IDENTIFYING OPPORTUNITIES AND UNDERSTANDING ISSUESRELATED TO

MANUFACTURING OF RUBBER PRODUCTS AT AGARTALA&

OTHER PARTS OF TRIPURA

2004

Prepared By:ARUN KESHAVEntrepreneurship Development Institute of India

Project officeSIDBI Building, HT Road,B.K. Chowmuhani,Agartala-799001

E-mail: arun.keshav@gmail.com

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INDEX

SL. TOPICS PAGE NUMBER

1 INTRODUCTION 3

2 PRESENT STATUS 4

3 OPPORTUNITY IDENTIFICATION 5

4 ISSUE ANALYSIS 9

5 CONCLUSION 12

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1. INTRODUCTION

Tripura is the second largest producer of natural rubber in the country with an annual production

of 14,905 Mt. Having an estimated value of Rs. 74.53 Crores. However when it comes to the

manufacturing of rubber products its share is dismally low.

The natural rubber goes out of the state mainly in the form of smoked rubber sheets. This

minimises the potential benefit extended to the people and the state that could have been drawn

from the further value addition.

In order to boost the all-important manufacturing of rubber products in the state an Integrated

Entrepreneurship Development Programme (IEDP) is to be conducted.

This IEDP has been sponsored by Small Industries Development Bank of India (SIDBI) and is

being conducted by Entrepreneurship development Institute of India (EDI).

The program is to be implemented in 4 phases spread over 14 month with 25 participants,

inputs would be.

Phase I (10 days): - Classroom teaching providing inputs to develop entrepreneurial skills.

Phase II (10-20 days): - Technical training involving competent Rubber Technologist and OJT.

Phase III (10days): - Reinforcing the inputs provided and finalizing loan applications.

Phase IV (Six months): - Need based follow up support for enterprise establishment.

In order to facilitate this IEDP an independent study was conducted for better understanding of

the business environment.

The report presents the findings of the study and few suggestions for improvement.

The inferences were drawn on the basis of inputs received by interviewing over hundred

persons including entrepreneurs, representatives from enterprise facilitating agencies and

financial institutions and other related individuals.

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2. PRESENT STATUS

Rubber production in the state in the year 2003-2004.

SL. District Tapping Area(ha) Production(Mt) Total value in Rs.

Crores

1. West Tripura 5800 6380 31.90

2. South Tripura 6500 7100 35.50

3. North Tripura and

Dhalai

2658 1425 7.13

Total 14,958 14,958 74.53

(Source Rubber Board)

Manufacturing of rubber products

There are about 40-rubber product manufacturing units registered with DIC of which

80% of the units are tyre retreading units, however the retread rubber comes from

outside. The other units include one rubber band manufacturing unit, one rubber foam

manufacturing unit and rubber compounding units.

More than 90% of units are either closed down or sick the units, which has been able to

sustain profitably to certain extent are tyre-retreading units.

Apart from these there is one latex centrifuge plant, rubber wood processing plant

owned by Tripura Forest Development Plantation Corporation Ltd. (TFDPC)

Also TFDPC has recently set up Training cum Production center for rubber product

manufacturing. This is an important infrastructure development.

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3. OPPORTUNITY IDENTIFICATION

OPPORTUNITIES THREATS

LOCAL MARKET

BANGLADESH MARKET

NORTH-EAST MARKET

NICHE SEGMENTS OF THE MARKETS

TAX EXEMPTIONS AND SUBSIDIES

PROVIDED BY THE STATE AND THE

CENTRAL GOVERNMENT

SMALL OVER ALL MARKET SIZE

NEGLIGIBLE SIZE OF INDUSTRIAL MARKET

LOW SDP

COMPETION FROM MANUFACTURERS OUTSIDE

THE STATE ENJOYING ECONOMIES OF SCALE IN

PRODUCTION HELPING THEM ACHIEVE LOW

PRODUCTION COST AND GOOD QUALITY

THE TECHNOLOGY EMPLOYED FOR

PRODUCTION IS MAINLY CAPITAL INTENSIVE

AND THE COMPETITORS WOULD HAVE

INVESTED HEAVILY, HENCE CREATING AN

ENTRY BARRIER.

