Shares of tyre companies like Apollo Tyres , Ceat and JK Tyre are under pressure as they have agreed to procure rubber from the domestic market at 25 percent higher price over international price to aid the fund-staved sector in Kerala. Analyst say margin expansion for tyre companies will be capped.
According to an agreement, worked out in an meeting with Kerala chief minister Oommen Chandy, tyre companies will buy rubber from local market with 20 percent customs duty and 5 percent purchase tax, over the international price from local dealers.
The government will refund 50 percent of the purchase tax to the companies while the rest will also be disbursed as refund claim on VAT collected from the buyers.
The scheme is effective till March 31, 2015. Decline in rubber prices has been a grave concern for the state and a further fall to Rs 115 per kg led to a crisis call. In 2009, rubber price was at Rs 245 a kg.
