swot analysis of india rubber industry

8/13/2019 SWOT Analysis of India Rubber Industry

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S p e c i a l F o c u s o n R u b b e r R u b b e r C b e m i c a ls

SWOT ANALYSIS

Indian rubber industry is poisedfor spectacular growthl it apac/rage for technoiogicaiupgr d tionand economy sizeoperation india can achieve

spectacuiar progress in ruhher manu facture

INDIA has made tremendous progress in rubber manufac-ture since the first fabric proofing facility was set up in WestBengal in 1922. From that single application, India's marchahead to make 35,000 different products has been incred-ible.

Natural rubber, the basic raw material of the rubberindustry, has advanced in production from around 8 000tonnes in 1920 to 830,000 tonnes in 2006. Its processinghas progressed from ribbed smoked sheets to latex concen -trate, pre-vulcanised latex, different types of crepes, blockrubber, constant viscosity and low viscosity rubbers,epoxidised rubber, thermoplastic rubber, chlorinated rub-ber, poly graft rubber, liquid natural rubber and cyclisednatural rubber. Synthetic rubber also comes in dry and latexforms to suit diverse applications. Reclaimed rubber wasdeveloped to supplement the new rubbers.

Rubber consumption (NR + SR -f RR) progressed fromaround 10,000 tonnes to1 200 000tonnes during the 85-year period of 1920-2006. The manpower employment isnow around 800,000 in the industry; 400,000 in the NRsector a n d another 400,000 in the rubber manu facturing, SRand RR sectors com bined. India is today the 4th largest NRproducer ahead of the 6th placed China, though plantedarea of both is equal at 600,000 hectares. India is also the4th largest rubber consumer (NR + SR) ahead of Germany.

What are the prospects and the current status of theIndian rubber industry?

A SWOT (strength, weakness, opportunity and threat)analysis may help us answer the question.

StrengthIndia has a deve loped rubber m anufacturing base . There

are around 4,800 product manufacturing units, spread overthe different States. Almost 90 of them are in the smallscale sector consuming rubber below 500 tonnes a year.

Medium scale units with annual consumption of rubberbetween 500 and 1000 tonnes number a little over 400 andunits consuming rubber above 1,000 tonnes comes to 62.These 62 large manufacturers consume around 700,000tonnes of rubber a year while the small units numbering over4350 consume not even half of this.

The broad spectrum of rubber products made in India areled by automobile tyres and tubes, for the production ofwhich there exist 43 com panies . Of the rubber consum ption(NR + SR) of1 038 605tonnes in 2005/06, major portion -571,230 tonnes - was absorbed by the tyre industry. Theindustry produced tyres a n d tubes for trucks, tractors, buses,cars, jeeps, LCV, motor cyc les, scooter, moped, ADV, OTRand industrial vehicles. Tyre industry's annual turnover hasbeen of the order of R s 150,000 million.

Other significant rubber product groups are cycle tyresa n d tubes, adhesives, beltings, cables, dipped goods, ex-truded products, foam products, footwear products, moul-ded goods, rubberised fabrics, mattings and sheetings,surgical and pharmaceuticai products and a host of miscel-laneousitems.About 467,370 tonnes of rubber w a s used fortheir production in 2005/06.

Of this, the major group cycle tyres & tubes consume130,000 tonnes a year, followed by the footwear sector w ith

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annual consumption of 125,000 tonnes of rubber. Nextcomes the belts and hoses group with annual consump tionof around 60,000 tonnes . Other product groups account forthe rest. The annual turnover of the general rubber goodssector is estimated at Rs.140,000 million.

The manufacturing units are spread all overIndia, scanbe seen from Table 1.

Almost all the feed stocks like NR, SR, RR, chemicals,fibres and fabrics are available indigenously. Machinery,equipment and testing instruments are ava ilable from indig-enous source. Any gap between demand and supply is metby imports. Indigenous p roduction of SR was 97,634 tonnesin 2005/06, of which poly butadiene rubber formed 67,286tonnes, almost 69% of the total.Styrene butadiene rubberfollowed with 14,635 tonnes. Output of nitrile rubber was6 525 tonnes and of EPDM 4,920 tonnes. Production ofsynthetic lattices - SBR latex, nitrile latex and VP latex hada combined dry rubber content of3 923tonnes. Consump-tion of SR during 2005/06 was 237,495 tonnes. A quantumof 132,118 tonnes was imported.

Production of reclaimed rubber was 76,645 tonnes dur-ing the year, while its consumption was 76,535 tonnes.While the production of NR and RR was more or less equalto consumption, SR met only 41% of the demand.

