The main reason for the slump in prices is attributed to decline in demand from automobile industry alongwith rise in production of natural rubber in the previous financial year which has led to an imbalance in demand and supply.

The average domestic price of RSS-IV grade rubber at Kottayam which was Rs 4229 for the three month period ended June 97 has declined to an average of Rs 3000 per hundred kilogram in the current year period ended June 98.

Similarly international prices of RSS-III grade rubber at Kuala Lumpur has declined to Rs 3001 against last year's Rs 3979.60 per 100 kilogram.

The prices of natural rubber started declining consistently from October 1996 from Rs 5112 per quintal into Rs 3980 in April 1997. In order to arrest the decline in the local market, State Trading Corporation (STC) was asked to procure 10,000 tonnes of natural rubber from the market as pert of market intervention scheme.

However, this did not help in raising prices and the declining trend continued unabated. The intervention by Kerala State Co-operative Rubber Marketing Federation which was asked to purchase rubber at a price of Rs 2.00 above the prevailing market rate also did not yield any significant result.

The three months concession of purchase tax granted by the Kerala Government also could not arrest the decline. The price had reduced to Rs 2970 in December '97.

Thereafter, as per directions of Kerala government, Kerala State Rubber Co-operative Ltd (RUBCO) also had procured about 13000 tonnes. The prices continued downward march even then. The trend aggravated later and the prices dipped to Rs 2700 in March 98.

The situation in the international market was no different. Prices in terms of Indianrupees registerd steady decline from June 96. However, it began to exhibit a recovery from January 98 onwards.

While the domestic prices were ruling above the international prices during May 97 to January 98, the situation reversed during February 98 to May 98.