Maruti drives into top gear in May, sales increase 8-10%
01 June 2009;economictimes.indiatimes.com:Sumit Chaturvedi; After a perky April, car market leader Maruti Suzuki is holding on to its above-industry-average sales growth in May as well, backed by strong rural demand and buoyant exports. Maruti Suzuki’s car sales in the domestic market have increased 8-10% in May 2009. Last May, Maruti sold 69,001 cars and this year it is looking to clock close to 76,000 cars. This would be the fifth consecutive month when Maruti clock’s over 70,000 units in sales. In April, Maruti’s domestic sales grew 9% and overall numbers (including exports) were up 15% year on year. According to top Maruti officials, exports have jumped more than 50% this May, driven by improved European demand. “Good exports are the result of new markets we have discovered. A number of countries such as Germany, France, the UK and others are offering special benefits for exchanging old cars for new ones, which is significantly adding to our exports. Also, last May, we were not exporting A Star, which is significantly contributing to our exports this year,” said Maruti Suzuki executive officer (marketing and sales) Mayank Pareek. The company’s newly-launched premium compact car Ritz is also doing well in the market and has started adding good numbers to its sales, although the company refused to give out the number of bookings since its launch on May 15. Maruti Suzuki hopes to repeat Swift’s success with the Ritz, which is available at a starting price of Rs 3.90 lakh for the petrol model and Rs 4.65 lakh for the diesel model. The Ritz is priced very close to Maruti’s highly successful Swift compact car, whose petrol model starts at Rs 3.99 lakh and diesel model starts at Rs 4.67 lakh. Yet, say company officials, there is no danger of major cannibalisation happening there. “A small number, around 5-7%, of Swift customers may shift to Ritz, but that will benefit us as there is already a waiting period both for Swift diesel and petrol. This way, we will bring down the waiting period for Swift and also add to Ritz sales,” said Mr Pareek. That, plus the special marketing efforts in rural areas and the appointment of rural sales executives, will lead to higher sales of all compact cars, including the newly launched ones, he added. As a result of its concerted push in the rural markets, Maruti Suzuki’s car sales in these areas have increased to 9% of its total sales from about 3.5% earlier. Auto analysts say the only reason why both Maruti and Hero Honda, market leaders in the car and motorcycle segment, have managed to beat the demand skid across industry is their concerted push into rural markets. But, lack of finance continues to be a challenge for Maruti, particularly in non-metro markets. “The situation has improved somewhat. Now, almost 67% of our total sales are financed vehicles compared to 80% earlier when times were better. But that’s still better than when the share of financed vehicles had fallen to 60-62% last year,” Mr Pareek added. Maruti ended fiscal 09 with 792,167 vehicles, its highest tally in its 25-year old history in India and up 3.5% over the previous year.
