India's Rubber Industry Calls for Urgent Government Support Amid Supply Crisis
The All-India Rubber Industries Association has made a pressing appeal to the Indian government for immediate intervention as global supply chain disruptions, linked to the ongoing conflict in West Asia, have severely escalated raw material and freight expenses. This crisis poses a significant threat to thousands of small and medium-sized manufacturers and exporters across the country, putting jobs and export commitments at risk.
Severe Stress on SMEs Due to Rising Costs
In a formal representation submitted to the commerce ministry, the industry body highlighted that SMEs are experiencing intense financial strain. Prices for essential inputs such as natural rubber, synthetic rubber, and rubber chemicals have surged dramatically. This increase is compounded by shipping delays, higher insurance premiums, and uncertainty in crude oil-linked materials, creating a perfect storm for the sector.
The association has proposed several measures to mitigate the impact:
- Ensure equitable access to raw materials for MSMEs.
- Provide enhanced credit support to sustain operations.
- Waive duties on specific synthetic rubbers to reduce import burdens.
- Expedite port clearances to alleviate logistical bottlenecks.
- Facilitate alternative sourcing by granting temporary exemptions or easing imports from countries like China and Southeast Asian nations.
Impact of Oil Price Hikes on Raw Materials
Anay Gupta, president of the All-India Rubber Industries Association, explained the direct correlation between oil prices and production costs. "The impact on the rubber industry is enormous because all the raw materials we use to produce rubber components are oil-based, primarily carbon black, synthetic rubber oils. So anytime oil prices rise, everything becomes more expensive," he stated.
Gupta noted that raw material prices have increased by approximately 30% to 40% compared to pre-conflict levels. The sharpest hikes have been observed in carbon black, synthetic rubber, and processing oils. Natural rubber has also become costlier, with a rise of about 10%, driven by demand factors and India's reliance on imports for around 40% of its consumption.
Freight and Insurance Costs Skyrocket
The conflict has led to substantial increases in logistics expenses. Shipping lines have imposed steep surcharges, adding $2,000 to 20ft containers and $3,000 to 40ft containers. Insurance costs have also risen, and overall freight charges have nearly doubled, exacerbating the financial burden on manufacturers.
"Shipping lines have put $2,000 surcharge on 20ft containers and $3,000 on 40ft containers. Insurance costs also have increased and freight charges have nearly doubled," Gupta emphasized, highlighting the sector's vulnerability due to India's heavy dependence on imports.
Import Dependence and Industry Data
India's rubber industry is particularly susceptible to global market fluctuations because of its import reliance. The country produces only about 60% of the natural rubber it consumes, while synthetic rubber imports constitute a significant portion of domestic demand. Industry data reveals that in FY25, India consumed 856,900 metric tonnes of synthetic rubber, with 413,627 metric tonnes, or nearly 48%, being imported.
Regional Impact and Economic Contribution
In Telangana, the rubber sector comprises approximately 800 units, predominantly MSMEs, with an annual turnover of around Rs 3,000 crore. This contributes 0.5% to 1% of the state's manufacturing output and less than 1% of its Gross State Domestic Product. Key clusters around Hyderabad and Mahabubnagar specialize in producing hoses, tubes, sheets, and profiles, while reclaimed rubber units focus on processing waste tyres.
Broader Implications for Export-Oriented Segments
The supply chain disruptions are expected to have a profound effect on export-driven segments such as automotive components, belting, footwear, and sports goods. Gupta warned, "Anybody and everybody who uses rubber and these inputs is affected badly," underscoring the widespread nature of the crisis across various industries dependent on rubber materials.
