1. PRE BUDGET MEMORANDUM 2014-15
KEY CONCERNS OF INDIAN TYRE INDUSTRY
1
Submitted by :
Automotive Tyre Manufacturers’ Association (ATMA)
Phone : 91-11-26851187, 26564291, 91-11-2686 4799
atma@atmaindia.org; www.atmaindia.org
Meeting with Chairman, CBEC & Sr. Officials from Finance Ministry
Day & Date : Fri. 23rd May,’14
Time : 2:30pm -3:30pm
Venue : Kalpavrisksha, Room No. 158 A
North Block (MoF), New Delhi.

2. 2
Contents
(Explained in following section)
• Indian Tyre Industry - A Profile
• Industry Environment & Outlook
- Auto Sector
- Tyre Industry (Including Capacity & Investment by Tyre Industry)
Key Issues / Major Concerns of the Indian Tyre Industry
- Natural Rubber : Inverted Duty Structure
- Major Raw Materials of Tyre Industry
- Demand Supply Gap
- Duty Structure – Existing &Proposed
- Customs Duty on Tyres
• ATMA Submissions

3. Indian Tyre Industry 2013-14 – A Profile
• No. of Tyre Companies - 39
• No. of Tyre Plants - 60
• Turnover + - Rs. 47,500 crores /US$ 8 billion
• Export in value terms - Rs. 4800 crores
• Production + - 123 million tyres
• Exports* - 8.4 million tyres /US$ 830 million
• Imports - 8.9 million tyres /US$ 465 million
• Product Profile - From Moped Tyres (weighing 1.5 kg) to
Giant Earthmover Tyres (weighing over 1.5
Tons), Steel Belted Radial Truck Tyres, High
Performance Tubeless Passenger Car Tyres
and Tyres for Fighter Aircraft of Indian Air
Force+ Est.
*ATMA Member Companies only
3

4. ATMA Member Companies
10 Large Co's (comprising of)
- Global MNCs
- Indian Tyre Co's (having presence overseas)
- Leading Indian Players
• (accounting for) 90%+ of Industry (in Value/Tonnage)
4

5. Locational Map – Tyre Plants (ATMA Member Co’s)
5
• Recent
investments by
Tyre Industry
have been to the
tune of over Rs.
20,000 crores in
greenfield
projects as also
major expansions

6. Industry, Environment & Outlook
Current Economic & Sectoral Environment
Auto Sector
The ongoing economic turndown has adversely affected the India’s Automobile
Industry. As per Society of Indian Automobile manufactures (SIAM),
Commercial Vehicle witnessed a (-)16% YoY drop in production during 2013-14
over 2012-13. This is on top of the decline of (-)28% in the previous fiscal.
Passenger Vehicle production also witnessed a (-) 5% YoY in 2013-14 over
2012-13 for the first time in a decade.
Tyre Sector
Indian Tyre industry’s performance is directly linked to that of the Automotive
Sector. The percentage share of tyre supplies to OEMs (Original Equipment
Manufacturers), has been increasing consistently for all major tyre categories i.e.
CV, Passenger Car, 2/3 Wheeler, Tractor etc. With the ongoing slowdown of the
Automotive sector, the Tyre Industry too faces a slow growth in the current
fiscal and uncertainty prevails for the future.

7. Automobile Production - % Change
7
S.No Category FY11-12
(Over 10-11)
FY12-13
(Over 11-12)
FY13-14
(Over 12-13)
1 M&HCV 11% (-)28% (-)21%
2 LCV 31% 2% (-)14%
3 P. Vehicles 5% 3% (-)5%
3.1 P. Car 3% (-)4% (-)5%
3.2 UVs/SUVs 19% 52% (-)1%
3.3 Vans 9% 1% (-)18%
4 2/3 Wheeler 16% 1% 7%
4.1 Motorcycle 14% (-)1% 5%
4.2 Scooter(2W) 25% 14% 21%
4.3 Scooter(3W) 10% (-)4% (-)1%
4.4 Moped 11% 1% (-)8%
5 Tractor 17% (-)10% 22%
• As a category, only 2/3 wheelers have registered single digit growth (7%) .
Tractors posed impressive double digit growth on the back of good agriculture
sector performance.