India is self-sufficient in rubber chemicals, fibres, fabricsand rubber machinery, equipment and instrum ents. Chem i-cals function as compounding ingredients to modify proper-ties of rubber of almost all products - as cross linkingagents, accelerators, activators, retarders, inhibitors,antidegradents, anti-reversion agents, plasticisers, soften-ers etc.

Fillers such as carbon black, clays, precipitated silica,calcium carbonate, mica, zinc oxide, magnesium carbon-ate, magnesium oxide and titanium oxide help transformrubber into myriad useful products. Fibres and fabrics suchas cotton,silk, rayon, nylon, polyester, fibre glass, aramide,steel and polypropylene are used in many products, espe-cially tyres and be ltings.

Thereis enoughqualified manpowerinthe country for theorderly development oftherubber industry. India has vastpool of technical manpower - as much as pne-th ird of theworld availability - and their services cost much less com-pared to the salary levels in developed coun tries. Man-power development centres such as Indian Rubber Insti-tute,technical education institutions and polytechnics run-

Table 1: Rubber m anufacturersState

KeralaMaharashtraTami lnaduPunjab + ChandigarhUttar Pradesh*West BengalGujaratHaryanaKarnatakaDelhiAndhra PradeshRajasthanMadhya PradeshG o aOrissaAssamHimachal PradeshBihar + Jharkhand

. * includes 10 units in Uttaranchal@ includes 14 units In Chattisgarh

n d i f ferentUnits

87 554 651447 842440 638333720 618 616 011 5

672510

7743

includes units In Dadra and Nagar Havell

States in 2 0 0 5Rubberconsumption tonnes)182,195149,137

57,789108,05244,549

49,24649,75158,13472,10519,76652,92058,53651,69045,50634,435

10 010 01,574

ning diploma courses in rubber/polymer technology andUniversities offering graduate and post-graduate coursesprovide qualified technical personnel for services at differ-ent levels in the industry.

Universities and IIMs run management courses and theCost & Works Institute and the Institute of Chartered Ac-countants provide the industry with personnel for manage-ment, finance , marketing and adm inistrative jobs at differenlevels. Testing labora tories offer services in quality screen -ing and certifying institutions tes tify the inherent prope rtiesof the products.

Hydro electric, thermal and nuclear power are availablein India for the power requirements. Road network, portsand airports ensure facilities for quick movement ofmenanmaterial.Existence of a well-developed banking sector andthe capital market facilitate cap ital formation of the industryWeakness

Though a network of rubber manufacturing units hasbeen established in India, the distribution is uneven amongthe States, as can be seen from Table 1. All of them putogether, produce enough goods for domestic consumptionand leave some portion for export, but a vast majority have

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Table 2: Consumption of rubber during 2004-06

Natural rubberAuto tyres and tubesGeneral rubber goodsTotal NRSynthetic rubberAuto tyres and tubesGeneral rubber goodsTotal SRN R & S RAuto tyres and tubesGeneral rubber goodsTotal NR & SR

In metric2004/05 2005/06 (

406,226 442,921349,179 358,189755,405 801,110

131,267 141,58093,383 95,915

224,650 237,495

537,493 . 584,501442,562 454,104980,0551,038 ,605

tonnes)Srowth

9.02.66.0

7.92.75.7

8.72.66.0

only modest scale of operation. There were around 6 000rubber manufacturing units in 1997, but the number camedown to 4,800 in 2006 , iargeiy ow ing to technological obso-lescence and failure to market the products competitively.Most of the small units follow old known technology andinnovation has hardly come about in their production pro-cess.

Manpower for the top and middle management levels isfairly sufficient,but thereis dearth of skilled manpowerattheshop floor. Many manufacturing units fail to find workmenwith basic background in process technology. Technicalschools and industrial training centres have been estab-lished in most of the States, but manpower availability forshop floor work In the rubber industry is inadequate. Manyschools offering technology courses at the post-matric leveldonot findenough students to attendthenri,probably for lackof awareness. Adequate publicity may improve the situa-tion.More such schools in the States with adequate public-ity can ensure future availability of qualified shop floorworkforce for the rubber industry.

Sure,India is the fourth largest consum er of rubberintheworld after China, USAandJapanand theconsumption (NR+ SR) crossed one m illion tonnes in 2005/06 ascanbe seenfrom Table 2, but the gerneral rubber goods sector suffersfrom low growth trajectory. The tyre and tubes sector isgrowing around 8 a year, while the general rubber goodssector is lagging behind at a shade below 3 . This sectorhasto develop much through techno logical advancem ent asservice properties of the products of a vast m ajority of themfail to stand competition with standard prducts.

