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Monday,
June 17, 2002, Chandigarh, India  
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Diesel
cars drive into home segment
Interest
free loan
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Market
is on recovery path
Deal
effectively with spurious goods
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Diesel cars drive into home segment The keyword has been fluctuation this summer. Power supply, tension at the border and petro prices - all have fluctuated with a promise to fluctuate further though not exactly in the same order. For the man on the road, the last event had the most telling ramification. Rather, upward jump in the petro prices is now having a cascading effect on the car buyers in general and medium-sized car purchasers in particular. With petrol price touching Rs 30 and diesel Rs 18 in Chandigarh, medium-sized-car buyers are mulling over the alternatives over and over again. All of a sudden they have discovered the diesel cars and are converging on to showrooms to inquire about the prevailing rates. Their hypothesis - a litre of petrol is worth 1.7 litres of diesel - is not entirely misplaced given the option of savings Rs 500 to Rs 700 per month (under normal family circumstances). This implies a saving of Rs 30,000 to Rs 40,000 on fuel costs alone if a car remains with the family for five years. “Kya kariye ji? Petrol nu taan aag lagee payee hai,” complains Baldev Singh, a potential car buyer from Zirakpur who plans to sell off his present petrol car in favour of a diesel one.
Marketing strategy There are many like Baldev Singh, doing rounds of showrooms inquiring about the diesel car’s price, mileage and add-ons, almost daily. To add fuel to the raging fire, Maruti, that reduced the price of its Zen D model by almost Rs 25,000, has taken the fight straight into the spark ignition (read petrol) car camp. “The price of diesel Zen has been lowered because of two reasons - demand and indigenisation. The competition is tough now,” explains Veenu, an executive with one of the Maruti car dealers. The marketing strategies are confounding, however. The price of diesel Zen is nearly Rs 20,000 less than its petrol contemporary (LXi E2) while in the Telco family the diesel version of Indica is priced higher than the petrol by nearly the same amount (DLE V2 vs. LEI V2). The only other car in the mid-size segment, Fiat Uno, doesn’t have a petrol version.
Then and now To get a bit historic, it was not before the fag end of the nineties that diesel car gained some respectability. Till then it was looked down upon as a crude four-wheeler that spluttered a lot of soot, splurged black oil from every conceivable seal and needed a push almost each time it was to start. Something that decorated the government office veranda or a small-time buisnessman’s work place. But a house garage - never. It was then that Tata rolled out Indica. Technology changed and other carmakers followed suit. The low-cost fuel proposition took off on the home front and this day we have a whole array of diesel cars in all segments.
In-house competition At present, diesel cars are facing intra and inter-company competition. On one hand they are competing with the petrol cars from their own stables and on the other are gearing up to meet the usual commercial and technological challenges that other industrial houses are throwing at them. Car dealers, too, try to influence the consumer buying behaviour so that the purchaser remains within the same ‘car family.’ For them retaining a customer matters more. Petrol or diesel doesn’t. “How can I say that petrol Indica is better than a diesel one or vice-versa? Rather, why should I say it?” questions the woman executive manning the sales counter at Indica showroom. “For high speed and low maintenance costs prefer a petrol version while if you are from the business class go in for the diesel one,” she explains tactfully while agreeing to the fact that diesel cars require more frequent maintenance as compared to its petrol counterparts. A comparison between diesel family cars in mid-size segment
In fact, proper maintenance was one point that all diesel car sellers agreed and emphasised upon. Once the cars go through the regimen of three servicings, respective companies recommend regular service for Zen D after every 10,000 km, Uno after every 7,500 km and Indica after every 5,000 km. “Do not buy a car with a catalytic converter (Cats) because such cars require unleaded diesel that is available mostly in Delhi. Cats do not last long,” alleges a Fiat Uno dealer as he looks down upon a rival car that comes with Cat in Euro II category. “A marketing ploy just because Uno Trend AC doesn’t come loaded with Cat?” one wonders. Eco-friendly? Catalytic converter is a device that converts poisonous carbon monoxide to carbon dioxide. Eco-friendly diesel cars come loaded with them though a Swedish study conducted for the Centre for Science and Environment (CSE), India, concludes that the “cancer potency levels of diesel exhausts from the Indian cars is more than twice that from petrol.” Even more frightening is the fact that if only particulate emissions are compared from different car models then the carcinogenic effect of diesel particulate matter from the new diesel car is equal to that of 24 new petrol cars and 81 CNG cars on road. Then this is a scientific projection understood only by those who either have a ‘green’ bone or are health (over)-conscious. For commoners, it is here and now and cheap fuel option is what their mind comprehends.
