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Monday,
September 2, 2002, Chandigarh, India  
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Price cut, sales and speculation
Inflation up 3.41 pc
Bonn bread gets quality award
TVS Motor |
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PREPARING FOR
RETIREMENT
Q: My father purchased agricultural land during the year 1962-63. our family is in the process of selling this agricultural land. My share in the sale proceeds will be around Rs. 6 lakh. Please let me know the following:
Distance sales: law to ensure fair deal must
Crucial week ahead
Opto Circuits a good pick
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Price cut, sales and speculation Old warhorses that are feeling insecure either by the new wheels on the block or stifling competition are fiddling with price, one of the five-cardinal Ps of management, to gain some market share. That is exactly what Maruti Udyog Limited (MUL) has done in the four-wheeler segment. The oldest of the young car manufacturers tinkered with the price factor. Thanks to the price slash of Maruti 800 models that happened more than a month ago, the car-war conflagration has flared up once again. Two-wheeler manufacturers are not far behind. Bajaj and Hero Honda are pursuing the same policy. Hero Honda did it to its products a while ago and after that it was Passion’s turn specifically, to go in for some diminution. Bajaj slashed the price of Caliber by Rs 4,000 and Boxer K-tec by Rs 2,000. “Why should we not do it? In fact, we are the last ones in the market to have done it. It’s an open price war and all this is to gain some market share,” says G.S. Saini, a sales manager with Bajaj. Strategy “This price tactics is not new for any MNC and professionally managed business group,” opines P.P. Arya, a management expert. “With the lowering of price sales increase. And then with the apprehension that prices might jack up to revert to what it was before the slash, sales would increase further. It’s a win-win situation,” he says and avers that this is now a hackneyed approach and instead auto manufacturers should concentrate on giving more facilities. “However, this makes a lot of commercial sense,” he adds. Baldev Singh, a general manager with one of the reputed two-wheeler agency, says that price slash depends largely on market forces and rival’s tactics. “Cost of production and competition in the market are the two prime factors that are kept in mind before going in for a cut in price,” he says. Product pricing plays an important role. It has been a prime factor for Maruti. According to J.D. Power sales satisfaction index (SSI) published recently, 45 per cent of the buyers preferred purchasing a Maruti car because they felt that they received a fair deal vis-à-vis the money spent on the purchase. Overall, out of the total SSI score of 120, MUL stands at 106, three points above the total industry score of 103 and one point ahead of rival Hyundai. Though the price slash by Maruti was in the midst of publicity glare, price hike by one per cent a week ago was unannounced and was noticed only by those who sauntered in to purchase a new gaddi. Executives in the agencies attributed it to ‘price equalisation’ and ‘increase in surcharge.’ Maruti dealers say that while the price reduction has given a boost to the sales by as much as 30 per cent, it has, on the other hand, affected the Class B segment. “Now Zen and Alto buyers are also deferring their purchase hoping that MUL would announce similar price cuts for this segment. Even the borderline cases, who were planning to move upward preferred to purchase the 800 model instead,” says Deepak Joshi, Managing Director of one of the Maruti showrooms, while agreeing to the fact that Zen sales dropped after the price cut. “The cut-down prices won’t stay for long. Three months at the most,” he forecasts. Most of the company’s competitors dismissed it as insignificant and an attempt to regain lost market share. Hyundai Motor India Ltd (HMIL) said the increase in sales of the entry-level car would not make any impact on their company. Officials in Tata Indica also dismissed Maruti’s sales as of no value to them, media reports indicated. Grapevine has it that archrival Hyundai-Santro plans to launch an entry-level car within a month or so to make inroads into the Maruti 800 buyer segment. “Despite all market rumours our sales have not been affected,” comments a Hyundai dealer. Similarly in the mobike segment, where the competition is revving up, buyers are feeling that purchase-deferred-approach is sensible because a new product maybe launched the next day or due to stifling competition auto manufacturer might go in for a price cut. This happened in mobike segment when the launch of LML’s Freedom reduced the queue by half at other two-wheeler agencies. Customers Surely, buyers are elated with the price reduction and new launches. Anil Dhar, a