Chapter -1

INTRODUCTION

1.1 History of Rubber Plantation

Rubber tree, originated from the tropical rain forest of

Central and South America, is one of the recently domesticated crops

in the world. The British probably identified and made use of its

unique practical use, i.e., for erasing pencil marks, at the beginning of

1770’s. Later Charles Good Year invented the vulcanization process

using natural rubber. This paved way for the spectacular development

in the annals of rubber through the invention of pneumatic types.

Dunlop Company produced the first motor car tyre in 1910 and there

after the tyre industry became the most important deciding factor in

balancing the supply and demand of natural rubber thereby dictating

its price.

In the late eighties the rubber industry in Britain found it

difficult to cope with the limited interrupted supply from South and

Central America. The colonial powers initiated a scheme for introducing

rubber as a wonderful plantation crop in South East Asia. Thus, the

modem age of natural rubber plantation started during 1870’s when the

British transported the seeds from Brazil for planting them in British

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India. By the end of 19th Century, natural rubber became one of the

major plantation crops with export-oriented estate system of production

in the ‘colonies of exploitation’ under colonial patronage. This was

made possible mainly through the use of immigrant and indentured

labour.

Today, rubber plantations have a green image and are

environmental friendly in nature mainly due to their carbondioxide

scavenging and oxygen recharging effects. These plantations are capable

of producing a fairly high volume of wood per unit land in a

comparatively shorter span. The rubber vegetation aids soil and water

conservation and indirectly helps flood controls and landslide. A

matured rubber plantation is a dynamic and self sustaining ecosystem

and renewable source of rubber with minimal external agronomic inputs.

1.2 Global scenario of Rubber Cultivation

Rubber plantations are restricted to the limited pockets on

this planet, due to the peculiar agro climatic situation needed for

cultivation of the crop. uHevea brasiliensis” is an indigenous rubber

tree in the tropical forest of Central and South America. Now, there are

about 15 rubber-cultivating countries in the world of which Indonesia,

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Thailand, Malaysia, China, India and Vietnam are the major producers

(Table 1.1).

As far as the area under cultivation Indonesia holds the first

position in area with 3262 thousand hectare followed by Thailand and

Malaysia. India held the fifth position in terms of area under rubber

cultivation . In production, Thailand was ranked first followed by

Indonesia; India was ranked fourth with a production of 74 thousand

tones. (2004-05). Even though India has been ranked fifth in terms of

area, it comes first with its high productivity of 1,576 kg/hectare

followed by Thailand with 1, 456 kg/hectare. The spectacular increase

in the yield of rubber in India has been made possible through the

need based development programmes backed by sound research and

development and efficient extension work carried out by the Rubber

Board. In the year 2000-01, India occupied the third position in

production, first in terms of productivity and fourth in consumption of

natural rubber. Now India continues to rank number four in

consumption, fourth in production and first in productivity. Regarding

import, India occupies the second place whereas in export it comes last.

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 China was the largest consumer of natural rubber in the

world followed by USA. But the USA leads other countries as regards

import. The policy of the government of India on import has

undergone a change from 2001. The Quantitative Restriction (QR) on

the import of natural rubber had been reserved as it was included as a

restricted item of import in the negative list. But in view of the

surplus production of natural rubber, the Government has banned the

import of natural rubber against advance license in 1999 and the

domestic rubber was made available to the holders of advance license

at international price through the State Trading Corporation (STC) of

India. However, with the removal of QRs on import of natural rubber

since April 2001, around 50,000 tonnes was imported during 2000-01

(Indian Rubber Statistics, 2002) and this resulted again in wide

fluctuations in the rubber price.

1.3 Natural Rubber Trade under WTO Agreements

As per the Agreement on Agriculture (AoA) under the

WTO agreements, natural rubber has been categorized under

‘Industrial Raw Material’ unlike other important plantation crops

which were classified as agricultural raw materials. The most

important disadvantage of exclusion of natural rubber from AoA is

with regard to the bound rate (import duty) which is relatively higher

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for the Commodities covered under AoA. India, in its negotiating

proposals on agriculture, submitted to the WTO, had stressed the need

for rationalization of the product coverage of agreement by including

primary agricultural commodities like natural rubber. The provisions

of agreements of WTO would have far reaching impacts on production

and marketing of export-oriented commodities, especially rubber in

India. Nevertheless, the consequences of international trade

agreements would be realized only in the years to come.