Govt to lose Rs 40,000 cr on tax breaks for gas production
01 June 2009;business-standard.com:New Delhi; The government will lose Rs 40,000 crore in revenues if natural gas production is given tax breaks, the revenue department in the finance ministry has said, an assessment disputed by experts. Revenue Secretary P V Bidhe met Petroleum Minister Murli Deora on May 29 and is believed to have expressed reservation on grant of seven-year exemption from payment of income tax to natural gas production, a senior government official said. Though the Cabinet had guaranteed exemption from payment of income tax on oil and gas production from areas awarded under New Exploration Licensing Policy (Nelp), the finance ministry last year said the fiscal incentives were only meant for oil. This stand, which ran contrary to the government’s written commitment while attracting investment under Nelp since 1999, led to a damp squib response to the last auction round and has led to postponement of current round. The official said Bhide had said tax breaks to companies like Reliance Industries, whose gas find would double India’s natural gas output, will lead to Rs 40,000 crore loss in tax revenues. Industry experts, however, said, the figure was highly inflated as income tax liability for companies like RIL would set in only after investments were recovered, which may take a minimum of four years. The remaining three years (out of the seven-year tax breaks) would yield about $1.5 billion in income tax on a total estimated revenue of $4.5 billion. Last year, international energy giants like BP Plc had decried the finance ministry for not keeping its commitment of giving tax breaks to both oil and gas production, saying the move would harm India’s brand as an investor-friendly country. The finance ministry believes the term mineral oil for the purpose of giving tax holidays includes production of only crude oil, but it choose to ignore the fact that the same tax incentives under the same act have been promised to producers of gas from below the coal seams (coal bed methane), where no oil can ever occur. The then Finance Minister P Chidambaram announced his version of the tax breaks in his Budget speech for 2008-09 and wants to apply it in all areas awarded since 1999. Petroleum Minister Murli Deora, too, had written to Prime Minister Manmohan Singh seeking his intervention on the issue but there has been no clarification from the finance ministry so far. He cited several definitions world over, and those in the Mines Act of 1952, Mines and Minerals (Development and Regulation) Act of 1957, Petroleum and Natural Gas Rules of 1959 and Oil Industry (Development) Act of 1974 to state that mineral oil contains both oil and gas. “The Income Tax holiday (should be) applicable for both oil and gas exploration, especially because at the exploration stage it is impossible to anticipate whether the exploration activity would lead to oil or gas discovery,” he wrote. Any denial of fiscal incentives promised earlier due to an ambiguity in interpretation will result in a huge embarrassment to the government and will mean a major reversal of our economic liberalisation programme, he said.
German Finance Minister confirms Magna wins bid for Opel
30 May 2009;timesofindia.indiatimes.com:BERLIN: German Finance Minister Peer Steinbrueck said on Saturday that Canadian auto parts maker Magna was Berlin's preferred bidder for General Motors' Opel unit. Germany has selected a bid by Canadian auto parts maker Magna to take over General Motors' Opel unit, backed by a Russian bank and in conjunction with Russia automaker GAZ, a source said on Saturday. "There has been a result. Magna is on board," a source close to the government said. The deal, struck after late-night talks between top German politicians as well as US government officials and both firms, would see GAZ making Opel vehicles in Russia, backed by Russia's top bank, state-controlled Sberbank.
Govt may free petrol and diesel prices in six weeks: Deora
29 May 2009;timesofindia.indiatimes.com:NEW DELHI: The Government will consider deregulating petrol and diesel prices in six weeks, Petroleum Minister Murli Deora said on Friday. "The issue of deregulation is being discussed and it will be put up to the cabinet for a decision," he said after taking charge of the Petroleum Ministry for the second time on Friday. Asked about the time frame during which the decision is likely, he said: "In about six weeks." Jitin Prasada also took over as Minister of State for Petroleum on Friday.
29 May 2009;business-standard.com:Vijay C Roy:New Delhi/Chandigarh: Punjab is losing over Rs 100 crore annually on account of higher value added tax (VAT) on petrol. As a result, consumers are turning to neighbouring states where the commodity is cheaper. Punjab charges about 27.5 per cent VAT on petrol, while it is 22 per cent in Chandigarh and 20 per cent in Haryana. Speaking to Business Standard, Punjab Petroleum Dealers Association president J P Khanna said petrol was almost cheaper by Rs 5 in Chandigarh and Haryana as compared with Punjab. While normal petrol is priced at Rs 40.51 and Rs 40.60 a litre in Chandigarh and Haryana respectively, Punjab sells it for Rs 44.94 a litre. According to excise officials, though it’s difficult to ascertain the exact revenue loss, rough estimates put it at about Rs 100 crore annually. Punjab has over 2,700 petrol pumps and consumes about 5,500 kilolitres daily. The state government earns VAT to the tune of 30 per cent from the sale of petroleum products. In order to boost sales, Khanna said the state government should bring the VAT rate in Punjab on a par with neighbouring states and abolish the entry tax, which is being charged at one per cent from pumps owners within the municipal limits.
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