average 27 tapping days were lapsed by rain in 2009-10. It is almost like

experiencing poverty in the midst of plenty.

In the district 70 percent of the growers are small holders and only 10 percentage

of them are having own rollers and not even one percent are having smoke house or store

house. The resource poor growers are forced to sell their produce as raw latex or as ungraded

sheets without value addition.

Attitude of the growers in the sample survey towards dense planting that is more

than 500 trees per hectare, increase the cost of production without increase in yield.

In the district 20 percentage of the plantation owners are absentee owners. They

have empowered hired labourers to decide and execute the decision on planting, replanting,
up keeping, tapping, processing, storing and disposing of rubber. The labourers misuse the

owners’ absence and weakens the plantations for undue gain in the short run.

Opportunities are the positive environmental factors. The rubber plantations are

enriched with opportunities like international market, increasing pace of industrialisation,

involvement of private sectors in rubber- based industries, rubber expos, proliferation rubber

articles day by day and recycling of rubber wastes.

Threats here, are the negative environmental factors which thrust the rubber

plantations. With the liberalized trade policies the challenge on rubber plantation has been

increasing from import of processed rubber. In the district 98 percentage of the produce is

processed in the traditional form of RSS. In the sample survey all the 300 respondents stick

on the form of ungraded rubber sheet.

Lack of manpower is another threat. As the district is crowned with the highest

literacy level, manpower for top and middle level is fairly sufficient but there is dearth for

farm level work. In the sample survey 67 percentage of the respondents are having nuclear

family size with less than five members and 47 percentage have higher education.

The standard tapping frequency fixed by Rubber Board is twice a week. But to

take the advantage of high price prevailing, in 65 percentage of the plantations in the district

daily tapping is followed. Among the selected samples 87 percentage respondents apt for

daily tapping. This will have negative impact on the economic life span of the trees.

The ever increasing demand for NR paved way for crop shifting in the district.

The prospect of getting high income drove the farmers to plant rubber in all kinds of land,

from the forest to inland. Anyhow rubber cultivation moved towards the areas of other crops

and gradually replaced crops like coconut, paddy, banana and tapioca in the globalized era. In

1990-91 out of 90219 hectares, paddy was cultivated in 41228 hectares, coconut in 23230

hectares, rubber in 15731 hectares and tapioca in 10030 hectares. In 2007-08 the area under
paddy decreased by 20878 hectares, tapioca by 1618 hectares and coconut by 644 hectares

but rubber increased by 3248 hectares.

In Kanyakumari district the total cultivated area of coconut, paddy, banana and

tapioca has been decreasing at the rate of 1389.5 hectares. While that of rubber has been

decreasing at the rate of 121 hectares. This shows the relative importance of rubber

plantations in the district. Hence the hypothesis rubber cultivation has been moving towards

the area of other crops like coconut, paddy and tapioca is justified.

7:2 Suggestions

Natural Rubber is an important raw material for a number of industries. So NR

has a good future. But it is in short supply all over the world. In India too, production falls

short of demand. The Rubber Board has to explore ways and means to expand rubber

cultivation in new areas.

Barren land in the traditional rubber producing regions is quite limited and land

price is very high. Government has to come forward to offer land on long- term lease for

rubber plantations.

The long gestation period of the plantations locks up the initial investment till the

commencement of the economic yield. Shorter gestation varieties of plants are to be evolved

for quick recovery of returns to investment and to attract more producers.

Stress tolerance of rubber is an important area, particularly in the context of

extension of rubber cultivation to marginally suitable agro climates. Research in this direction
has to be strengthened by Rubber Research Institute of India (RRII) to identify the factors

contributing to stress tolerance.

In crop harvesting low frequency tapping has proved to be effective in

maintaining yield levels with reduction in labour input. The findings of RRII in this regard

need popularization. Likewise a tapping tool has to be evolved to retain the tappers in their

present jobs and to attract the new generation.

Uneconomic size of holdings is a major constraint in increasing the holders

income. Enhancing the net farm income of rubber holdings is of prime importance. Apart

from intercropping other sources of income such as rubber wood, honey from rubber, rubber

seed oil and the like need to be strengthened.

Processed rubber wood and modern rubber wood furniture have excellent scope

for increasing revenue of the rubber plantation sector. Once the technical and financial

feasibility are established at the model rubber wood factory of the Rubber Board, a number of

units will come up. This will increase the pace of replanting. For long- term benefit the pace

of replanting has to be faster.