1.4 Rubber Cultivation in India

The growth of Indian plantation industry has been mainly

through the expansion of rubber cultivation in Kerala. The first rubber

estate were established in 1902 at Thattekkadu of Travancore State

(now in Kerala) on the banks of the Periyar river. During initial phase,

the Indian rubber plantation industry was controlled by British

companies and rubber produced was exported to London. But later,

Indians managed to consolidate their position and by about 1947 about

73 percent of the area under rubber was controlled by Indian

Companies.

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1.4.1 Challenges in Rubber Industry

In the 21st century, dubbed as an Era of Knowledge, the

demand for energy is ever increasing in the ever-widening universe.

In fact energy is the pivot around which the whole world revolves. No

wonder today’s hot topic is energy, particularly in the scenario when

crude price is increasing almost everyday. Energy is definitely an

essential element of today’s society. One can not even dream of life

without energy. People simply expect it and demand it and therefore,

people of today virtually take it for granted that it is there, you pay for

and have it. Number of times every day at the touch of a switch, turn

of a key or push of a small button energy is delivered instantly.

Today’s energy is used in cultivation, creating products,

product movement and generating commerce in safer, stronger, and

more efficient than at any time in the history. With the on-going

Liberalization process there has been a drastic change in the Indian

economy and there is a sign of positive growth of both Agricultural

and Industrial production. Automobile industry growth in any country

is driven from growth in transportation. India’s transportation growth

is basically driven from agricultural growth.

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 A close look at the growth in different sectors reveal

many fascinating facts. While agricultural growth in India was 7-8%

it was 5-6% in automobile industry, during 2003-2004. It was an

exceptional year when the automobile industry showed a growth rate

close to 14%

In the year 2004, the average growth of vital truck

segment was recorded to be above 12%. Average passenger car

growth came close to 10% . Scooter growth rate came to 9%

followed by motorcycle with 7%. OTR growth rate was close to 5%

per annum. The above growth rate figure is of OEM.

Some of the major OEM manufacturers in India are

Maruti, Toyota, Ford, Hyundai, General Motor, Honda City, Fiat,

Telco, Mercedes, Mitsubishi, Mahendra & Mahendra, Swaraj Mazda,

Volveo, TVS, Bajaj Auto, Hero Honda, Suzuki Motor etc. The

presence has done a lot to the Indian economy of theses foreign

companies. They have taught good practices in quality processes like

5S, TPM, TQM etc. for industry discipline, managing products

processing, defects, managing inventory and dispatching to customer

for highest level of customer satisfaction, customer relations and so

on.

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1.4.2 Growth of Indian Automobile

The growth of rubber industry in all countries is

inseparably linked with the growth of automobile industry. That the

Indian Automobile Industry has a bright future is evident from the

following facts:

• Economical growth of 7-8% (7.6% in 2004-2005).

• India is the fifth largest economy in the world.

• India has 3rd largest GDP in the entire continent of Asia.

• A huge population of above 1.1 billion.

• Average income of lower middle class and middle class

people are increasing due to the impressive economical

growth due to the investment policy of Government of

India.

• The growth of Indian Railways to meet the growing

demand for passenger and goods transport.

• Road transport is the major link for essential goods to the

rural masses and transportation of farm produce to the

cities. India has a good network of roads.

• Development of golden quadrilateral and North-South &

East-West Corridors National Highways.

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 • More and more capacity utilization in automobile

industries.

• Continued thrust of exports by all automobile industries.

• Easy financing for new and old vehicle purchase.

1.4.3 Rubber Products

India can produce now all types of rubber products

beginning from critical applications in information technology,

footwear, cables, pharmacy, critical products of passenger car

profiles, hose, conveyor belt, transmission belts, V-belts, gasket, oil

seals to higher rated passenger car tyre and all steel truck tyres for

domestic use as well as for exporting to abroad.