professional service officer with Pfizer, is a delighted man. “Earlier, I had planned to purchase a second-hand car. But with price reduction, I am driving home a new car,” he says. On the other hand P. Jyoti, an educationist by profession, rues that Hero Honda’s price slash on Passion was unannounced. “I purchased a Splendor in the last week of July simply because of the price difference between it and Passion, a model rated higher by Rs 2,000 nearly. Then, in the first week of August, Passion went in for price trim. This was unannounced and I feel kind of cheated,” he says and adds that price cuts should not be made at the drop of the hat. “Imagine the plight of a customer who spends money and goes home to find that had he waited for one or two days he could have got the same model at less price. Or a better model instead.” Second-hand market Overall, the customers are happy but hand-me-down vehicle dealers are not. One man’s meat is another man’s poison as a cliché goes. For the second-hand car and scooter market, the price reduction could not have come at a time worse than this. Already reeling under the impact of recession and ‘financer onslaught’ most of the second-hand car dealers are feeling the pinch and shifting their business. “Bura haal hai! The sales (of used Maruti cars) have come down by 60 per cent. If a customer wants a Maruti, he purchases a new one. Now most of the deals are for luxury cars in the car bazaar. It’s difficult to survive if you do not have another business or job, says Satpal Gupta, a car dealer. Raju Khosla, another car dealer, rues that customer expects that the price of second-hand Maruti 800 should also be reduced as a new car comes Rs 15,000 to 18,000 cheaper. “Earlier we used to sell 2k model for Rs 1,55,000. Now it’s difficult to find a purchaser at 1,40,000 even,” he says. Officialspeak Maruti had registered a net loss of Rs 269 crore in 2000-01 on a total revenue turnover of Rs 9253.3 crore. In 2001-02 it achieved a net profit of Rs 104.5 crore on a total revenue turnover of Rs 9410.3 crore. This turnaround came in the year when the car market was flat and the overall economic sentiment remained depressed. Officials in MUL say that the price-cut strategy has helped them boost sales by as much as 70 per cent across the region (30 per cent, all over) and that a new class of buyers has sprung up with the under 2-lakh price playing a vital role. “It was not because of heavy inventory that we decided to cut the prices. In fact, the market had remained sluggish with regards to the domestic car industry in Q1. Since it remained untouched by the revival trend so we, as market leaders, thought of infusing some life into it. India still has low car penetration of 6 per 1,000 persons. After the price cut the industry has grown by 4 to 5 per cent,” Vikram Mehtani, Regional Manager, MUL, says. Mehtani says speculations regarding Zen and Class B segment cars dropping prices in near future could be due to ‘mischievous reporting’ by some TV channels. He, however, refused to comment on for how long would the reduced prices remain in force and precisely and specifically why the prices were hiked by nearly one per cent in Chandigarh recently.
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Inflation up 3.41 pc
New Delhi, September 1 However the rate, which saw only a moderate rise on a weekly basis due to decline in prices of petrol, high speed diesel oil, tea, fruits and vegetables, was lower by 1.94 per cent as compared to 5.35 per cent recorded during the corresponding week of the last fiscal year. Last week the inflation rate was 3.03 per cent the previous week. The Wholesale Price Index for all commodities (base 1993-94) during rose by a mere 0.1 per cent to 166.9 points during the week.
UNI
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Bonn bread gets quality award Ludhiana, September 1 The award was presented to Mr Manjit Singh, the Managing Director of the Bonn Nutrients by the Union Finance Minister, Mr Jaswant Singh in New Delhi recently. The Minister of State for Small Scale Industries Ms Vasundra Raje Scindia was also present at the function. The award carries a citation, a trophy and cash prize of Rs 25,000.
TNS
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TVS Motor
Chandigarh, September 1 A company press release said that the bulk of this growth is attributed to the continued increase in demand for motorcycles amongst the various segments.
TNS
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PREPARING FOR RETIREMENT Ludhiana Annuity a good option
Annuity is something that can make post retirement life akin to the pre-retirement as it offers a fixed amount of money at periodic intervals. Annuity as the name suggests implies periodic payment that can start immediately or can be deferred to start after a certain time. Annuity is generally advisable to supplement one’s retirement income. Who should go in for an annuity?
