Natural Rubber (NR), also known as Hevea Brasiliensis is one of the key commodities on the Indian market. Recently, there have been significant disruptions in this sector due to plummeting prices which have hit a 16-month low. Consequently, farmers and various organizations have engaged in protests over the downturn and the consequent hardships. Several factors have contributed to the sudden fall in pricing.
The Cause: Poor Demand and Other Factors
The sharp drop in NR prices can be attributed primarily to two central reasons: weak demand from China and the ongoing European energy crisis coupled with high inflation. China’s stringent zero COVID strategy, which consumes approximately 42% of the global volume of NR, has led to a significant blow to the industry.
Impact from Imports
Another factor contributing to the fall in domestic rubber prices in India has been an ample supply of block rubber from Ivory Coast and compounded rubber from the Far East for the domestic tyre industry. The Auto-Tyre manufacturing sector alone accounts for 73.1% of the total quantity of natural rubber consumption.
Effects on Farmers and SMEs
Falling prices impact heavily on the rural areas, where most dwellers rely solely on rubber cultivation. Crop shifting, a widespread reaction to falling prices, often results in the fragmentation of rubber holdings. Small and Medium Enterprises (SMEs) are also suffering as the price drop threatens business continuity, some even having to halt production temporarily.
Kerala: A Case Study
Kerala, a state that accounts for almost 75% of total rubber production in India, is particularly affected by the falling prices. The local economy heavily depends on rubber production, fostering widespread panic in Kerala’s farming villages.
About Natural Rubber
Rubber is an industrial raw material made from the latex of a tree named Hevea Brasiliensis. It thrives in specific conditions such as above 25°C temperatures, a moist and humid climate, and rich well-drained alluvial soil. Major global rubber producers include Thailand, Indonesia, Malaysia, Vietnam, China, and India.
Rubber Production in India
The British established the first rubber plantation in India in 1902 on the banks of the Periyar river in Kerala. Currently, India ranks as the fifth largest producer of Natural Rubber globally and remains the second biggest consumer. Most of India’s total natural rubber consumption is met through imports. Kerala, Tamil Nadu, and Karnataka are the top rubber producing states in India.
Government Initiatives
India’s government has initiated various programs to support the rubber industry, including the Rubber Plantation Development Scheme and the Rubber Group Planting Scheme. In March 2019, the Department of Commerce launched the National Rubber Policy, designed to support the Natural Rubber (NR) production sector and the entire rubber industry value chain.
The Rubber Board of India
Headquartered in Kottayam, Kerala, The Rubber Board of India operates under the administration of the Ministry of Commerce and Industry. Its key responsibilities include supporting and promoting research, development, and training activities related to the rubber industry.
Way Forward
Raising import duties on compound rubber could help stabilize the market. To address farmers’ concerns, the government could also increase the replanting subsidy and the support price of rubber under the price stabilization scheme.
[UPSC Civil Services Examination Previous Year Question (PYQ) removed]
Background: New World and Old World Crops
Christopher Columbus discovered the New World, known today as the Americas, during his voyage to India. The Old World continents during the 15th century included Asia, Africa, and Europe. Tobacco, a significant cash crop native to the North and South American continents, became known to the Old World when European explorers noticed Native Americans using it as medicine. Similarly, Natural rubber trees originated in Southern America and were later introduced to the Old World, along with the cocoa tree from the Amazon Basin. Cotton and Wheat, on the other hand, were native to the Old World, found in the Indus Valley Civilization.
