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Run-up to the Budget: Tyre industry
State of the industry (2000-01)
- Total capacity of the tyre industry is expected to increase due to capacity additions in the car radial tyre category.
- Growth in tyre production is estimated at 4.3 per cent, due to lower than anticipated growth in the replacement demand for truck and bus tyres, and a decline in automobile production.
- Imports of tyres (largely car radials) are expected to decline due to significant capacity additions by tyre producers.
- Exports of truck tyres are expected to increase, due to lower than anticipated replacement demand in the domestic market.
- Average price realisations on truck tyres are expected to remain stable. However, average prices of car radials are expected to decline over those in 1999-2000. Prices are expected to decline due to an increase in the supply of car radials, as a result of significant capacity additions by tyre producers.
- Operating profit margins of tyre producers are expected to decline, due to higher prices of raw materials. (Domestic prices of raw materials increased due to an increase in international prices.)
Industry expectations from the Union Budget (2001-02)
- A reduction in the excise duty: The Automotive Tyre Manufacturers' Association (ATMA) has asked for a reduction in the excise duty on all tyre categories, tubes and flaps from the existing level of 16-32 per cent to 8-16 per cent. The excise duty could be reduced in a phased manner over the next two years.
- Withdrawal of the concessional customs duty: The ATMA has asked for the withdrawal of the concessional customs duty of 5 per cent, levied under the Bangkok Agreement.
- A reduction in the customs duty on raw materials: The ATMA has asked for a reduction in the customs duty on raw materials of tyres, to atleast 10 per cent less than the import duty on tyres.
- A waiver on the customs duty on tyre cord: The ATMA has asked for a waiver on the customs duty on steel tyre cord and polyester tyre cord, which are not produced indigenously.
- A restriction on the imports of used/old tyres: The ATMA has asked for a restriction on the imports of used/old tyres, through the imposition of a customs duty of $ 50 per tyre.
| |
Tariffs
(per
cent) |
Domestic
prices |
International
prices |
Landed
cost |
| |
1999-2000 |
2000-01 |
Price
type |
Jan
2001 |
Price
type |
Jan
2001 |
(Rs/tonne) |
| |
Customs |
Excise |
Customs |
Excise |
|
(Rs/tonne) |
|
($/tonne) |
Jan
2001 |
|
Natural
rubber1 |
27.5 |
- |
30.0 |
- |
Kottayam
market |
28,800 |
fob
Kuala
Lumpur |
654 |
40,734 |
|
SBR |
40.0 |
16.0 |
44.0 |
16.0 |
Ex-factory |
54,000 |
cif
Mumbai |
950 |
67,570 |
|
PBR
(1220) |
40.0 |
16.0 |
44.0 |
16.0 |
Ex-factory |
63,220 |
cif
Mumbai |
900 |
64,080 |
|
NTC
fabric2 |
40.0 |
16.0 |
25.0 |
16.0 |
Ex-factory |
179,000 |
cif
South-East
Asia |
2,900 |
191,840 |
|
Carbon
black
(N220) |
38.5 |
16.0 |
44.0 |
16.0 |
Ex-factory |
37,700 |
cif
Mumbai |
500 |
38,873 |
NTC: Nylon tyre cord; PBR: Polybutadiene rubber; SACD: Special additional customs duty; SBR: Styrene butadiene rubber.
1 Excise duty is in the form of cess of Rs 1.5/kg.
2 Additional excise duty of Rs 10/kg in the basic customs and excise duty.
Notes:
1) For 2000-01, the landed cost and customs duty include the SACD of 4 per cent, effective since 1999-2000. In 1999-2000, the SACD was applicable only for non-traders, and hence, has not been included in the customs duty.
2) In the case of NTC fabric, SACD is not chargeable.
3) All raw materials, except natural rubber, are under the open general license (OGL). A special import license is required for importing natural rubber However, imports of natural rubber from the SAARC countries (such as Sri Lanka) are under the OGL, and are subject to an import duty of 25 per cent.
4) Given the surplus availability of natural rubber in the domestic market, the Government of India has banned natural rubber imports under the advance license also, with effect from February 20, 1999. In an alternative arrangement, exporters of rubber goods are allowed to purchase locally procured rubber from State Trading Corporation of India Ltd., at international prices. As on January 31, 2000, the ban on imports of natural rubber was effective.
5) As on January 31, 2000, an anti-dumping duty of Rs 48.20-62.16 per kg was effective on imports of SBR from the US, Taiwan, Turkey, Korea and Japan.
6) From November 9, 1999, a provisional anti-dumping duty was imposed on the imports of nylon tyre cord fabric. As on January 31, 2000, the anti-dumping duty was at Rs 1.77-4.22 per kg on imports from South Korea, Indonesia, Thailand and Taiwan.
Compiled by CRIS INFAC
Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.
Rediff-CRISIL Budget Impact Analysis
Budget 2001
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