Domestic tyre companies face the heat

Transport ministry seeks elimination of customs duty to usher in foreign competition

Written by Gunjan Pradhan Sinha | New Delhi | Published: January 22, 2009 12:30:11 am

In what may queer the pitch for local tyre makers such as MRF,Ceat and JK Tyres,the ministry of road transport and highways has asked the commerce ministry to review its decision to place radials or tyres under the restricted category of imports. After the truckers strike,it has written to the department of commerce to remove the restriction on import of tyres.

Tyres attract 14 per cent customs duty. Countervailing duty adds another 10 per cent,taking it to 24 per cent. The road transport ministry claims that this is tantamount to protection for three of the largest domestic tyre manufacturers. Commercial vehicle producers are not able to import tyres and are forced to pay the prices quoted by Indian players,it pointed out.

“We are of the view that there is some cartelisation on pricing of tyres as far as three the Indian major players are concerned,” a government official who did not wish to be named said.

The road transport ministry claims that tyre manufacturers in India raised the prices of radials by 19-22 per cent during April-October 2008 on the plea of natural rubber prices going up from Rs 88 per kg to Rs 142 per kg. Imports of truck and bus radials dropped to less than a third in September-November 2008 due to an appreciating dollar and high level of duties. By this time rubber prices also fell to a 3-4 year low but domestic tyre companies did not pare prices.

“After the matter was raised with the commerce department,leading tyre manufacturers dropped prices,but by only 3-5 per cent,which is a nominal cut,” said the official.

The excise duty on tyres is 10 per cent. If the import duty is done away with,then the domestic and imported radials can compete in the market as there is already a 10 per cent countervailing duty on them,say commercial goods vehicle owners associations.

It seems the ministry of road transport and highways is making all efforts to resolve issues with transporters so as to avert any further stand-off with them after having to deal with two strikes within a six month period in the current fiscal.

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