The rubber sector in Kerala is headed for a new crisis with just two months left for the implementation of the next phase of ASEAN Free Trade Agreement (FTA). As more rubber products will be eligible for import tariff reduction as per FTA, it will have serious repercussions of Kerala, which accounts for 80% of natural rubber production in the country. 

 

Reduction of import tariff of a wide range of rubber products under the FTA will be a severe blow to rubber farmers who are already facing a crisis after the price of natural rubber took a downward spiral soon after India hosted ASEAN-India Commemorative Summit in 2012.  In the next phase, import duty of 14 more rubber products will be eliminated while the import tariff of 71 products will come down to 5%. 

 

As many as 174 rubber products ranging from rubber bands to tubes of tyres are listed under FTA. With the implementation of next phase in January 2017, import duty of 92 products will be abolished while the tariff of 40.23% rubber products will be reduced to 5%. 

 

The troubles for the rubber farmers in Kerala multiplied with  India began signing individual trade agreements with ASEAN countries, from 2012 onwards, which led to further reduction or elimination of import tariffs on several rubber products. Rubber price was Rs 240 per kg in 2011, and it plummeted to Rs 90 per kg in 2015. Tariff changes are likely to cripple the domestic rubber sector pushing the farmers into a deeper crisis. 

 

A study of Rubber Research Institute had found that FTA has led to the ballooning of trade deficit of Indian rubber sector. The trade deficit increased from $9.88 crore in 2004-09 to $61.16 crore in 2009- 14 after India signed FTA in 2009.