Innovate and flourish
Revising its earlier forecast on natural rubber supply outlook, the Association of Natural Rubber Producing Countries (ANRPC) has reported that prices may not rise in the short-term after five years of heavy decline. In India, import liberalisation has also contributed to the current decline in NR prices, says Dr KJ Joseph, Professor at the Centre for Development Studies (CDS) in Kerala. As a short-term measure, it may be advisable to impose some import restrictions to address the issue of price drops. However, it is myopic to depend entirely on trade restrictions as a means to stabilise prices
Well-known economist Dr KJ Joseph, Professor at the Centre for Development Studies (CDS) based in Thiruvananthapuram, Kerala, says import liberalisation is one of the contributing factors that has led to the crash in natural rubber prices.
To curb the current price decline, as a short-term measure, it may be advisable to impose some import restrictions, he observed. “Having said that, it will be myopic to depend entirely on trade restrictions as a means to achieve price stabilisation.” India has to look beyond this and encourage innovation, he said adding that these are his personal views and do not represent that of CDS.
The long-term solution lies in further strengthening the competitiveness of NR sector that can be achieved only through increasing productivity and bringing down production costs, he noted. It is also important to build an internationally competitive rubber-based industry in Kerala, the state which contributes more than 90 per cent to India’s NR production.
“This becomes especially important in Kerala because during the last 25 years, the share of manufacturing in the State Domestic Product (SDP) has declined from 15 per cent to 6 percent,” he noted.
While the national policy-makers were much concerned about their inability to increase the share of manufacturing output from 15 per cent in 1991, the state government has failed to take appropriate action to mitigate the problem.
Such inaction is unacceptable because Kerala still remains as a raw material supplier to other states. Piecemeal attempts like establishing Rubber Parks at the instance of government-run Rubber Board with a meagre investment of Rs 500 million will not be of much help, Dr Joseph said.
The challenge before Kerala, which now has a new government, is to establish an international rubber park covering a wide range of products by harnessing the resources from different stakeholders like planters, the commodity board, manufacturers, both foreign local and foreign.
Make in India
Dr Joseph suggested Kerala should take advantage of central government’s Make in India programme and produce value added products. In that case availability of land will not be a constraint as one of the rubber estates under the state government could be utilised for this purpose.
The sustained competitiveness of such an initiative would depend on the R&D and knowledge input to such projects. Hence, the Rubber Research Institute of India (RRII), which is under the Rubber Board, could be upgraded its work with additional mandate to undertake research on rubber-based products.
Such industrial parks should be established in other rubber growing states as well. It should be done in such a way that their synergy through backward and forward linkages is fully utilised instead of squandering away resources in wasteful competition.
In this process both the large and small holders will find that they have major roles to play in the country’s NR economy. The small growers, apart from discovering new investible resources, could also contribute to economic development by of their social capital.
While the large holders could contribute in the form of investible resources, knowledge and managerial resources will help the rubber sector achieve sustainable and equitable development, he felt.
Commenting on ageing of the plantations and labour shortages, Dr Joseph said it is important to take appropriate policy decisions to handle the issue of ageing plantations, which in turn will prevent a total collapse of the NR economy.
Systematic efforts towards timely replanting through utilisation of government subsidy notwithstanding, NRPPD (National Research Programme on Plantation Development) has shown that a major issue facing Kerala’s NR sector is the ageing of plantations. This in turn is shown to have adverse impact on the yield performance.
Dr Joseph said there is an inexorable link among NR prices, rubber-wood prices and replanting. Therefore, the ultimate solution to this issue lies in ensuring stable and remunerative prices along with required investible resources.
Yet another issue of much concern is the acute shortage of labour, especially for rubber tapping. Given the new opportunities from other growing sectors of the economy and new employment opportunities offered under MNRGEA (Mahatma Gandhi National Rural Employment Guarantee Act), there has been an acute shortage of labour in all plantation crop sectors, including NR.
In this context, the initiatives of the Rubber Board like training new tappers and setting up Tappers Bank are timely interventions. NRPPDP studies have called for harnessing woman labourers and utilise institutions such as woman neighbourhood groups like Kudumbashree, a female-oriented, community-based poverty reduction project of the Kerala government. It can be done with appropriate modifications under MNREGA.
“However, I am inclined to say that in a highly status-conscious Kerala society, the young generation is not at all interested in the conventional type of work in the agricultural and plantation sectors. Hardly any attempt has been made to adapt the work and work environment and improve the work status to make it more attractive and acceptable to the youth,” Dr Joseph said.
The long term solution, therefore, lies in bringing about appropriate technological changes along with organisational innovations. Perhaps it is high time to do away with terms like plantation thottam thozhilali (labourer in local parlance) vettukaran (rubber tapper).
Addressing another complaint from the NR growers, the economist said that the inverted duty structure is harming the plantation sector. Under this tax regime, the import duty on the raw material is higher than the import duty on the finished goods.
Different segments of the rubber sector like tyre and tube manufacturing, rubber and latex goods industry etc are confronted with the impact of the inverted duty structure leading to high-costs that in turn is adversely affecting their international competitiveness.
Given the adverse effect of the inverted duty structure on the competitiveness of the producers of the final product, it is important to rework the policy to ensure that this anomaly is done away with.
Dr Joseph emphasised that there should be a relook to bring sustainability-oriented innovations to India’s NR economy. “The term sustainability has at least three dimensions: Economic, social and ecological,” he said. These are interrelated and sometimes in conflict with each other.
The challenge before policy-makers is to facilitate the growth of the sector in such a way that sustainability in all their dimensions is ensured. In the context of globalisation, economic sustainability depends to a great extent on building international competiveness.