Commerce ministry says will fix pricing issue soon

Tyre manufacturers and dealers are again at loggerheads on the issue of pricing. The reluctance of all major tyre manufacturers to reduce prices in accordance to the fall in prices of natural rubber has forced the commerce ministry to look into the matter for the second time in less than a month. Tyre prices have been rising since February this year due to

Tyre manufacturers and dealers are again at loggerheads on the issue of pricing. The reluctance of all major tyre manufacturers to reduce prices in accordance to the fall in prices of natural rubber has forced the commerce ministry to look into the matter for the second time in less than a month.

Tyre prices have been rising since February this year due to an extraordinary rise in the prices of natural rubber. Since the start of this year, rubber prices had gone up from Rs 78 per kg to Rs 116 per kg in May. Then prices slid to settle slightly below the original level of Rs 78 per kg in September. Following the trend, tyre prices also took a jump of around 20-35 per cent across all segments by July. However, a similar reduction in tyre prices mirroring the fall in rubber prices has not taken place.

Late last month, when commerce minister Kamal Nath intervened, tyre manufacturers reduced prices by 3.5-4 per cent on commercial vehicles. Not enough, say the dealers. 8220;The 8 per cent hike in July, even when rubber prices had started easing, was unjustified and the partial reduction is another attempt to fool consumers,8221; said All India Tyre Dealers Association convenor S.P. Singh.

Tyre manufacturers on the other hand rule out a complete roll back as a measure to ward off fluctuations in future. 8220;Commodity prices keep fluctuating and over the past one and a half years the industry has been witnessing a series of rubber price escalations,8221; said Ceat VP sales and marketing Arnab Banerjee.

But the conflict seems to be getting out of hand and the effect is already visible on the balance sheets. In August , the dealers refused to store extra stock which resulted in abnormally high inventories for tyre manufacturers. A conservative estimate suggests that only 3.9 lakh out of 7 lakh tyres were picked up in the replacement market in August.

8220;There is something fishy in the whole process. When the market leader abstains from hiking prices and all the others do, one does get a feeling that we are being taken for a ride,8221; said an Apollo tyres dealer referring to MRF which refused to participate in the last round of hike in July.

Automotive Tyre Manufacturer8217;s Association ATMA has also raised the issue of dealers8217; validity to question a company8217;s motive. 8220;Pricing is something that is strictly subject to a company8217;s own policies. The dealers have nothing to lose either way as their margin is always secure,8221; said ATMA director general D. Ravindran.

Story continues below this ad

The dealers hit back saying that it8217;s the direct consumers they represent. 8220;The consumers are aware of raw material prices and have started blaming us for misleading them and usurping the benefit of price increases. We had to take a stand on this issue,8221; said Singh.

With both parties trading charges against each other, the ball is again in the commerce ministry8217;s court. 8220;We are looking into the merits of the case and are analysing pricing trends,8221; said a commerce ministry official.