STRENGTHS

ANNUAL PRODUCTION OF NATURAL

RUBBER IN THE YEAR 2003-2004 14,905 Mt

SECOND HIGHEST PRODUCTION AMONGST

THE STATES IN THE COUNTRY.

AVAILABILITY OF LABOUR

ESTABLISHED DISTRIBUTION CHANNEL

WEAKNESSES

NO RUBBER TECHNOLOGIST IN THE STATE

RUBBER CHEMICALS NOT AVAILABLE LOCALLY

NO KNOWLEDGE BASE AVAILABLE FOR

INDUSTRY SUPPORT

TECHNICALLY SKILLED PERSONNELS NOT

AVAILABLE IN THE STATE

NO LOCAL SUPPLIER OF REQUIRED

MACHINERIES

MAINTANENCE OF MACHINERY A COSTLY

AFFAIR

RAIL HEAD NOT AVAILABLE

NEEDED RAW MATERIAL AVAILABILITY MAY BE A

PROBLEM

LOGISTIC PROBLEM

TECHNICAL BACKWARDNESS

LOW PRODUCTIVITY OF LABOUR

WEAKENING OF DISTRIBUTION NETWORK DUE

TO INSURGENT ACTIVITY IN THE STATE

HAMPERING ITS REACH IN INTERIOR AREAS.

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OPPORTUNITIES: -

The manufacturers of the rubber products may aim to tap the local market of the state.

Another very important opportunity lies in the form of Bangladesh market. Presently annual trade is more

than Rs.170 million. The trade relationship beetween Tripura and Bangladesh is a very natural one due to

the geographical location. Most of the important Bangladesh towns are less than 150 kms from Tripura.

Also the developments taking place to further facilitate INDO - BANGLA trade gives further hopes (recently

establishment of rail links between Agartala and Akhaura in Bangladesh has been agreed in principle).

The subsidies and the tax exemptions provided by the state and the central government can help in many

ways to bring down the production cost and is an opportunity that can be tapped by the manufacturers to

their advantage.

THREATS: -

Major threat lies in the form of competition from outside the state. Producers out side the state, in general,

enjoys “ECONOMIES OF SCALE” of production hence achieving low cost of production and relatively

betters quality, owing to heavy capital investment.

STRENGTHS: -

Major strengths are production of natural rubber amounting to 14,905 Mt. In the year 2003- 2004 and the

production is growing steadily also there is ample availability of labour.

WEAKNESSES: -

Major weaknesses are that there is no Rubber technologist available in the state. Also technically trained

manpower is not available. There is no agency dealing in rubber chemicals in the state and logistic

problem throws up a great challenge for the manufacturing sector.

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ANALYSIS OF THE MARKET BEHAVIOUR AND SUGGESTED OFFERINGS

Analysis of the consumer behaviour reveals that the market is highly “PRICE SENSITIVE” and also looks

for “VALUE FOR MONEY”. Hence any product offered should be low in price and should give a good

value for money spent on that product.

Perceptual Mapping will help better identify the product-offering zone in a better way.

High Quality

IV I

LOW PRICE HIGH PRICE

III II

Low Quality

Though the quadrant IV is the most preferred zone quadrant III may be practically feasible

Marketing Strategy

Though it is very difficult to generalize marketing strategy for products that would be quite different from

each other a common strategy may act as a basis of detailed strategy product wise.

Target Market: - Depending on the product, market may be identified, it may be consumer market or

industrial market and upon selection of market it may be divided in to segments to target it.

Positioning: - The position should be “ More For Less”

Price: - Slightly lower than the competitors, has to be a price leader.

Distribution Outlets: - Depending on the type of the product, wholesalers, Retailers or door to door sales

channels may be selected.

Financial Objective: - Try to achieve the break even as early as possible.

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An indicative list of rubber products that can be considered for production at Tripura.

1. Latex based products

1.a. Rubber Bands

1.b. Balloons

1.c. Latex Adhesives Latex

1.d. Ordinary Rubber Gloves

1.e. Foam products

2. Dry Rubber based products

2.a. Black molded items like washers, bush kits, brake shoes etc.

2.b. Micro cellular sheets

2.c. Rubber Toys

2.d. Hawai Chappals

2.e. Rubber Mats

2.f. Other products like doormats, Black tapes etc.

