The government had hiked the excise duty on rubber, called rubber cess, from Re 1 a kg to Rs 1.50 to get additional funds for rubber development programmes.

"We are not aware of any instance in the past where a cess rate has been increased at one go by 50 per cent," ATMA director general D Ravindran said in a letter to commerce secretary PP Prabhu.

The slowdown in the automobile sector had affected industry's health and at a time when the units were finding it difficult to pass on rise in production costs to selling prices, the hike was hard to absorb, hesaid.

Natural rubber was already subject to 11 per cent purchase tax by Kerala government and the recent hike in cess took the total tax incidence of the industry on the commodity to 16 per cent.

Ravindran said the hike in rubber cess would yield a revenue of over Rs 90 crore but government allocation for rubber development programmes was only Rs 68 crore, he said, wondering why the government chose to levy a burden which would generate a surplus of Rs 30 crore.

Suspecting that the cess had been hiked to subsidise expenditure on other commodities, he said such gross subsidisation was inimical to the concept of cess.

"Further, why should tyre industry subsidise developmental expenditure of some other industries?," he asked.

As parliament had empowered government to hike the cess upto Rs 2 a kg, rubber cess could have been hiked moderately and if there was a further need for funds, it could have been raised later, he said.

Stating that a major portion of benefit of rubber development went toKerala, he said through purchase tax alone the southern state netted an annual revenue of Rs 230 crore. Therefore, part of the requirement for development fund could have been met by Kerala, he said, seeking status quo ant on the cess issue.