8. 8
Close linkage - Tyre Supply (Supplies to OEMs)
• Indian Tyre industry’s performance is directly linked to that of the Automotive
Sector. The % share of tyre supplies to OEMs (Original Equipment
Manufacturers), has been increasing consistently for all major tyre categories i.e.
CV, Passenger Car, 2/3 Wheeler, Tractor etc. With the ongoing slowdown of the
Automotive sector, the Tyre Industry too has faced a sustained slow growth in
the last fiscal.
73% 73%
63%
41%
62%
43%
61%
40%
7%
14%
17%
36%
37%
50%
39%
57%
20%
13%
20% 23%
1% 7%
0% 3%
0%
20%
40%
60%
80%
100%
2000-01 2013-14(E) 2000-01 2013-14(E) 2000-01 2013-14(E) 2000-01 2013-14(E)
T&B Light Truck P Car M Cycle
Rep. Mkt. OE Export

9. • Inline with the capacity creation in the auto sector, the tyre sector has also
added/expanded capacity pan India.
• This kind of investment by the tyre industry in India is unprecedented in
history.
Project(s)
TBR
(in units)
PCR+LT
(in units)
Speciality & OTR
(in MT)
2W
(in units)
Others
(in units)
Recently
completed 2,06,200 6,08,000 7,00,000 4,167
Greenfield 2,80,500 15,08,000 86,400 7,29,200
Brownfield 1,59,200 8,05,000 12,950 2,50,000 60,000
Total 6,45,900 29,21,000 99,350 16,79,200 64,167
Project(s)
Total Investment
(Rs crore)
Recently
completed ₹ 3,164
Greenfield ₹ 14,410
Brownfield ₹ 5,030
Total ₹ 22,604
Summary Statement of Capacity Creation &
Investments in Tyre Industry in India
As of Jul/Aug’13
Source: Smithers / ERJ
Cumulative
Investment
(approx.)
Rs. 23, 000 Crore

10. Key Issues / Concerns of the
Indian Tyre Industry
10

11. Key issues & Concerns of Indian Tyre Industry
• Related to Raw Materials (RMs)
– Tyre industry is RM intensive
– Raw materials accounts for 72% of Production cost
– Natural Rubber (NR) , the principal raw material, accounts
for approx. 42% of RM cost
• Tyre Industry consumes over 65% of Total NR
consumption in India (domestic production + imports).
• Key Tyre related issues relate to:
– Trade Agreements
– Tyre Imports
11

12. Domestic NR Demand – Supply Imbalance
• Current Gap (between Domestic Production : Consumption) is given below:
• On a YoY basis, the gap has increased by approx 75,000 MT.
FY 2013-14
8.44
9.77
0.0
2.0
4.0
6.0
8.0
10.0
Production Consumption
9.14
9.73
0.0
2.0
4.0
6.0
8.0
10.0
Production Consumption
Gap Increased by 74,395
MT
FY 2012-13
Gap = 59,005MT
12
Gap = 133,400 MT

13. NR Availability / Gap
13
• For the last 7 successive years, India has experienced
shortfall/deficit- of varying degree- between domestic
NR production & consumption. The situation in FY 14-
15 is also projected to close with a shortfall.
32590
-36110
-7220
-99165
-85765
-35000
-59005
-133400
-60000
-100000
-160000
-140000
-120000
-100000
-80000
-60000
-40000
-20000
0
20000
40000
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 As per
Rubber
Board
As per
Industry
est.
(MT)
Projected
FY2014-15Actual

14. Natural Rubber Imports Imperative – Yet ‘Inverted
Duty Structure’ continues
NR Imports are necessary:
• To bridge the demand/supply gap
• For quality specific requirement of new technology driven Radial Truck & Bus (TBR)
Tyres
• To maintain international competitiveness in Tyre Exports
• For reasons cited above, Tyre Industry seeks regular supply and competitive
domestic & international pricing/sourcing of its critical raw-material.
• Customs duty on Tyres has been reduced over the last few years with no
corresponding reduction in basic rate of customs duty on Natural Rubber.
14
Period Rate of Duty Specific duty
(converted to % on
current May'14 NR RSS-
3 prices)
Advalorem Specific
Upto 31st Mar'11 20% N.A. N. A.
w.e.f. 01.04.2011 20% Rs. 20/kg* 16%+
w.e.f 20.12.2013 20% Rs. 30 kg* 20%++
*whichever is lower ;
+if the earlier duty (@Rs.20/kg) was applicable in May'14
++As per current rate of duty
NR Duty in India : Recent Changes