As on today, India is making more than 35000 different

kinds of rubber products in 6000 different units spread all over India

for domestic as well as for export whose turn over is close to USS 5

billion per annum. Out of these 6000 units, rough estimates reveal that

there are:

• 30 large scale units

• 300 medium scale units and

• 5600 small scale units

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 Today large and medium sectors do not face so much

threat as the small sectors. Large and medium diversification may not

be possible for small sectors and their current situation. Hence they

will either survive or die. Today’s major challenges for small sectors

are cost, quality and productivity.

Challenges

The small-scale units face many challenges and the

major challenges are how they can cope with the current scenario of:

• Global competition

• Rising fuel cost

• Rising raw material cost

• Reduction in import duty

Potentials of Rubber Industry

The scope and potentials of rubber industry are plenty.

While Japanese rubber production, is 14kg/person. India has only

less than 1kg. Other advantages of India in rubber field are:

• Large producer of NR

• India is 4th largest consumer of rubber

• Large domestic market

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 • Rapid growth of automobile sector.

• Skilled labour at low cost

• Academic based technologists

• On going economical reforms

New Concept

What one really needs now is better understanding of

marketing rubber. It is not enough to know making a product and the

existing profit margin in the domestic market. The strategy needs to

be changed entirely from domestic market focus to international

market focus.

India’s small scale industry is driven by business

community. In most cases the owner becomes the technical man,

marketing man, quality man, production man, commercial man etc.

which means the owner is everything. In most cases the owner’s

relatives will be holding all the key positions in the organization and

as a result multifunctional communication is lost and finally the

opportunity for the future growth of the company is also lost.

At least all manufacturing organizations, however small

they are, will have a quality control department for controlling

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incoming raw material, process and identification of the quality of

product suitable for customers. R&D center should be made as a

special wing of the existing Quality Control department only.

R&D center alone can perform the company objectives

today, tomorrow and after 5-10 years from now. That means the R&D

center practically provides business directives for the present and the

future. This is very true in the case of developed nations. It is an

attempt to brings in these concepts as fast as possible. Thus the

challenges include the growth of rubber industry.

1.5 Rubber Cultivation in Kerala

The agricultural sector in Kerala is dominated by plantation

crops of which rubber is the most important one. Among the districts,

Kottayam ranked first both in terms of area and production of natural

rubber. This district constituted 19.7 percent of total area and 22.4

percent of total production in India (2000-01). The productivity of rubber

in Kottayam district was 1,668 kg/ hectare which was higher than the

state average (Rubber Board, 2002).

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1.6 Rubber Cultivation in Tamilnadu

In Tamilnadu about 99 percent of the area under rubber has

been confined to Kanyakumari District. The total area under rubber in

Kanyakumari District in 1960-61 was 5614 hectares and in 1990-91 it

was 17,000 hectares and now it is more than 20,000 hectares.

1.7 Rubber Cultivation in Kanyakumari District

The agro climatic characteristics of this district are

favourable for large scale introduction of rubber cultivation. Rainfall is

more or less evenly distributed. The laterite and red soil of this region are

generally deep, less weathered and comparatively more fertile. Out of the

20,000 hectares of rubber plantation, 12500, hectares are under small

holdings while 7500 hectares are under estates. In rubber plantation,

there is a chance of better utilization of family labour, and continuous

cash inflow throughout the year. Since in Kanyakumari District the

major area (above 70%) is under small holdings, it is felt necessary to

make an intensive study of the small scale rubber plantation, which

will bring to light the problems associated with expansion of area and

other related ones.

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1.8 Problem focus

The rubber industry in India is mainly confronted with the

problem of imbalance between demand and supply. Indian rubber

consumption is greatly influenced by tyre manufacturing industry. On

the otherside, the production characterized by high degree of regional

concentration (Desalphine, 2002)

*.

