Last year, NR fetched an average price of Rs95 a kg for the growers. Last week, the price of the benchmark grade RSS-4 shattered previous records, touching the Rs180 mark. Growers and traders in the southern Indian state of Kerala expect NR prices to continue heading northwards, perhaps even breaching the Rs225-mark by the end of the year.

Rubber prices are expected to expand globally this year, despite a sharp fall in demand in the industrialised world, including the US. According to Sajen Peter, chairman, Rubber Board, India has emerged as the world's second-largest consumer of rubber after China, replacing the US.

The International Rubber Study Group (IRSG) had predicted that India would become the second-largest consumer of rubber between 2015 and 2020, but a dramatic, nearly 35 per cent fall in rubber consumption in the US has pitch-forked India to that position this year. But Peter admits that it would be difficult for India to retain the second position, as demand in the US is expected to pick up, once the economy gains traction.

According to the Association of Natural Rubber Producing Countries (ANRPC), despite sharply reduced demand for NR from the developed world, countries such as China, India and Malaysia would ensure continued growth for the industry. The auto sector in all these three countries is expanding at a rapid clip, fuelling demand for tyres and rubber.

For instance, NR consumption in China shot up (on an annualised basis), by more than 25 per cent during the January-April period, according to ANRPC figures. In Malaysia, it grew by nearly 14 per cent and in India by almost 12 per cent. China accounts for nearly a third of the global demand for rubber. Global consumption of NR in 2010 is expected to rise by almost 12 per cent.

But the association has forecast slower growth in supplies, slashing the figure to 5.2 per cent from 6.1 per cent projected in May. During 2010, global NR production is expected to be less than 9.4 million metric tons.

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Thailand, the world's largest producer of NR, will see a mere 2.4 per cent growth in production at 3.24 million tons. Indonesia's production is expected to expand by 6.2 (at 2.44 million tons), Malaysia's by 16.7 (at one million tons) and India's by 9.1 per cent (at 895,000 tons).

WITH the south-west monsoon having set in with full fury, rubber tapping in Kerala - which accounts for 90 per cent rubber production in the country - has slowed down sharply. George Valy, president, Indian Rubber Dealers Federation, notes that heavy rains in the state have affected rubber tapping and the plantations are unable to meet demand. He also suspects that growers are holding on to their stocks, expecting a further hike in prices.

Rubber consumers, who include the powerful tyre industry, are annoyed with the government over the continued failure to stop the price rise. The Rubber Board claims that there is a 200,000-ton buffer stock, which would help cool down prices in case of a sharp spurt.

But Rajiv Budhraja, director-general, Automotive Tyre Manufacturers Association (ATMA), rubbishes these claims, pointing out that much of the rubber that finds its way into the market is fresh stock.

A major battle is brewing between the rubber producers and the consumers, with the latter accusing the growers of jacking up prices and lobbying against the import of rubber. The ATMA, together with the Indian Cycle and Rickshaw Tyre Manufacturers Association and the All India Rubber Industries Assocition, has filed a petition in the courts, seeking regulation of NR prices, the removal of import duties, the fixing of a price band and banning futures trade in rubber.

The consumers are demanding that import on NR be brought down from 20 to seven per cent. According to ATMA, there is a distorted duty structure in India, with importers of raw materials (rubber) having to pay higher duty (20 per cent), while importers of finished products (tyres) pay just 10 per cent import duty. Indian rubber is also dearer by Rs10 a kg as compared to the international commodity.

But the Indian Rubber Growers Association (IRGA) is opposed to any reduction in customs duty on NR or a ban on futures trading. According to Siby Monipally, a spokesman of the IRGA, NR consumers were trying to dictate terms to the growers and hurting the rubber industry in the country.

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THE tyre industry is also engaged in a battle with the automobile sector, with the latter accusing it of hiking prices and not ensuring timely delivery. Tyre prices in India have already jumped by 10 per cent so far in 2010 and the industry fears prices would rise by another 25 per cent.

Blaming tyre manufacturers, many automobile firms are planning to raise the price of their vehicles, the fourth such hike this year. Ashok Leyland, a leading producer of commercial vehicles, plans to increase the price of its vehicles by between Rs20,000 and Rs50,000. Two-wheeler makers Hero Honda and Bajaj Auto have already raised their price of their products by Rs1,000.

General Motors, Toyota Motors, Maruti Suzuki and Tata Motors are also learnt to be toying with the idea of raising prices, to off-set the rising cost of components including tyres and steel. General Motors, for instance, is raising the price of its products by up to two per cent from this month, as the price of raw materials - including steel and rubber - have gone up sharply, says a company spokesman.

Worse, many automakers complain that shortage of components, including tyres, is leading to delays in deliveries. There are growing disputes between tyre manufacturers and auto firms over the price of tyres. The former wanted to revise the price, despite entering into long-term contracts, as the price of rubber has more than doubled in recent months.

The RSS-4 grade of rubber is the main raw material for tyres. Tyre makers are demanding a 25 to 30 per cent increase in the price of tyres, but auto firms are reluctant to accede to their demands.

A lock-out at a plant of Apollo Tyres in Kerala has also resulted in an acute shortage of tyres. Apollo accounts for nearly a third of the demand for tyres for buses and heavy and light commercial vehicles, and the Kerala plant is a major supplier of such tyres.

The Indian government had last month liberalised tyre import rules, allowing unrestricted import of radial tyres for trucks and buses.

Manufacturers of these vehicles had complained that a shortage of radial tyres could affect production.

Chinese radial tyres are 20 to 30 per cent cheaper than Indian ones. Consequently, imports from China account for nearly 70 per cent of truck tyres in the country.

But despite the opposition from the automobile industry, tyre makers are planning to raise the price of their products. Apollo Tyres, for instance, has decided to go in for yet another price hike - the fourth this year - from this week. According to a company spokesman, the continuing increase in NR prices has forced it to go for the latest round in price increase. Other manufacturers including Dunlop India are also raising the price of tyres.