Tyre makers seek end to inverted duty structure

Natural rubber, which makes up 42% of the cost of a tyre, attracts customs duty of 20%, while the duty on the finished product is around 10%, leading to an inverted duty structure, industry players said.

“A higher customs duty on the key raw material of tyre industry distorts the cost structure," the Automotive Tyre Manufacturers Association (ATMA) said in a statement, ahead of India’s 2009/10 interim budget on 16 February.

“Our demand was either increase the duty on tyres, or reduce duty on rubber. The inverted duty structure is unjustified," A.S. Mehta, director-marketing, JK Tyre & Industries said.

“To compound matters further, concessional or preferential customs duty on automotive tyres under Regional Trade Agreements is much lower than the applied rate of 10%," ATMA said.

The industry body has asked the government to reduce customs duty on natural rubber from 20% to 7.5%.

It has also sought a 5% customs duty reduction on key inputs such as nylon and steel tyre cords and rubber chemicals and asked for a waiver of customs duty on raw materials not manufactured domestically.

A sharp rise in costs on key inputs for the better part of 2008 and slowing auto sales led to major tyre makers such as MRF, JK Tyre and Ceat posting losses in Oct-Dec.

Car sales in India fell 3.2% in January, the sixth drop in seven months as global economic uncertainty and tight credit crimped demand.

“The basic issue is lack of demand. There must be a stimulus package for auto and transport industry. Once that happens the demand in the market could be restored and tyre firms will not have to cut production," JK Tyre’s Mehta said.

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