Tyres: Cut customs duty on inputs

The Tyre Industry is one of the industries that have been majorly affected by the global economic meltdown. The Net Profit margins of the industry has drastically declined to 0.96 per cent in FY 09 as against 4.84 per cent in the corresponding previous year. This down turn was mainly due to fall in demand. Major portion of the Industry turn over (around 62 per cent) accounts from the Truck and Bus tyre segment.

Nevertheless, after seven years of consecutive growth the industry has observed a dip in production of truck and bus tyres segment by 2 per cent and subdued growth in the passenger car segment in FY 09. The industry has also suffered on the exports front; with major segments like Truck and bus tyres reporting 20 per cent decline and passenger cars slipped by 10 per cent in FY09.

The raw material intensive tyre industry is also dependent on the Natural Rubber -- and consumes around 58 per cent of total natural rubber produced in India. The spike in the rubber cost from the past three months is being alarming tyre industry. To uplift the tyre industry from the down trend, ATMA has submitted a pre budget Memorandum to the GOI for its consideration in the forth coming Budget 2009-10.

Duty Structure

Industry Expectation

The industry has urged Government to reduce customs duty on the Natural rubber from existing 20 per cent to 7.50 per cent as the domestic prices were hovering much above the International prices. However, as an alternative it has suggested to increase customs duty on tyres from existing 10 per cent to 20 per cent.

The Anti dumping duty on all key raw-materials and select machinery of tyre industry, viz. Nylon Tyre Cord Fabric, Rubber Chemicals, EPDM, Carbon Black, Tyre Curing Presses etc to be waivered as the import of the above, adds costs to the raw material intensive tyre industry.

Butyl rubber is used for manufacture of inner tubes of tyres as it has better air retention capacity compared to natural rubber. Chloro butyl and bromo butyl are synthetic rubbers mainly used for inner liners for tubeless tyres and inner tubes for tube tyres. The Industry seeks customs duty exemption on raw materials like Butyl Rubber, Polyester Tyre cord, Styrene Butadiene Rubber, Chloro / Bromo Butyl rubber etc. 

The industry has asked for waiver of Customs Duty on Tyre manufacturing machinery, (like Machinery (for working rubber), Extruders, Moulding / retreading tyres / inner tubes and other machinery along with parts) which will accelerate the pace of radialization in the country.

The industry has also looking for reduction of customs duty on inadequately produced  raw materials in India, like Nylon Tyre cord, Poly Butadiene Rubber and Steel Tyre cord from existing 10 per cent to 5 per cent each and reduction in Rubber chemicals from existing 7.5 per cent to 2.5 per cent or nil.

To encourage radialization in the CV segment, Tyre Industry seeks 'excise rebate' on domestically manufactured radial truck & bus tyres so that the domestic capabilities are enhanced

Besides these, any measure taken for Automotives will also help tyre industry.

Companies to watch

MRF, Apollo Tyres and CEAT

Outlook

The share of Chinese imports in to domestic tyre industry is showing a consistent improving trend, due to which the domestic companies were losing the advantage to grab domestic share of the tyre market. About 60 per cent of the revenues of the tyre sector comes from truck and bus segment.

But the share of imports in the domestic production of Truck and Bus tyres has surged from 4.67 per cent in FY06 to 9 per cent in FY08 which has further zoomed to 12 per cent in the eight months ended November 08. So, the industry seeks cut in import duty on inputs as well as Increase in the customs duty on tyres which can contain the dumping of tyres into India.