According to researchers, the increase of carbon black's customs duty and the reduction in duty on caprolactam, which are both important for the tyre industry is said to increase localisation by tyre manufacturers. On this basis, the customs duty on carbon black has been increased to 7.5 percent and the duty on caprolactam has been reduced to 5 percent as per the budget.
Satish Sharma, president, Apollo Tyres, says that, "The industry has been adding capacity of carbon black in the country and an increase in customs duty will further boost investment in capacity addition by tyre makers in India." The changes in the duty are said to address the problem of inverted duty structure.
K M Mammen, chairman ATMA (Automotive Tyres Manufacturers Association) and CMD MRF, said: "Inverted duty structure in the tyre industry has created an uneven playing field and we look forward to the new duty structure which will be put in place by October 2021."
However, tyre manufacturers are concerned that carbon black is not the only inverted duty raw material in the tyre industry
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Rajiv Budhraja, director-general ATMA, said: "Tyre industry is already bearing the brunt of higher import duties on several key raw materials including duty inversion in case of natural rubber."
Earlier, The Commerce and Industry Ministry had submitted its recommendation wherein it had advised the government to 'rationalize' basic customs or import duties on over 300 items from different sectors, including pneumatic tyres.
For new pneumatic tyres of rubber specifically, it had recommended a hike in customs duty from 10-15% to 40%.
The move comes after multiple such yearly hikes for import duties on tyres in the last few years. In 2018, the customs duty for pneumatic car radials was increased to 10-15 %. The government in June, 2019 had imposed countervailing duty as well as anti-dumping duties for five years on new trucks and bus radial tyres (above 16 inches), which are imported from China. The 2019 hikes came owing to the increased fear that the US-China trade war would drive up exports of tyres to India, with the Chinese seeing the country as an easy alternative with significant demand.
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