Indian rubber growers, traders get e-platform that promises more transparency, payment security. Will it work?

A rubber tree and bowl filled with latex (Source: ShutterStock)

As Rubber Board’s e-trading platform mRube went live on June 8, growers and traders viewed it with a sense of cautious optimism, unsure how it will pan out.

The board intends to complement the existing trade system for rubber by introducing more transparency coupled with quality assurance and payment security through mRube.

It also envisages market visibility and increased efficiency in the domestic supply chain through the electronic platform. E-trade has the potential to bring more business to existing rubber dealers, processors and manufacturers by reaching out to new sellers and buyers, even in far-off places.

Rubber Board executive director KN Raghavan said unlike the futures market, the focus in e-trade will be physical delivery.

“It is a project for the future and we don’t expect immediate gains. We will run it on a trial basis for one or two months and will see if there are any deficiencies and then address it,” he said.

The board proposes to address one of the key issues of certifying the quality of rubber through mRube. At present, no systematic method exists for assessing the quality of rubber traded in the country.

Traders are sceptical about how it will work out.

“We are not sure how the board will be able to ensure the quality of rubber produced and sold as there are quality issues with most of the grades of rubber. Besides, we will have to see whether there will be artificial manipulation of prices,’’ said Ronnie Thomas, secretary of Indian Block Rubber Processors Association.

Premium quality rubber fetches a good price, but traders of ungraded rubber, which runs into large volumes, are at a disadvantage. There are instances where growers and co-operatives find it difficult to sell rubber as per quality grades to the final consumer, which often dissuades them from producing quality material, according to the board.

Rubber dealers also expressed concern on assessment of the quality of rubber.

“The grading of rubber is a manual activity so we don’t know how it will work out, ‘’said George Valy, president of Indian Rubber Dealers Federation.

Rubber Board officials say the number of rubber dealers in the country had shrunk from 10,512 in 2000 to 7,135 in 20 years. Natural rubber production in the country has been hovering between 700,000 and 800,000 tonnes for the last few years.

“So on an average, a trader gets over 100 tonnes to trade in a year which amounts to just over 8 tonnes in a month. So, unless the production increases, the dealer will not be benefitted as he may not have sufficient stock to trade,” Valy pointed out.

Raghavan said two unique features of e-trade are the personalised trade pages with filter options and an escrow account to cover the payment risk of buyers and sellers. Buyers and sellers can upload their offers, and it has a provision for quoting counter-offers before confirming a trade. Personalized trade pages are available for buyers whose purchases are from their empanelled vendors. The system will generate digital legalised trade contracts.

The filter option will enable users to locate a buyer and seller in a specific geographical area based on quality, quantity, grade of rubber, customer ratings and so on.

For the first time in the history of commodities trade, two partnering banks, Federal Bank Ltd and ICICI Bank Ltd, will extend a zero interest rate facility to rubber sellers trading through the e-market. The banks will provide interest-free advances to sellers against the escrow credit of invoice value from the buyer subject to conditions.

“In normal trade, the payment happens in a period extending up to a month. But in e-trade we will have to advance money before the delivery as a buyer. Not many may have the financial stability for that,’’ said Ashok Khurana, president of Cochin Rubber Merchants Association.

The technology partner for developing the mRube is Ahmedabad-based i- Sourcing Technologies Pvt. Ltd. The electronic market follows a simple one-time registration for users. Users shall input their Rubber Board license number, and the system will fetch the rest of their details from the board’s licensing portal, and a One-Time Password-based validation will complete the registration.

Small rubber growers are not sure to what extent e-trade will benefit them. “I don’t know how many of them will find e-trade comfortable. They may have to go through the Rubber Producers Society (RPS). But not many RPS members have a GST registration which may be needed for trading,” said Babu Joseph, a small rubber grower.