15. NR Duty Structure : India vs other major NR
Producing / Consuming Countries
15
• India’s effective NR duty is the highest amongst all countries.
Major NR Producing Countries
S.*
No
Name of
the
Countries
Customs Duty(%)
1 Thailand 0%
2 Malaysia 0%
3 Vietnam 3%
4 Indonesia 5%
5 Combodia 7%
6 Sri Lanka 15%
7 India
20% or Rs. 30/kg
whichever is lower
Major NR Consuming Countries
S*.
No
Name of the
Countries
Customs
Duty(%)
@ Specific
Duty+
1 China 20% 9.5%
2 USA 0%
As per
Calculation
below
3 Russia 0%
4 Japan 0%
5 Mexico 0%
6 India
20% or Rs. 30/kg
whichever is
lower 20%
+ Levied on specific rates converted into % at current NR prices

16. Basic & Concessional Customs Duty on NR in India
– No relief to Consumer Sector
*Under SAFTA, 5% concessional duty for NR applies for imports from Pakistan & Sri Lanka. However, the tariff is Nil for imports
from other SAFTA nations where there is no NR Production.
NegativeList
16%
NegativeList
5%(orNil*)
NegativeList
NegativeList
0%
4%
8%
12%
16%
20%
Basic Customs
Duty
ASEAN FTA Asia Pacific Trade
Agreement
Indo Sri Lanka SAFTA* India Singapore India - Malaysia
No Duty
Concession
No Duty
Concession
No Duty
Concession
No Duty
Concession
In India
20%orRs.20/kg,whichever
islower
Although tyres (finished product) can be imported into India at preferential /
concessional duties under various RTAs, the corresponding concessional duties for NR is
not beneficial.
NR falls in the negative list across most FTA except for Asia Pacific and SAFTA. However,
in both Asia Pacific and SAFTA, the concessional duties apply mainly for NR imports
from Sri Lanka (which are insignificant and hence of no practical significance).

17. (To Allow) Limited Quantity of Natural Rubber (NR)
Import on a Tariff Rate Quota (TRQ) Basis
• During FY 2013-14, the gap between domestic NR Production and
Consumption was ~135,000 MT and for FY 2013-14, the gap is
expected to exceed 60,000 MT (as per Rubber Board Projections).
• As per Industry estimates, during the current fiscal (FY 2014-15) the
gap is likely to be over 100,000 MT. This quantity (to bridge the
demand-supply gap) of NR has to be imported into India.
Submission
• Department to consider allowing import of limited quantity of NR (say
100,000 MT) under a Tariff Rate Quota (TRQ) basis for FY 2014-15 at a
concessional rate of duty of 7.5% OR Rs. 10 per kg, whichever is
lower. In Dec.`10, Finance Ministry has allowed 40,000 MT of NR at
7.5% concessional duty on TRQ basis .
17

18. CESS on NR imports under Advance License
• Cess on Natural Rubber is levied under Section 12 of the
Rubber Act -1947. Under Sub Section (1) Cess is levied on
rubber produced in India. NR Consumers’ are facing problems
at the time of clearance of imported rubber due to insistence
by the Customs at JNPT for payment of Cess, including on
Advance License import of NR.
• Finance Ministry has been requested by Industry to issue
clarification to Customs at JNPT on the issue.
18

19. Customs Duty on Tyres under Trade Agreements
• While basic customs duty on tyres is 10%, under various Trade Agreements
the duty (on tyres) is actually much lower than the basic rate of customs
duty (on its principal RM (i.e. Natural Rubber):
Item
Normal
/Basic Rate of Duty
in India ASEAN FTA
Asia Pacific
Trade
Agreement
(Bangkok
Agreement)
Indo Sri
Lanka SAFTA
India
Singapore
India
Malaysia
Tyre 10% 6% 8.60% Nil 5% / Nil*
Nil
(Bias Tyre)
6%
(Radial Tyre)
NR 20% OR Rs.30/kg
whichever is lower
Negative List
(No Duty
Concession) 16% **
Negative List
(No Duty
Concession) 5% / Nil*
Negative List
(No Duty
Concession)
Negative List
(No Duty
Concession)
* Under SAFTA 5% concessional duty for Tyre when imports from Pakistan & Sri Lanka ,imports from other SAFTA countries Nil Duty.
** Under APTA although NR is at a concessional duty of 16% ,there is no NR production in APTA countries, except Sri Lanka.
• Tyre is perhaps the only finished product (vis-a-vis its basic RM) on which
‘duty inversion’ not only continues but has actually aggravated in recent
years. This needs to be addressed and corrected on priority.
19