In India financial assistance for rubber cultivation is limited to planters of 20 cents

to two hectares. Source for the assistance is the cess of Rs. 1.50 collected from every

kilogram of rubber produced. So it can be extended to all the growers irrespective of area of

plantation. If this is done sufficient investors would come forward from the private sector and

rubber production would substantially rise.

Where ever the soil is good, there is larger number of holdings of smaller size.

The poor remain poor as they are unable to utilize their land resource to the optimum. There

is always a dearth of money for investing in fertilizers, pesticides and the ingredients required

for modern agriculture. The drastic reduction in subsidies may create serious problems. The
subsidies need to be periodically reviewed and kept at a reasonable level. The Rubber Board

has to move in this direction.

Shortage of tapper is the major challenge for the rubber plantations. As migrating

labour is available they need to be trained since tapping involves skill. Rubber Board can

encourage Rubber Producers Societies to create tappers banks.

Climate change has its impact on plantations. High temperature causes about 12

percentage fall in rubber production. So early morning tapping can be done. Moreover, rain

guards can be used to increase output by 11 percentage.

The yield per hectare, which is the productivity of rubber plantation, is at the peak

in Kerala, growing faster in Karnataka but slow in Tamil Nadu. To compete in the global

market in the context of land becoming very scarce for cultivation and increasing momentum

of import of NR and SR in the liberalisation era, efforts need to be taken to increase

productivity. Empowering small holders with modern technology is a well said answer to

increase productivity.

The key factors which depress the growth in productivity of rubber plantations in

Kanyakumari district are relatively lower level of adoption of short- term yield enhancing

measures by the dominant tiny holdings of less than 20 cents and the passive attitude of

Arasu Rubber Corporation in developing the plantations under its control. Rubber Board has

to move towards the resource poor growers. Moreover the secured position of the workers in

ARC has to be positively reflected in the productivity of rubber. The corporation has to

replant uneconomic plantations with high yield varieties.

Rubber Producers Societies can be started with collection centres and processing

centres wherever they are required. It will help the small holders to market their produce in

the form of latex without quality deterioration.

 Nothing should be done to endanger our food security. While boosting rubber

plantation, crop imbalance need to be corrected.

NR prices have been a matter of hot dispute between the growers and the

manufactures in India and the world over. Good price is the best incentive for growers to

stick on to NR cultivation and its further expansion. The prime concern of a consumer shall

be the availability of NR at a globally competitive price. The remunerative price for NR

demanded by the grower is often considered too high and unaffordable by the manufactures.

The dispute continues creating rivalry between these two important stakeholders of the rubber

industry. Their mutual co-operation is essential for the industry’s growth, especially in the

years of global economy.

The free market mechanism has given the producers and the rubber consumers

equal opportunity to reap benefits of the price changes from time to time. The price rise was

the result of thrust in demand for raw rubber from the user industry. Enhancing supply is the

best way to maintain the market at a fair level.

In a free market economy that has embraced globalisation, we need to have an

independent organization with statutory power which can function as an impartial regulator.

In a liberalized economy, the competitiveness of the crop depends on international

prices, freight rate and handling charges. A change in any of these factors would make

positive or negative repercussion on Indian prices. Therefore a tariff band should be fixed to

protect the growers without compromising the interest of the consumers. Moreover,

liberalisation of trade needs to be accompanied by a certain control by the Government of

India, so that free trade serves not only just to create private profit but also public welfare.

Regarding price and tax which are the major sensitive issues for both growers and

manufactures they have to understand the problems faced by each other as well as their

needs. A good rapport with growers and consumers has to be fostered. Ensuring balanced
growth of the producing and consuming sectors is necessary. Production and consumption

should go hand in hand as the health of one sector depends on that of other. The Rubber

Board has to keep in mind that a happy co-existence of all the stakeholders like growers,

dealers, manufactures and exporters is the precondition for inclusive growth of the sector. For

better co-ordination it is necessary to have Commissioner for Rubber Products Development

like Commissioner for Rubber Plantation Development in the Rubber Board.

Promotion of products suited for the domestic and export markets with an inbuilt

option for flexibility in restructuring the production is necessary for surviving the crisis posed

by the liberalized economic policies. Research and Development activities are to be improved

to produce new and quality rubber products. Rubber products manufacturers have to imbibe

new technology and upgrade plants and manufacturing practices and remain globally

competitive. They need to form joint ventures take part in global expos and conferences and

take their products to the global market.

