- Budget 2022 proposes to ban import of rubber-based products to support local industries
- The move also aimed at doing away with exportation of raw rubber
- Local rubber value addition industry calls for long-term solution to natural rubber supply issues
- Urges need for aggressive replanting
The proposed ban on importation of rubber-based products and the parallel promotion of investments into local production of rubber related finished goods may not yield the desired results as the country is already scrambling to meet the demand for natural rubber needed to power its existing value addition industries, according to an industrialist.
The budget 2022 presented on November 12 proposed to restrict importation of rubber related products and to promote investments into the local rubber based value addition industries for both domestic and international markets, while doing away with the exportation of raw rubber.
“It’s a good move, but the question is it’s a short-term thing and we must have long-term arrangements as to the supply of natural rubber,” said Dr. Kulatunga Rajapaksa, Emeritus Managing Director at DSI Group of Companies, which is famed for manufacturing footwear, tyres and a range of other rubber-based products for over five decades.
“Right now the rubber production is about 5,000 to 6,000 tonnes a month which is barely enough for the present value addition part. Therefore we are importing,” Dr. Rajapaksa told a post budget forum held last week calling for replantation of rubber, which he said as the durable strategy to address the perennial issue facing the local value added manufacturers.
This year, the problems facing the rubber producers and value added manufacturers have been exacerbated due to the incessant rains, which have damaged the rubber yield.
Replanting of rubber has a six-year gestation period.
The budget allocated Rs.10 billion over what is already allocated under the Appropriation Bill for replanting a number of export crops including tea, rubber and cinnamon as part of its broader plantation sector incentive package for next year.
Having massively failed in their experiment since last year, the government continues to push through its import substitution agenda as part of their trade policy. The government appears to have doubled down on this futile exercise in the budget presented for next year.
The import substitution policy provides special concessions, tax payer funded subsidies and other relief for those who engage in such industries but has almost always resulted in the taxpayer having to bear exorbitant prices in the market, more often for an inferior quality product. The policy has also resulted in breeding rent seeking cronies who win special interest under whatever the administration in power at the expense of the hapless taxpayer.
Experiments made on paddy, turmeric, green gram, dairy and many other food and non-food products since last year have resulted in the people having to pay at many multiples the price they paid prior to such policies came into being. Ironically, after having a record paddy harvest for back-to-back years, Sri Lankans are paying more than double the price they pay for rice now and the prices of the vegetables in the country, thanks to the government’s ill thought out fertiliser policy, are now at levels simply out of reach of a low income family of three. The plight of rubber products will be of no different if the government restricts finished rubber goods imports as proposed in the budget.