Annuity is best suited to someone who fears that he / she may outlive their savings i.e. live longer than they expected. It is best suited for people who have some spare money that they would not require for a period of about 10 to 15 years. This period is recommended because it gives you the best advantage in terms of tax benefits. Unlike endowments that do not attract tax on maturity, annuities attract tax and any investment in annuities should be made so that the maturity coincides with the retirement. Immediate versus deferred annuity
For those planning to invest in annuities for a period of 10-15 years before retirement, deferred annuity plans are best suited. As the annuity’s gains are tax deferred for people who are in a very high income tax bracket and do not want to increase their tax liability from funds received as bonus or inheritance, deferred annuity should be taken with returns coinciding with retirement when the income tax liability drops. In other words, a ‘Deferred Annuity’ will start making the payments at a pre-determined future date, as agreed between the buyer of the policy and the company offering the policy. The annuity also offers a Tax benefit u/s 80CCC(1): up to Rs10, 000 deducted from you. But for those who are about to retire and would receive huge chinks of funds may like to invest in an immediate annuity that will partially cover up the drop in post retirement income. An immediate annuity starts making the income payments within the first year of its purchase. Do not invest blindly
Anyone nearing retirement and looking for a guaranteed income for the rest of his / her life, annuities are a good investment. But do not invest all your savings into annuities. Most financial advisers recommend that the investments must be spread over between endowment, annuities, rental income from real estate, stocks and fixed deposits. A diversified investment for post retirement benefits is best recommended as diversification adds safety. How does the deferred annuity work?
According to a predetermined period, a policy holder would make payments to the insurance company. This is called the ‘Accumulation Phase’. Based on the number of years and the amount paid, the second phase is when the policy holder starts receiving the annuity periodically. This is called the ‘Payout Phase’. The payout phase is generally as per the convenience of the policy holder and he / she can receive payments monthly, quarterly, semi-annual or annual as desired. How much does the annuity pay?
The money that a person would receive depends upon various factors including the annual premium that the client pays to the insurance company towards the purchase price of the annuity, the life expectancy of the policy holder depending upon his / her age, etc. Annuities generally offer you a competitive interest rate and with some annuities you can lock-in at a guaranteed interest rate, this helps in fighting inflation. What other options to explore?
Many deferred annuities offer continuing the payments to the spouse of the policy holder under the ‘Joint Life option’, besides the ‘Last Survivor Annuity’ option in most companies offer to return the purchase price of the annuity to a designated nominee. Besides you can include major surgical assistance, accident and disability benefit and critical illness benefit with most policies being offered today. Annuity also covers life
If a policy holder dies prematurely, the spouse or the joint holder of the policy gets the annuity ensuring the same income stream determined at the time of taking the policy. Annuities also offer the option of a guaranteed death benefit, which passes to your named beneficiary. |
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by R.N. Lakhotia Q: My father purchased agricultural land during the year 1962-63. our family is in the process of selling this agricultural land. My share in the sale proceeds will be around Rs. 6 lakh. Please let me know the following: 1. How to compute capital gains? 2. What will be my tax liability? 3. How to reduce tax payment giving exact details? —Rajinder Kumar, Panchkula Ans: Yes, there would be liability on you to pay tax in respect of capital gains (long-term) arising to your share by selling the agricultural land. You would be entitled to the benefit of Cost Inflation Index. Finally, the net capital gains if deposited in selected bond like NHAI Bonds or Nabard Bonds, within six months from the date of sale then there is no liability to payment of Capital gains. [IT rebate] Q: I need some clarifications regarding the Income Tax Rebate. The details are as below: 1. I am living in a house owned by me on GPA. Official telephone is at my this residence. 2. I purchased a Group Housing Scheme flat in Panchkula by taking loan from bank. Then I took Rs.4 lakh loan from my office and repayed it to bank. This house is now nortgaged to my office. 3. Then I purchased another Group Housing Scheme Flat in Chandigarh by taking Rs 4 lakh loan from HDFC. 4. I am paying instalment of these two loans. 5. Both these flats are lying vacant and I am not staying in any of these Flats. Now my querry is :— 1. Can I claim rebate for House Rent Allowance from my income. 2. Can I claim rebate for the interest paid for both the loans. Please explain what kind of rebate is possible for me and how much rebate I am admissible. —Amarjit Singh, Chandigarh Ans: You can claim benefit of house rent allowance exemption after producing evidence of Rent payment. You would also enjoy tax deduction for interest paid on one residential flat. In respect of the second no deduction would be permissible now and only if at a future date you would like to rent it out, then you would get benefit of old interest prior to tenting out of property which will be allowed in two equal instalments in five A. Ys. |