20. Duty inversion has favoured large Tyre Imports
(esp. from China)
Source: DGCI & S ; Figs. in brackets ( ) indicate the percentage of China of Total Truck/Bus tyre Imports.
*Latest available. Annualized based on Apr13-Jan'14/10 Months actuals.
Source : DGCI & S ; Figs. in brackets ( ) indicate percentage share of China & South Korea in Total P. Car Tyre imports
*Latest available. Annualized based on Apr13-Jan'14/10 Months actuals.
80
88
221
506
873
1328
1107
1362
2464
1337
1759
1334
19(24%)
67(76%)
192(87%)
345(68%)
750(86%)
1192(90%)
908(82%)
958(70%)
1911(78%)
687(51%)
858(49%)
698(52%)
0
500
1000
1500
2000
2500
3000
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-
14(Annualized)*
('000 nos) TRUCK / BUS TYRE IMPORTS - TOTAL & FROM CHINA
Total China
194
446
779
692
1502
1627
2778
2994
4864
5284
5374
5218
65(33%)
232(52%)
459(59%)
463(67%)
884(59%)
994(61%)
1982(71%)
2033(68%)
2896(60%)
2637(50%)
2760(51%)
2812(54%)
0
1000
2000
3000
4000
5000
6000
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-
14(Annualized)*
PASSENGER CAR TYRE IMPORTS - TOTAL & FROM (CHINA & SOUTH KOREA)
Total China & S. Korea
('000/Nos)
20

21. Tyre Imports into India favoured by FTAs
• Low import tariffs in India have encouraged large &
growing volume of tyre imports, despite adequate
domestic capacity & investments.
• Hence, based on compelling need and
circumstances, the Government of India can increase
the customs duty on tyres from existing rate of 10%
(to a higher rate of duty) without any corresponding
action / explanation to the world body (WTO).
21

22. Major RMs of Tyre Industry
Raw Material(s) Domestic
Production
(est.)
Domestic
Consumption
(est.)
Shortfall
/ Deficit
Shortfall as a %
to consumption
MT / Year
Nylon Tyre Cord Fabric 65000 125000 60000 48%
Rubber Chemicals 35000 55000 20000 36%
Steel Tyre Cord 15000 40000 25000 62%
Polyester Tyre Cord 3000 9000 6000 66%
Polybutadine Rubber
(PBR)
85000 113000 28000 25%
Process Oil 96000 150000 54000 36%
(Gap between Domestic Demand and Supply / Capacity)
Butyl Rubber NIL 58000 100% 100%
EPDM Nil 3700 100% 100%
SBR (Tyre Grade) Nil 110000 100% 100%
RMs with Domestic Demand : Supply Gap – Case for Reduction in Customs Duty
RMs of Tyre Industry having no Domestic Production – Case for Exemption
from Customs Duty
Significant gap
between
domestic
Production :
Consumption of
critical RMs, yet
NTCF, Rubber
Chemicals,
Carbon Black &
Capital
Equipment are
burdened with
Anti Dumping /
Safeguard Duties
affecting Industry
competitiveness.
22

23. RM Imports – A Necessity
• Due to gap between domestic production &
consumption varying between 12% - 70% as also ‘No
Domestic Production’ in India, import of key RM of
Tyre Industry is a necessity.
23

24. Proposal for Reduction of Customs Duty on Raw-Materials having gap
(shortfall) in domestic Capacity : Consumption & Waiver of Customs
Duty on Raw - Materials of Tyre Industry NOT manufactured
domestically
24
Raw Material Existing Duty Suggested /
Proposed Duty
Natural Rubber 20% or Rs.20/kg 10% of Rs.10/kg
Natural Rubber Compound 10% Waive Off
Nylon Tyre Cord Fabric (NTCF) 10% 5%
Poly Butadiene Rubber (PBR) 10% 5%
Rubber Chemicals 7.5% 2.5%
Polyester Tyre Cord 5% 2.5%
Steel Tyre Cord 10% 5%
Process Oil 10% 5%
Butyl Rubber* 5% Waive off
EPDM* 10% Waive off
Styrene Butadiene Rubber (SBR)* (Tyre Grades) 10% Waive off
* No Domestic Production

