Explained | The fall in natural rubber prices in India

Why are natural rubber farmers protesting against the government? What has led to the decline in prices?

The story so far: After a moderate post-pandemic revival, the price of natural rubber (NR) has crashed to a 16-month low of ₹150 per kg (RSS grade 4) in the Indian market. The price of latex, which soared during the pandemic due to huge demand from glove makers, took a more severe drubbing with its prices rolling down below ₹120. With the impact of the falling prices beginning to reflect in their daily lives as well as the local economy, the growers are up in arms against the authorities for their perceived delay in checking the slide. Under the aegis of the National Consortium of Regional Federations of Rubber Producer Societies India, an umbrella organisation for rubber growers, a day-long sit-in protest was staged in front of the Rubber Board headquarters in Kottayam, Kerala, last week.

The current fall in prices is attributed primarily to a weak Chinese demand and the European energy crisis, along with high inflation and an import glut, among other things. While the unremitting zero COVID strategy in China, which consumes about 42% of the global volume, has cost the industry dearly, analysts have also flagged the acceleration of imports.

The domestic tyre industry, according to them, is sitting pretty on an ample inventory, especially in the form of block rubber from the Ivory Coast and compounded rubber from the Far East.

India is currently the world’s fifth largest producer of natural rubber while it also remains the second biggest consumer of the material globally. (About 40% of India’s total natural rubber consumption is currently met through imports)

A latest report by the Rubber Board has projected the natural rubber production and consumption in India during 2022-23 as 8,50,000 tonnes and 12,90,000 tonnes respectively. The production of the material improved by 8.4%, to 7,75,000 tonnes, during 2021-22 compared to 7,15,000 tonnes in the previous year. An increase in yield, tappable area and area tapped during the year contributed to the rise in production.

On the demand side, the domestic consumption rose by 12.9%, to 12,38,000 tonnes in 2021-22 from 10,96,410 tonnes in the previous year. The auto-tyre manufacturing sector accounted for 73.1% of the total quantity of natural rubber consumption. Import of the material, meanwhile, increased to 5,46,369 tonnes from 4,10,478 tonnes.

The turnaround has exposed the growers — mostly small and medium scale — to a painful reckoning, contributing to wide-spread panic in Kerala, which accounts for nearly 75% of the total production. The precipitous plunge in prices coupled with high costs have also left them staring at an uncertain future, forcing some to stop production for the time being.