3. Processing

3.a. Rubber wood processing

3.b. Rubber compounding

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4. ISSUE ANALYSIS

The core issues faced by the industry is as follows:

How to achieve the cost of production and quality, which can face the competition

from the products from outside the state and sustain profitably in long run?

How to match the pace of the dynamic business environment and remain

competitive?

PROBLEMS IDENTIFIED

(i) For manufacturers of Rubber products apart from natural rubber chemical and

synthetic products may be other important raw material, which has to come

from mainland. In the absence of rail route this has to come using the road

transport, which is comparatively costlier. Also as the chemicals are to come

from outside the state a high inventory level has to be maintained by the

manufacturers hence adding to the cost.

(ii) There are no skilled technicians available in the state for servicing of

machinery used in a rubber manufacturing units, also non-availability of spare

parts can make maintenance of machinery a very costly affair (To & Fro airfare

to Kolkata is more than Rs. 6000.00, the nearest resource center).

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(iii) Proper technical knowledge is a must for producing quality products is

required but No rubber technologists or Rubber chemists are available in the

state also there is no information and knowledge base support system

available in the state. The engineering college and the polytechnic college

don’t have chemical engineering departments.

(iv) Latex based simple products like rubber bands, balloons require low

investment and the manufacturing process is simple as well and has a

potential to go a long way. In long run, development of clusters may be

thought of but availability of required raw material is a problem in the way that

ammoniated field latex or crepe rubber is the suitable raw material.

Presently the rubber band manufacturing unit is using centrifuged latex (100

% DRC) as the raw input, costing approximately Rs. 81.00/ Kg, available from

latex centrifuge plant. This is a very high quality product and quite costly and

hence not suitable to be used as raw material for rubber band manufacturing.

Equivalent DRC content, ammoniated field latex would cost about Rs. 45.00

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Some suggestions to over come these problems:

Any state government department, for ensuring a regular “Just In Time”supply of rubber chemicals, must set up, a chemical depot. Also supply of

chemicals at subsidized rate may be thought of at this stage. This would help

the manufacturers to cut down their inventory level and lower the production

cost due to availability of subsidized chemicals. If it is difficult to establish a

new chemical depot Manimalyar Pvt. Ltd, (a joint venture of Rubber board

and Rubber producers society), having licenses to deal in all types of rubber

chemicals, should be used as a distribution channel

In the later stages, when the demand for chemical increases and the industry

matures a bit, private suppliers can step in.

A full time Rubber technologist must be appointed by TFDPC for their

Training cum production center.

Rubber board may be requested to open training and technical consultancy

division at Agartala.

Ammoniated field latex must be supplied by TFDPC to facilitate the growth of

latex-based product manufacturing units.

Engineering college should introduce B Tech chemical Engineering with a

specialisation in Rubber technology. Also the polytechnic college should

introduce short-term courses and certificate courses in rubber technology.

Proper database/ information base must be established. Institutions like DIC,

SISI, NECON etc. must be given the task to conduct product wise feasibility

study and to prepare a localised information base.

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5. CONCLUSION

Certainly there exists a great potential for development of manufacturing activities

related to rubber at Tripura. As of now, the industry is in initial stage and is struggling.

To develop this industry a hand holding support is required from state government and

other support organisations.

Over a period of time, development of cluster related to some products like micro

cellular sheets, rubber mats, rubber bands, black moulded rubber products, may be

thought of, based on actual experiences certain product or product categories having

distinct comparatitive advantages over competitors may be chosen and developing

clusters may planned followed by forward and backward linkages hence increasing the

pace of economic development in the region.

The clusters thus formed would be having a geographically bounded concentration of

similar, related or complementary businesses, with active channels for business

transactions, communication and dialogues, that share specialised infrastructure, labour

market and services and that would be faced with common opportunities and threats.

Over a period of time formation of clusters would give an opportunity for the employees,

suppliers of raw materials and traders to change into manufacturers, thus widening the

manufacturing base.

Working in clusters these units will try to achieve the critical mass in production hence

facilatating forward linkages.

Also benefits like collective bargaining from their suppliers and buyers and availing

facilities like insurance and other incentives from the government and other support

agencies may be thought of.