The details of tyre manufacture and consumption of various

rubber products over the years are presented in Table 1.8 (a) .& Table

1.8 (b). Statewise consumption of rubber is given in Table 1.8 (c). It

must be noted that the production is characterized by high degree of

regional concentration. With the removal of quantitative restriction on

import, effected on April 2001, natural rubber can be imported by paying

the prevailing duties (Details given in Table 1.8.(d). This gave the

manufactures the opportunity to import the required quantity of rubber

from any part of the world. So, they may not confine themselves to the

domestic market alone, unless price and quality are internationally

competitive. This has created an opportunity for exploitation of

marketing (Table 1.8.(e) contains details of licensed dealers) thus

creating the problem of intermediaries in marketing.

* Desalphine. S.M., “Challenge before the Industry”,

The Hindu Survey of Indian Agriculture, PP 97-101 (2002)

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 Another factor attached to rubber industry is the

employment generation in hilly regions which help in tribal

development. At present the price increase helps the usage of the

waste lands in Kerala and Tamilnadu. The international price may

vary in different condition and different grades. The detail is given in

the following table (Table 1.8 (f) and 1.8 (g)).

In such a situation, natural rubber producers in India have

to compete with their counterparts across the world in production,

marketing and management, across the world for meeting both domestic

and export demand at competitive prices. Hence, in order to make the

Indian rubber cultivation more economical, it is quite essential to

improve the efficiency of the resources used in plantation and reduce the

cost of production besides taking care of quality of the product.

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Although 94 percent of area was already under high-yielding

varieties, the genetic potentiality of increasing the productivity by

another 40-50 percent. In a similar way the market structure and the

share of intermediaries also will affect the agriculturists in getting

their proper share, and the management should play its role

effectively in uplifting the sales in time. Hence it is high time to

analyze the resource use efficiency, market structure and the role of

intermediaries and also the effect of management on the income of

the rubber plantation. With all these aspects in mind, this study is

undertaken in Kanyakumari District with the following hypotheses

and objectives.

1.9 Objectives of the study

l'he overall objective of the study is to estimate the

production, marketing and management efficiencies in the study area.

The specific objectives are

1. To assess the resource use efficiency in rubber plantation.

2. To estimate the production efficiency.

3. To evaluate the marketing efficiency and the performance.

4. To measure the management efficiency.

5. To assess the income and employment generation.

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1.10 Hypotheses

1. In Kanyakumari District Rubber planters have not

reached the optimal level of production.

2. Rubber planters have not reached the efficiency in

marketing.

3. There is no potential usage of management practices

among rubber planters.

1.11 Scope of the Study

A study on the resource use, marketing and management

in rubber plantation would help the planters and the managers to

maximize their output with limited resources. This will help them to

fetch the proper share in the market and also the management skill

needed to sell in time, to solve the labour problems and the timely

harvest with the minimum labour force. The data on the cost structure

of rubber cultivation would be of immense use to planners and policy

makers in formulating appropriate policy packages for enhancing the

productivity of rubber so as to make it internationally competitive.

1.12 Limitations of the study

The study is confined to a particular region viz

Kanyakuamari District and the conclusions drawn need to be used

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with caution, while generalizing the findings for the state or country

as a whole. The data and the information on cost of production of

rubber were collected through survey method by contacting the

sample farmers. Because of this reason, the data and the information

are not completely free from recall bias, though almost care has been

taken through preparation of the interview schedule meticulously and

also by cross checks of data collected in the field itself.

1.13 Organization of the Thesis

The present study comprises six chapters as described

below.

Chapter I - Introduction

The first chapter serves as an introduction and it describes

the current scenario, importance of the topic, problem focus, hypotheses,

objectives, scope and limitations of the study.

Chapter II - Concepts and Review

A brief review and definition of concepts, econometric

models and the results of the related studies have been summarized in

the second chapter.

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Chapter III - Design of the study

The third chapter focuses on the sampling design, data

collected for the study, methods of analyses and the econometric models

used in the study.

Chapter IV - Description of the study area

A brief account of the agro climatic conditions, land use

and other information relevant to the study forms the fourth chapter.

Chapter V - Results and Discussion

A detailed discussion on the results of the study to draw

specific inference is presented in chapter five.

Chapter VI - Summary and Conclusion

A summary of the research study done and the salient

findings are presented in the last chapter which will help future

researchers to carry on intensive study on the areas not covered in depth.

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