25. Safeguard Duty on Carbon Black import –
Advance License Imports
• Under Para 4.1.4 of Foreign Trade Policy, Government has
granted exemption from payment of all kind of duties under
Advance License Authorization imports.
• Safeguard Duty was imposed on imports of Carbon Black vide
Notification No.4/2012-Customs(SG) dated 5th Oct. 2012.
• Customs authorities at various ports have been demanding
Safeguard Duty on imports of Carbon lack against Advance
License Authorization.
Submission:
• Finance Ministry may issue clarification by exempting
Safeguard Duty under Advance Authorization import.
25

26. Operational & Procedural Issues
– Tyre Industry Concern
26

27. Central Excise
• Rate of Interest for delayed payment of excise duty/ service tax should be restored back
to 13% p.a. from existing 18%.
• Interest on pre-deposit of duty demanded, penalty levied etc. while filing the Appeal
• Interest on diversion of goods for home consumption from a warehouse registered
under Rule 20 of Central Excise Rules,2002 – present @24% is exorbitant.
• Expiry of Stay Order if appeal is not disposed of within the period of 180 days -
provisions are not in favour of Industry
• Short payment of duty due to genuine clerical errors – Treat as defaults under Rule -8
Cenvat Credit Rules, 2004:
• Capital goods:
– 100% CENVAT credit on capital goods in the year of receipt - Otherwise funds are blocked.
• Inputs
– Expand the scope of definition of Rules (k) of Cenvat Credit Rules, 2004 – to include diesel &
motor spirit.
27

28. Service Credit
– Definition of input service and its eligibility under Cenvat Credit Rules,
2004
– Condition of non availement of Cenvat Credit by the GTA Service
Provider should be removed
– Cenvat credit for Input services without making payment
– Service tax credit on goods manufactured on job work basis;
– Distribution of credit by Input Service Distributor
Service Tax ( Finance Act, 1994 & Rules There under)
– Reverse Charge Mechanism – imposes burden of transaction cost and
compliance issues
28

29. Key Submission(s)
• There is an urgent need to correct the existing (and continuing) anomaly of
‘inverted duty’ structure as it prevails for the domestic Tyre Industry by way
of the following:
• Reduction in Customs Duty on Natural Rubber, from 20% (or Rs. 30/kg
whichever is lower) at present to a suggested rate of 10% (or Rs.10/kg,
whichever is lower).
or alternatively
• Increase in customs duty on Tyres from 10% at present to 20%, the same rate
as its principal raw-material (i.e. Natural Rubber);
• To meet the definite shortfall between domestic NR production :
consumption (gap in availability for which imports are indispensible), limited
quantity of NR import- on Tariff Rate Quota (TRQ) basis- @ 7.5% for a
quantity of 100,000 MT for Fy 14-15. Such TRQ based volume of NR import
be allowed on a recurring basis each year as per demand : supply gap as
established by the Rubber Board (Govt. of India) each year.
29

30. Key Submission(s) (contd…)
For other key RMs of Tyre Industry, the duty inversion / anomalies continue and
need to be corrected by way of:
Waiver of customs duty on raw materials NOT manufactured domestically,
• Butyl Rubber (HS Code 4002 31 00) – present rate of customs duty : 5%
• Styrene Butadiene Rubber (Tyre Grade) (HSN 40021900) – present rate of custom
duty: 10%.
• EPDM (HSN 4002 7000) - present rate of Customs Duty : 10%
Reduction in Customs Duty on key raw materials of Tyres for which the domestic
capacity / production is insufficient to meet domestic demand, i.e.
• Nylon Tyre Cord (HSN 5902 1010) – Reduction sought from 10% to 5%;
• Poly Butadiene Rubber (HSN4002 2000) – Reduction sought from 10% to 5%;
• Steel Tyre Cord (HSN 7312 9000) – Reduction sought from 10% to 5%;
• Rubber Chemicals (HSN 38121000/30 10) – Reduction sought from 7.5% to 2.5%
• Polyester Tyre Cord (HSN 5902 20 00) – present rate of customs duty: 5% to 2.5%
30***