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Now, tyre industry under PMO scanner

business Updated: May 20, 2008 21:12 IST
Sumant Banerji
Sumant Banerji
Hindustan Times
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After steel and cement, it's the turn of the tyre industry to come under government scrutiny. The Prime Minister's Office has asked the Industry Ministry to look into pricing of tyres by manufacturers and take "appropriate action" in this regard.

A senior Industry Ministry official, who spoke to Hindustan Times on condition of anonymity, said the Department of Industrial Policy and Promotion has received a letter from the PMO to look into the matter. The direction comes following allegations by tyre dealers that manufacturers have increased prices despite a fall in the share of raw material costs in net sales.

Last month, the Monopoly and Restrictive Trade Practices Commission sent notices to five tyre makers - Apollo, JK, MRF, CEAT and Goodyear - to probe if they were operating as a cartel.

Tyre companies have increased prices as many as three times in the last six months blaming high cost of inputs like rubber, crude and steel for it. But according to the All India tyre Dealers Federation, the share of raw material costs in net sales has fallen by 12-15 per cent during the two quarters ended March, 2008. For example MRF's net sales for six months ended March 31 2008, rose to Rs 2370.40 crore over Rs 2141.35 crore while raw material costs came down to Rs 1505.68 crore against 1527.33 crore.

Raghupati Singhania, chairman of the Automotive Tyre Manufacturers Association, however, defended the price revisions effected by the tyre companies. According to Singhania, natural rubber prices have gone up by 24 per cent, butadiene rubber by 66 per cent, nylon tyre cord fabric by 13 per cent, carbon black by 24 per cent and rubber chemicals by 23 per cent and that has forced tyre makers to hike prices.

“Being a raw material intensive industry, there is only a limit to which such spiraling rise in the cost of inputs can be absorbed by the industry,” Singhania said.