Modern technology should come to the aid oftheseunits.One way of acquiring it is through strategic alliance withreputed manufacturers. The alliance is possible with indig-enous units and overseas manufacturers. While the techno-logical innovations are attempted at consolidation of theunits should also take place, to bring in economy scaleoperation. The scale of operation is basic to profitability.

Research and development activities in India are mainlyon process development, to developandimprove the knowntechnology in production. This needs improvement. In theliberalised trade scenario, every manufacturing unit needsstate-of-the-art technology to produce goods of worldstan-dard.There should be adequate R & D facilities and collabo-rative research in rubber manufacture. Collaborative re-search with the products manufacturing sector has to bedeveloped in India.

Developed countries have progressed through collabo-ration for & D between research institutions and manufac-turing enterprises. R & D is the basis for process innovation.There are many research and technical institutions under-taking basic and applied research in rubber technologyalong with other disciplines, but we need an exclusivenational institution to look after the needs of the rubberindustry.

OpportunityThe World Trade Organisation is trying to establish a fair,

equitableandtransparent m ultilateral trading system a roundthe world through progressive liberalisation and eliminationof tariff barriers in the member countries. Being a memberof WT O, India is progress ively open ing the domestic marketto overseas competition and this presents opportunity forthe rubber manufacturers to acquire sophisticated machin-ery and material, and produce enough goods of standardquality to make gains from the overseas market.

Demand scenario presents abundant opportunity for en-hanced production of many rubber products. Auto compo-nents sector is a case in point. With massive deve lopmentsin the automobile sector producing per annum more than amillion passenger cars, nearly 700,000 commercial, utilityand multi-purpose vehicles and 8 million two and threewheelers, there exists great demand in the country to en-hance production of rubber based auto components for theoriginal equipment and for replacement. Other mouldedgoods, extruded and calendered products are in great de-mand in an industrially developing country like India. Theirexport prospects is also b right. We have to equip the manu -

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Year

2001/022002/032003/042004/052005/06

NR631,400649,435711,650749,655802,625

Table 3: Statistical tables

Production of

SR69,65380,40189,24093,85497,634

rubber

Total701,053729,836800,890843,519900,259

Consumption of rubber(In metric tonnes)

NR638,210695,425719,600755,405901,110

SR174,530194,850210,190224,650237,495

Total812,740890,275929,790980,055

1 038 605

facturers with the latest technology to produce them ineconomy size faciiities.

Many manufacturing units produce quality auto compo-nents and other products. The rubber industry fetchedRs.38,330 million in 2005/06 from export of items like auto-mobile tyres and tubes, cycle tyres and tubes, beltings,hoses, medical and surgical articles, rubber footwear, rub-ber coats and apronsfor the textile industry, rubber sheetingsetc. But this forms only1 of the world market for rubberproducts. This low percentage offers opportunity to consid-erabiy enhance the shareinthe wo rld market. One limitationis the limited scale of operation. The producing units shouldbe assisted to expand production.

A good number of the components are produced fromNR-SR biends and from thermoplastic elastomers. This isan opportunity for popularising the know-how for productionof goods in suitable polymers and polym er blends. A surveyshould be conducted to ascertain the technology status inthe general rubber goods sector and a package should bedeveloped to help them m odernise the production facilities.

Whi le the rubber indust ry gets deveioped,opportunitieswould accrue to the Infrastructure sector fordevelopmentandexpansion. With the second largest popu-lation in the world in excess of 1000 million people, there isgood internal market for consumer products. Living stan-dards of the peopie, especially in urban areas, are going upand there is sustained demand for diverse produc ts, inciud-ing those made from rubber.

ThreatRaw material supply poses threat to the industry through

violent fluctuations in price. Indigenous production of rub-ber, both naturalandsynthetic, is notenoughforthe growingdomestic consum ption. As the general rubber goods sectorachieves higher growth, demand for rubber wiil further go

up . Consequently, the pricewould remain high in India, resulting in diseconomy for themanufacturing sectoranderod-ingthe com petitive edge. Propepolicy orientation is necessaryto ensure sufficient supply ofraw material, be it NR, SR orother feed stocks . We have theresources, but lack their opti-mum utilisation. Supply ofnatu-ral rubber has to definitely goup.

Non-availability of land is a constraint for expansion ofrubber cultivation in the traditional region. However, non-traditional region in North-East India can provide around500,000 hectares of fallow and degraded forest land forrubber cultivation. Tripura, Assa m, Nagaland, Mizoram andManipur have successfully cultivated rubberandliving stan-dard of people who planted rubber a decade ago or earlierhas impressively gone up.

