Falling rubber price is a major challenge for the cultivators and Kerala economy. The major reason for decline in rubber price is the fall of crude oil prices. As a result, cost of synthetic rubber is declining and tyre companies are happy to import synthetic rubber. Apart from this, the Free Trade Agreement between India and ASEAN signed in 2009 made an impact on the rubber market.
Falling Rubber Price – Government intervention
Import of natural rubber from ASEAN countries causes fall in rubber prices and brings havoc in the life of around ten lakh rubber producer households especially in Kerala, Tamil Nadu, Karnataka, Goa and North Eastern states. The average price of natural rubber in 2010-11 was Rs 240 per Kilogram. In the last three years it has come down heavily and now stands at Rs 100 per kilogram and small farmers are selling for Rs 90 per kilogram.
To address the price fall, Union Government hiked import duty on natural rubber by 5% to 25% and basic customs duty on natural rubber has been raised from 20 percent or Rs 30 per kg, whichever is lower. Price fall is so acute that even with these measures, the problem of farmers still persists. Cost of latex production does not align with the price fall. So the production of latex is no more profitable. As a result, most of the rubber farmers abandon the production. The only community which gains from this price fall is the tyre factory owners.
The Kerala government announced a scheme of assured price of Rs 150 per kg for rubber farmers, who are reeling under crisis due to sharp fall in natural rubber prices. For this, state government allocated Rs 300 crore. This action may provide some relief to nearly a million small growers of the commodity.