A crop of high industrial and strategic importance, natural rubber is one the major plantation crops in India. Though the crop has long ago moved away from the conventional plantation economy systems, much of the production is still concentrated in the traditional areas, majorly in the state of Kerala. Often dubbed as the plantation hub of the country, the state accounts for a substantial share of production of the four major plantation crops in India namely tea, coffee, rubber and cardamom. Natural Rubber is undoubtedly the most favoured among these crops in the state and has witnessed significant growth since its introduction. Today it is the most important crop in the state with maximum area under production far exceeding conventional crops like rice and coconut and is a source of livelihood for around a million households in the state.
The rise and the fall
Though a crop of great commercial importance to the economy, picture is far from rosy for the rubber cultivators in Kerala. With constant decline in prices, rising unprofitability and multitude of other problems the sector is facing its toughest time in the history. As the following graph shows there has been a free fall in prices especially in the last two years. While tribulations associated with price crash is a not a novelty for the rubber cultivator, it is feared that the present crisis questions the very existence of the sector.
A plantation crop with a history of indigenous entrepreneurship, rubber cultivation had a smooth growth trajectory in Kerala. With a constant decline in conventional agriculture, it had acquired the undeniable status as the most remunerative crop in the state by the 1960s. Everything went well until the early 1990s when the Indian prices stayed above the international prices attracting huge investment and showing a steady increase in acreage. The situation has changed henceforth. The synchronisation of domestic and world prices subsequently led to a low price phase between 1997 and 2001. This is often referred to as the �Rubber Crisis� period. During this period, the price of rubber reached its rock bottom but the sector wriggled out of it in mid 2000�s with prices again peaking in 2010-11. Everything was looking promising at this juncture; rising prices, increasing production and consumption. Then one fine morning, the cycle restarted, prices slumped and we have the present crisis. It is at this juncture that the big question arises – how is the present price crash and associated issues different from the former ones? What makes it more serious?
�When ill luck begins, it does not come in sprinkles, but in showers� [i]
Historically, the growth and sustenance of any plantation crop around the world has been based on the age old theory of �comparative advantage�. This is more pertinent in an open economy set up into which we are slowly heading. In the case of rubber, since the time of independence, the sector has been lucky to avoid such a challenge largely due to the support of the state not just from the supply side but also on the demand side. The opening up of markets in 1991 and the demand for natural rubber in the country outstripping the domestic production pushed the rubber cultivators to the hitherto unheard challenge of world prices. It was also at this time that the sector reached the culmination of a �structural change� that started long ago – the predominance of smallholdings. This posed further complications for the sector. Usually the comparative advantage of a plantation crop stems from a �cheap land-low wage� combination. Both land and labour which provided the �comparative advantage� for the tropical or sub-tropical plantation crops are already costly in Kerala. But again this is natural for any capitalist economy where the price of factor inputs like land and labour are bound to increase overtime. The way out for this challenge usually comes in the form of labour augmentation, technological changes, rise in productivity etc. which would again drive down the costs and thereby increase profitability. This is where it gets tricky for Natural Rubber Cultivation. Unlike most other crops in India, the productivity (kg/hectare of tapped area) in India is already much higher than competing countries and the yield in Kerala is above the national average[ii] . This limits the scope to overcome the crisis through yield increase. That leaves us with the option of labour augmenting technology. Sadly rubber does not have much to look forward here also. Tapping (extraction of latex) of rubber is a semi-skilled process where the experience and talent of the tapper matters a lot. Scope to adopt labour augmenting technology or mechanisation is highly limited here. Further, the ability of small farmers to adopt even the existing technological innovations to improve the product quality is also a concern. With almost every available quality enhancement technique showing clear economies of scale, these are often neither accessible nor profitable for the smallholders.
Another major concern that haunts the sector is its declining labour force. The most alarming fact in this regard is that that there has been hardly any growth in the labour force in most of the areas over the last two decades. The gruelling job is no longer attractive to the young generation. Inability to earn a respectable income makes matters worse. The point that is often missed is that the wage in rubber tapping is per tree and hence the daily wage depends on number of trees tapped. With the dispersal of holdings, multiple grower dependency and shrinking of land holdings, adequate sufficiently large tapping assignment is a far cry for almost all the tappers. Efforts to introduce migrant labour have also failed miserably owing to socio-economic reasons.
The trajectory of growth during late 2000�s teaches us an important lesson. Better prices may not always get translated to a sustainable growth. The growth during this period was largely due to the smallest category of holdings- those of 2 ha and below. Growth of area under production for all other size categories either declined or stagnated. The impact of this was two-fold. Firstly, the instability and informality of production in smallholdings negatively affected the supply chain. Secondly, sustained low and volatile prices as we experience today immediately throws the entire sector into a haywire. As the state has failed to establish proper institutional safeguards and social security measures during the growth period, the ability of smallholders to withstand price fluctuations remain highly limited.
In short, the natural rubber sector has got itself into a �padmavyuha�. The run has been impressive but not enough. The way out is also not easy. Tested with the tumults of the global economy, its own structural deficiencies are pulling it down. While raising import duty appears to be an attractive option at first glance, it is neither a practical nor a sustainable option. As our production falls short of domestic demands, the threat of imports and the short term price fluctuations caused by it is here to stay. Also it is often pointed out that in the case of rubber the relationship between tariff rates and imports do not follow the expected pattern[iii] . This is majorly because the demand for natural rubber by our industries also depends on a host of other factors ranging from crude-oil prices to industry structure and export promotion policies. The almost monopsonist status of tyre industry further complicates the demand pattern. While price floors and import restrictions can be short term mitigation measures, the need of the hour is larger structural and institutional overhauling both from supply and demand side.
– Sandeep Paul
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Strasser Balz (2009). �We are as flexible as Rubber: livelihood startegies, diversity and the local institutional setting of rubber small holders in Kerala, South India.�New Delhi, Manohar.
Viswanathan, P.K. George, K.T. and Joseph, T. (2003). ��Informal Labour Market and Structural Devolution.�� Economic and Political Weekly, 38(31): 3277-81.
[i] Mark Twain – The Tragedy of Puddn’head Wilson
[iii] Joseph, K. J. (2009). ASEAN-India pact and plantations: Realities of the myths. Economic and Political Weekly, 14-18.