The increase in rubber production in Kanyakumari district was one of the reasons

for the development of rubber based industries in the district in the pre-liberalisation period.

The present practice of 90 percentage of rubber growers is selling their produce as sheet

rubber. The graduation of the district from the supplier of Ribbed Smoked Sheet (RSS) and

Latex Concentrate to the producer cum supplier of rubber products is significant in the

globalized era.

A change which is very difficult in Kanyakumari district is transformation of raw

rubber in to rubber products, as bulk of NR production is from small and marginal holdings.

A number of small scale rubber-based industrial units, engaged in non-tyre sector, sink in to

sickness due to lack of competitiveness and outdated technology. A major share of their gross

profit is eaten away by interest payment, as the consequence of very high Debt-Equity Ratio.
The Government of Tamil Nadu has to come forward to provide soft seed capital to

technocrats, who run on modern technology. This will result in alleviation of sickness.

During the processing of NR, a large quantity of water is used and this is loaded

with traces of rubber and other chemical substances. On average 20 litres of effluent is

generated for every kilogram of processed rubber. The effluent from sheet processing is

highly polluting and has objectionable odour. As per the Water (Prevention and Control of

Pollution) Act 1974, the industries are required to treat waste to the degree as fixed by the

Pollution Control Board, before discharging them into any water body or disposing them on

land. Biogas Plants can be installed for effluent treatment, which serve dual purpose of

reducing environmental pollution and generating energy. This too is economically possible

with Common Collection, Processing and Industrial Centres.

In the era of globalisation, possibilities of increased trade in global market are

widened. Therefore the future priorities and strategies of the rubber sector shall be focused on

the basis of the issues confronting the natural rubber production, rubber products

manufacturing and export marketing.

7:3 Conclusion

Globalisation is neither a total failure nor a total success. It is not important to

analyze why it is done but what comes out of it is important to know. India has to face the

challenges of globalisation in a pragmatic way. It offers an opportunity for rubber plantation

to enhance the productivity with the proliferation of new rubber products day by day in the

global market. With regard to rubber-based industries, globalisation has given more

opportunities for the wealthy and healthy to make more money more quickly. As compared to

China’s per capita rubber consumption of 4.6kg, India’s present per capita rubber

consumption is still far below. Therefore Indian rubber sector has the potential for growth in
the coming years. The fruits of Liberalisation, Privatisation and Globalisation (LPG) can be

availed by the NR sector in a better way, by improving Research and Development activities,

implementing the R& D findings in both the sectors of rubber plantations and rubber- based

industries, encouraging frequent dialogues among growers, consumers and agencies,

encouraging estate sectors to replant rubber, increasing the productivity of holdings and

transforming raw rubber into rubber articles. The Rubber Board has to be empowered for

enforcing these measures. At the same time, the Arasu Rubber Corporation, Nagercoil, has to

extend its area of operation from mere supplier of Latex Concentrate and RSS to rubber-

based industries under private sector to producer of rubber products.

In Kanyakumari District, small scale rubber- based industrial units are facing

serious problems as globalisation augments competitions. Thus LPG has opened the gateway

for the rich and shut the same for the poor. In the district out of 126 of rubber-based

industries only seven are withstanding the global competitions. Being the source for the best

quality of NR, the optimum development of rubber plantations and utilization of NR for the

first grade rubber products can be achieved by the district, by having common collection

centers and common processing centers under the wing of Rubber Board. The Arasu Rubber

Corporation can think of converting the raw material into finished products, especially the

most demanding automobile tyres for 100 percentage capacity utilization of its plants and

machineries and to ensure the profitability of its rubber plantations. To reduce the drain of

NR, the unique natural resource of the district, Government of Tamil Nadu has to pave way

for localization of rubber-based industries by implementing the long pending proposal of

Rubber Techno-park in the district. An in-built provision of Biogas Plants has to be made in

the Common Processing and Industrial centres to mitigate the dual problems of pollution and

energy crisis. To conclude, LPG has widened the scope of rubber plantations and rubber-

based industries with the need for the modernisation of both the sectors. It can be affordable
by the large scale units but the tiny units are at the mercy of the Government for their

survival.

Scope for Further Studies

The researcher has identified the following areas for further studies for the

development of NR sector

5. Movement of NR price before and after globalisation in India.

6. Challenges before rubber plantations and rubber-based industries under globalisation

in India.

7. Role of Rubber Board to maintain the lead position in NR productivity in the

globalisation era.

8. Value addition in NR- A comparative study in the States of Kerala and Tamil Nadu.
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