co
by Pushpa Girimaji Distance sales: law to ensure fair deal must It sounds strange to hear an American or a European extolling the virtues of a body-trimming gadget or a vacuum cleaner or a skin cream, in chaste Hindi, Punjabi or Bengali. But that’s what television shopping or tele-shopping has done — shrunk distances, broken down language barriers and created a global market through which you can get a wide variety of goods manufactured in any corner of the world at your doorstep. All you need to do is call and place your order. Technology has in fact brought about a marketing revolution, wherein goods and services are sold through television, telephone, cellphone, catalogue/mail order and the Internet. Manufacturers and retailers have been quick to cash in on the opportunity provided by various communication technologies to expand and capture new markets. But lawmakers have not kept pace with these developments and come up with appropriate measures to protect consumer interest. This is apparent in the fact that today we do not have specific laws or regulations aimed at protecting consumers who shop from home via these communication channels. The Consumer Protection Act and the Monopolies and Restrictive Trade Practices Act protect consumers against defective goods, deficient services and unfair trade practices. The consumers can take recourse to these laws for relatively quick and simple adjudication of their complaints against goods and services. But there are no specific regulations aimed at ensuring a fair deal to consumers at the time of transaction via “distance sales”. Given the fact that consumers who buy through distance selling schemes do not have face-to-face contact with the seller nor an opportunity to actually examine the goods before purchase, the possibility of consumers getting a raw deal here is far higher, unless there are regulations laying down clear norms for such transactions. Recognising this, the UK, for example, has implemented the European Commission Directive on the protection of consumers in respect of distance contracts and passed the Consumer Protection (Distance Selling) Regulations, 2000, conferring certain specific rights on consumers. For example, in order to give consumers an opportunity to examine the goods or services being offered before actually concluding the deal, the regulations provide for a seven-day “cooling off” period in which a consumer can cancel or withdraw from the contract. That is, after receiving the goods, if the consumer feels that she or he does not want it, the goods can be returned within seven working days of receiving the goods for a full refund, without offering any explanation for the return. This is specifically meant to give consumers the confidence that they can change their mind after receiving and seeing the goods and get a full refund.. The Office of Fair Trading, UK, which has the responsibility of enforcing the regulations., is now asking companies to return in such cases, not just the cost of the product, but also the cost of packing and delivery (but not return cost). These regulations also give the consumers the right to receive full and clear information about the goods and services before placing the order. And once the order is placed, the consumer has to get a written confirmation of the original information, plus additional information such as the method of canceling the order, details of guarantees and after sales service, who will pay for the postage if the goods are returned, date of delivery, etc. In fact the contract is not enforceable by the supplier unless he gives the required information to the consumer. And if the goods are found to be faulty or are not what the consumer ordered, then the consumer is entitled to a full refund, including the delivery charges, plus the cost of returning the goods. The regulations also provide for credit card protection against home shopping fraud — a consumer gets a refund from the card issuer in such cases. In short, the regulations provide legal protection to consumers who buy goods or services through “distance sales”. We in India also need to have such regulations conferring specific rights on ‘distance shoppers’, so as to ensure a fair deal in such transactions. The regulations should clearly specify basic norms for such transactions that the seller should follow. There is also an urgent need to create a full-fledged investigative wing attached to the apex consumer court, on the lines of the office of the Director-General (Investigation and Registration) under the Monopolies and Restrictive Trade Practices Act. This could be done through an amendment in the Consumer Protection Act and would provide for suo motu investigations into false and misleading claims on product quality, safety and performance. In other words, it would provide for an independent watchdog that would constantly look out for unfair trade practices and haul up those making false and misleading claims to sell their products and ensure that such claims are stopped, corrective advertisements issued and if necessary order recall of goods sold on false claims. The need for such a sentinel of consumer interest also becomes imperative when the MRTP Commission is wound up. |
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