Many of the nomadic tribals of yester year are proudproducers of rubberinthe North-East enjoying fairly reason-able living comforts. Potential of the non-traditional regionshould be tapped fully to find enough rubber for domesticconsumption in the co ming years.

Simultaneously productive efficiency of the rubber plan-tations in the traditional region com prising Ke rala and Tam iNadu should be enhanced. India has developed rubberclones with production potential averaging 2500 kg of dryrubber per hectare against the current average productivityof around 1790 kg. The gap is of the order of 700 kg. Thisgap has to be bridged. The best way is to rehabilitate the oldrubber plantations with modern high-yielding clones.

There are now around 100,00 hectares of old rubberplantations which have outlived their economic life span.These could be replanted to enhance the average produc-tivity. Fresh planting also should get enough attention,where feasible. Demand for rubberwouldgrow substantiallyin India in the coming yea rs. The gap between demand andsupply has been assessed at 10,000 tonnes in 2006/07.This has been estimated to go up to 50,000 tonnes by 2010/11 ,and to 200,000 tonnes by 2020.

If the NR sector s developmen t goes at the current paceof annual replanting and new planting at5 000ha. apiece,we wiil not bridge the gap in supply, as this scale of replant-

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speed up to a maximum of 50 rpm and whose rotors have4 high-dispersion profiles.

The pneumatic-hydraulic floating weight in this specificcase presents several advantages in respect to a traditionalpneumatic pressing unit or to a completely hydraulic sys-tem. The main feature consists in the possibility of substan-tially reducing the consumption of air pressure withoutlosing the typical advantages coming from an effectivefloating function on the compound.

: : :

The MPES technology, being introduced on the interna-tional market by Rutil, revolutionizes the moulding concept

and discovers the miniaturization process , that is the useof a single-cavity m ould. The m achine is not considered asa simple press, but now becomes a work centre where themoulding process is integrated with finishing, control, test-ing and packaging.

In short, the advantages of MPES a re: minimum materialwaste, high productivity and qualitylevel,complete automa-tion and lower power consumption. It is a very efficientprocess when expensive compounds are used, or for appli-cations like gaskets, oil seals, caps, medical stoppers andplugs that can be produced in controlled environments suchas a clean room.

Indian rubber industry Is poisedContd from page 58

ing and fresh planting would not aid substantial enhance-ment of rubber production in the coming years. Adequatesupply of raw rubber would eliminate price volatility.

Volatility in the market is very adversely affecting themanufacturing units. The development schemes of theRubber Board should be suitably reoriented with enoughincentives to rehabilitate the 100,000 h a. of old plantationsin five years' time. At the same time earnest e fforts have tobe made to expand fresh planting in the non-traditionalregion.

Inadequate production of synthetic rubber is anotherthreat. More than half of the annua l demand of SR is met byimports though we have enough resources to produce theentire domestic requirement indigenously. Oil refineries,petrochemical complexes and the steel manufacturing en-terprises in the country provide enough feedstock for pro-duction of synthetic rubber. World o il prices are on the risethough a let up is the pious hope of the oil importingcountries.

With OPEC's frequent production cuts, the hopes mayget reduced to pious wishes. In all probability, price of SR inthe world market would further goup.Hence the indigenousresource should be utilised to enhance its production andeliminate violent fluctuations in price.

Now a few units IPCL, Apar Industries, Apcotex Lat-

Year

2001/022002/032003/042004/052005/06

Table 4:lmport and export

ImportNR

49,76926,21744,19972,83545,285

t of rubberSR

111,527129,902104,733113,095132,118

of rubberIn metric tonnes)Export of rubber

Total161,431156,119148,932185,930.177,403

NR6 99

55,61975,90546,15073,830

tices and Herdillia Unimers are producing synthetic rub-ber in India. Their capacity is too low to reap economiesof scale. Only units with econom ic size operation can sellthe products at fair price. Capa city of existing unitsshould be suitably enhanced to maximise output. Stepsshould also be taken to establish one or two new unitswith about 200,000 tonnes of capacity to meet the grow-ing demand.

The SWOT analysis indicates that India can achievespectacular progress in rubber manufacture with a packagefor technological upgradation and economy size operation.Work in this direction should start straightaway to achieveresults quickly, before our competitors exploit the opportu-nities to their advantage. Our country's future will dependupon the earnest efforts we make.

Coutrtesy Rubber St Journat

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swot analysis of india rubber industry

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