Reclassification of rubber as agricultural commodity

The recommendation by the Parliamentary Standing Committee on Commerce to recognise natural rubber as an agricultural commodity deserves urgent consideration by the government to accept it and initiate policy change to benefit small rubber growers in the Northeast region. Apart from tightening imports to protect the livelihood of rubber growers in the country, recognition of the commodity as an agricultural commodity will unlock agricultural subsidies and open the scope for negotiation of a minimum support price to increase the sustainability of rubber growing as an assured livelihood. The parliamentary panel’s recommendation is centred around the argument that rubber is an agricultural crop similar to cotton and other such produce and warrants protection like any other crop instead of its current classification as an industrial raw material under the World Trade Organisation (WTO) framework. The committee’s view that the classification of natural rubber outside the agricultural category under the WTO “is patently anomalous” stems from its observation that “this misclassification has led to an influx of rubber imports from SoutheastAsian countries, endangering the very existence of rubber cultivation in India, which supports millions of farmers.” The primary argument advanced by the parliamentary panel is that current classification as industrial raw material has resulted in minimum tariff rates set as 25%, whereas imports of agricultural products can be subjected to tariffs of 100% to 150% to protect the small growers and plantation owners. The parliamentary committee points out that natural rubber in its dry form is the only plantation commodity with maximum customs duty fixed at a notably low level of 25%, and it is necessary to reassess and adjust this rate for natural rubber imports to better align with the country’s economic and trade priorities, ensuring fair protection for domestic producers. The central government, however, holds the view that natural rubber cannot be treated as an agricultural product. It argues that rubber cultivation may be treated as an agricultural activity, but the income from its post-cultivation practices may not be treated as agricultural income, as it is exclusively used as a raw material for industrial purposes. The inclusion of natural rubber in exclusion lists to protect the interest of rubber growers and the majority of existing Free Trade Agreements (FTAs) and Regional Trade Agreements (RTAs), however, makes a strong case for India to accept the recommendation of the committee. Widening gap between demand and supply of rubber in the country driven by increasing consumption in the automotive and industrial sectors has created opportunities for small rubber growers in the region to expand the area under the crop. The rubber industry has been seeking duty-free import of rubber from major rubber-growing countries to meet the domestic supply gap and to maintain their competitiveness in the global export market. This market reality naturally triggers apprehension among small growers about the sustainability of rubber cultivation as a livelihood, as they fear the import of rubber causing prices of rubber produced by them to fall and become non-remunerative. Assured remunerative prices will also attract more farmers in the region to take up rubber as an alternative crop, which will also ensure sustainable land use. The northeast region primarily being an agrarian economy, reclassification of rubber as agricultural commodity can help create a better ecosystem to promote the crop among more farmers, particularly among tribal farmers. This can help farmers in the region overcome the psychological barrier of shifting to a crop that is primarily seen as an industrial raw material. Poor industrial growth of rubber-based industries creates a disconnect between the activity of growing the crop, which they see as an agricultural activity, and the produce as industrial raw material. The establishment of major rubber-based industries like tyre-manufacturing units and the reclassification of the commodity can boost the confidence of rubber growers and also attract new growers to boost production. The Rubber Research Institute of India releasing three high-yielding and climate-resilient clones in the region reflects initiatives to address issues of climate change and sustainability of the livelihood in the sector. The committee observes that rising temperature, changing rainfall patterns, and increasing drought are experienced in various rubber-growing regions. The observation of the panel about a study carried out to analyse the deviation of maximum and minimum temperature from the optimum requirement for rubber-growing regions in South and NortheastIndia showing an increase in daily and weekly maximum temperature in several rubber-growing regions signifies the importance of ensuring rubber cultivation climate-resilient sustainability of livelihoods associated with it. Another assertion by the committee that the success of “Make in India” in the rubber industry primarily depends on adopting a “Grow in India” approach underscores the crucial importance of the reclassification of the commodity. Persistent shortfall in domestic rubber production will only make the industry heavily dependent on imports, and the potential of rubber growing in the northeast will remain untapped.