The union government is likely to revise the benchmark price of natural rubber to Rs 40 per kg. This follows a plea from Rubber Board chairman KJ Mathew a couple of months back seeking a revision of the benchmark price in an attempt to protect growers from rapidly falling prices. The Rubber Board is also planning to export a substantial quantity of natural rubber to neighbouring countries.Top sources in the board told The Financial Express that Mathew had written to the union commerce ministry last December seeking a hike in the benchmark price. The letter also pointed out that the ruling benchmark price of Rs 24.90 per kg was fixed in July 1994. Sources said that following the board recommendation, a member of the cost accounting branch in the ministry would be visiting the board on Monday (today) to finalise modalities for revising the benchmark price. The member's visit would be followed by a high-level delegation from the cost accounting branch which will assess the cost-price relationship andrecommend a new benchmark price.
While the Rubber Board feels the benchmark price should be revised up to Rs 45 per kg, the ministry may peg it at Rs 40. This would help growers hit by the fall in prices in the past six months.
The source said a major reason for the rapid price fall was the abolition of buffer stock system. Under the system, the government used to fix a floor price for rubber with upper and lower bands, taking a seven days moving average of the price. If the price crashed below the lower band, the government used to step in and procure rubber. If the price crossed the upward limit, the government would release stocks to bring normalcy. However, in the absence of the system, there is no mechanism left to regulate prices, the source pointed out.
Meanwhile, the board finalised plans to export an undisclosed quantity of natural rubber as domestic prices are ruling below international ones. "The board has received enquiries from several countries, including Pakistan and Bangladesh," thesource said, adding: "We would be exporting some quantity to these nations soon."
Till January, domestic prices were ruling at least Rs 5 per kg above international prices. However, the trend has been reversed from January end.
Commerce minister BB Ramaiah had stated in October that the government had firmed up a three-pronged strategy to bring natural rubber prices to the level of Rs 42 per kg in a month's time. Ramaiah's strategy included the export of natural rubber even at a loss, increasing demand for the commodity by hiking the content of natural rubber in tyre production and hiking the import duty well above 40 per cent. However, even after five months, the government has done precious little to improve the lot of rubber growers. The price of natural rubber hit an all-time low of Rs 26 per kg last Friday and has been ruling at the same level since then.
Though, both the central and state governments pressed various procurement agencies to mop up excess stocks from the market since October last,the strategy has apparently failed. Agency sources, however, claimed that they had mopped up the quantity targeted by February first week.
Similarly, the performance on the export front has been disappointing during the current fiscal. According to sources, total export during the period was below the 500-tonne mark compared to the 1,598 tonnes shipped in 1996-97.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
