"If the hike is imposed then it will make us uncompetitive in terms manufacturing in the country and hence you will start seeing more of tyre imports," he said in an interview to CNBC-TV18.
Further tyre manufacturing outside India would become much cheaper than manufacturing it domestically if the duty was hiked.
Also read: Tyre prices brake on stable rubber; exports to boom: Ceat
Below is the verbatim transcript of his interview on CNBC-TV18
Q: We understand that the government is going to notify hike in import duty on imported rubber. What does this mean to rubber consumers such as yours? Will the cost go up?
A: There will be a certain impact in terms of rubber prices that will be there in the domestic market. However, we need to see how much that impact will be because it is clearly demand-supply equation. From an industry perspective, our belief is it is not a step in the right direction given that it will translate into imported tyres coming in because the cost of manufacturing tyres outside the country will become more competitive.
Immediately, the impact that will be on the companies will depend significantly on the mix of revenues that they get from exports because depending on the quantity of export one gets licence to import duty-free rubber.
So for company-by-company, it will vary, but at an industry level we should see strengthening or hardening of domestic rubber prices because of this.
Q: Is it right that the import duty cap will be Rs 34 per kg from the current Rs 20. So, basically a kilogram of rubber could get about Rs 14 more expensive for you. What does this mean in terms of percentage increase in raw material cost for a tyre?
A: The numbers have to be looked a little differently. Current policy is 20 percent or Rs 20, whichever is lower. So effectively you end up paying Rs 20 for the amount of rubber you import per kg. From there the policy is moving to 20 percent of Rs 34, whichever is lower. So, the 20 percent will translate close to Rs 28-29 given the current rubber prices.
So effectively, the increase will be Rs 20-28 per kg. It is only on the amount of rubber that you import. So, close to about 75-80 percent of the rubber is still domestic. If you translate that at the overall level then it will mean Rs 2-3 per kg impact, which is close to about 1 percent or 1.5 percent increase in the raw material prices because rubber happens to be 50 percent of the total revenue from a tyre perspective.
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