This is much lower compared with the benchmark price of Rs 34.09 per Kg announced by the commerce ministry recently. The Board also feel that production of natural rubber is likely to be lower during the second half of the current fiscal compared with the same period last year. This, they feel, would relieve the pressure on prices which have been mounting due to the dip in demand from the key demand sectors including tyre.

Sources in the Rubber Board told The Financial Express that early indication from the market suggests that the price for natural rubber is likely to settle at Rs 32-33 per Kg mark in the short-run. This, they said, is because of several factors that lead to a decline in production and a late firming up of international prices.

They said the Board has revised the annual production figures for the current fiscal from 6.20 lakh tonnes to 6.10 lakh tonnes.He said the Board has pared the production figures down based on the feedback from the plantations during the first half of the current fiscal. He said, while the total rubber production went up a shade over 8 per cent during the last fiscal the Board had projected a growth of 4.5 per cent for the whole 1998-99 fiscal. He said during the first half of the current fiscal the total production was virtually stagnant with the growth rate being at 0.6 per cent. The Board has projected a growth of 7.3 per cent in the second half of the current fiscal. However, the Board feel that production is likely to be lower than the projected growth rate following late beginning of the season and less moisture content in the soil.

He said, even after the elapse of November the second season for natural rubber has not began in the full swing as major rubber growing areas are still under rainfall. "The tapping in most of the rubber growing areas in the State other than Kottayam, is hit by the late rains lashing these areas",the source pointed out. He also feel that the second season, which is considered as the peak production period due to night cold and other favourable climatic factors, is likely to be end by February because of the predicted low moisture content in the soil. Growers generally stop tapping if the soil becomes dry to avoid risking the life of the plant, he said. Besides, lower prices are acting as a dis-incentive for the growers, the source added.

However, on the other hand, the Board has also pared the estimates of consumption down to 5.84 lakh tonne for the entire 1998-99 from 6 lakh tonne projected earlier. While, the total consumption of the commodity grew at a -0.8 per cent during the first half, the growth in demand during the second half is estimated at 5 per cent, taking the total demand growth to 2.1 per cent.

Taking into account all the exogenous and endogenous factors, Board sources feel that the price is likely to stabilise at Rs 33 per Kg. Even in the worst case scenario the price for RSS-4variety is unlikely to fall below the Rs 32 per Kg mark, they said.

This, they said is because of several factors. First, they said the price for RSS-4 variety has been hovering around Rs 33 per Kg without much support from outside agents. Second, there are early signs of recovery from key demand sectors including the tyre sector, which has the maximum linkage effect with the rubber sector.

Third, they said, the Government agencies lead by the State Trading Corporation which has an unutilised mandate of over 18,000 tonnes, will step into the market once the price slip below that level.