KOTTAYAM, December 25: The Rubber Board has submitted a comprehensive package to the centre for arresting the free fall in the prices of natural rubber.

Board chairman K J Mathew told The Financial Express that the director board of the agency which met here early this week has recommended to the union government that the State Trading Corporation (STC) immediately procure at least 20,000 tonnes of natural rubber to stabilise the commodity price in the domestic market.

The board has also recommended a steep hike in the subsidy to growers from Rs 8,000 to Rs 18,000 per hectare in the traditional areas of Kerala and Tamil Nadu for new plantation and re-plantation. For the non-traditional areas, the board has recommended a flat Rs 22,000 per hectare. This is for the first time that the board is recommending a differential subsidy for traditional and non-traditional areas.

Earlier the board was providing a uniform subsidy of Rs 8,000 for both traditional and non-traditional areas. The new rates are effective from April 1997, board sources said. The enhanced subsidy is aimed at increasing the production substantially by the year 2000.

The board has also urged the Government to declare a support price for natural rubber taking into account the escalation in the cost of production. According to board's estimate, wage cost alone has shot up by over 300 per cent over the last couple of years. According to the board's figures, the wage cost per 100 trees increased to Rs 25-30 in 1997 from Rs 10-12 in 1990.

However, as the wage rates remain downward-sticky, the slump in the commodity prices has cost the growers dearly, sources added. Small and medium farmers are the most affected by the cost escalation. However, the board has not fixed any benchmark for support price. The board has also urged the government to mop up additional rubber from the market. According to the board's estimates, the domestic market has been flooded with an excess supply to the tune of 46,000 tonnes. According to the Board's view if the government failed to step in, prices are likely to slide further.

It may be recalled that STC had earlier agreed to procure 10,000 tonnes of natural rubber at Rs 2 higher than the ruling market price in a bid to arrest the free fall in prices. However, sources said the agency was not able to procure even half the quantity of the target, making the whole exercise meaningless.

Moreover, the Rubber Marketing Federation allegedly made a killing by unloading dead stock to the STC and thereby misusing the subsidy and concessions offered by the government. The federation is estimated to be mopping up nearly 10 per cent of the marketable commodity and the remaining 90 per cent is being procured by the private dealers.

Mathew, however, was optimistic and felt there were ample signs to suggest that the industrial demand was all set to look up in the near future. He said a spurt in demand would mop up the excess supply from the market and would help prices rebound. He, however, said that if the situation failed to improve in the coming months, the government should export rubber.

According to the figures of the Rubber Board, the total supply of natural rubber during the current fiscal is to the tune of 722,310 tonnes. Of this, domestic production is estimated to be 590,000 tonnes while carryover stock is 107,310 tonnes. The board estimates that 25,000 tonnes will be imported into the country under the advanced licence scheme.

However, the total consumption is estimated to be only 579,000 tonnes and the two months buffer stock is 96,500 tonnes and the estimated exports is 1,000 tonnes, taking the total demand to 676,544 tonnes leading to an excess supply of around 46,000 tonnes.

The board has also projected a sharp fall in the exports of natural rubber to 1000 tonnes from the previous years level of 5000 tonnes.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.