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by R.N. Lakhotia Interest free loan Q: 1. I have given a interest-free loan of Rs one lakh to my wife, which she has invested and getting interest. Whether the interest income will be counted as my income or will be considered as the income of my wife. My wife has some more income as interest on money she has earned/collected over the past years but the total interest income does not come upto taxable limit. 2. What type of evidence shall have to be kept for showing the interest free loan to the wife. Will a pronote suffice. My wife owns a telephone connection in her name but its installation charges + Bill are paid by me. Is she required to file a return under 1/6 scheme. She has already filed return in December 2001 and also applied for PAN. If she is not required to file the return how to correct the mistake or when the next return becomes due. — O.P. Mittal, Panchkula. Ans: Now owning a telephone is not to be counted as one of the economic indicators for compulsorily filing the Income-tax return. The interest accrued to your wife as a result of interest from loan given by you to her will be treated as your income because direct or indirect transfer to the spouse in terms of section 64 is not permitted. It is suggested that you should not give any interest free loan to your wife. However, you can advance loan to your wife at reasonable rate of interest like the existing bank rate of interest.
Investment Q: Is it better to invest in PPF/LIC u/s 88 or in “Tax Saving Bonds” of ICICI. I am a tax payer and need to invest u/s 88 to the maximum permissible extent. Any other alternative may also be advised. — Er. R.L. Vij, Panchkula. Ans: Purely from the point of view of better yield it is recommended that investment in Public Provident Fund is the best one. Your investment in PPF will bring you net yield of 9 per cent p.a. There is no income-tax on the interest earned from PPF Account.
House rent Q: Our house stands in the joint name of me and my wife. I am in service and my wife is a housewife. However, the house was purchased out of the major contribution made by my wife’s parents. Can I get house rent receipt from my wife for the purpose of saving income tax for the financial year 2001-2002. On March 6, 2002 to a similar query by Abhinav Kumar from Patiala, you have stated that making rent payment to wife is perfectly legal within the framework of the income tax law. — Vijay Kumar Preenja, Amritsar Ans: You can make payment of rent to your wife and claim deduction from the house rent allowance so received by you from your employer. However, please ensure that the rent income of your wife is shown in her income-tax return. |
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by J.C. Anand Market is on recovery path The stock market is now recovering by a slow but a steady process. During the last fortnight the Sensex moved up from 3161.09 on June 4 to 3312.07 on June 14. I believed that the market will continue to recover during the current fortnight too with some profit-taking in between. The war clouds have almost disappeared though sporadic militant attacks may continue, particularly during the Vidhan Sabha election in Jammu and Kashmir. There are also indications that the industry is doing well. The industrial output was up by 2.9 per cent in April (as against 2 per cent in April, 2001). Based on better industrial performance economists project the GDP growth for the current financial year in the range of 6.5 to 6.7 per cent. There is improvement also in the growth rate in the manufacturing sector as well as electricity and mining sectors. There are reports that exports are also picking up. There is also a turn- about in the public response to public issues. Telco has reported good results for the January-March quarter. The net sales growth of 18.6 per cent was higher than expectations. There is 175 per cent rise in the earnings, and the company has earned a net profit of Rs. 162 crore in this quarter. It will take a long time for the company to recover from the setback it has received during the last two years. A better scrip for investment is that of Tisco. The steel prices have been raised and almost all steel making companies have registered gains in their market-rating. SAIL’s share price has jumped by over 140 per cent from its Rs. 5 level. Sesa Goa, which has iron ore mines has also attracted long term buying. International demand for steel products has been moving up since last year. A long-term investment in Tisco can be safely recommend, though the market price of Tisco scrip has already moved up from Rs. 102 to Rs 132. There is distinct scope for further rise. TVS Electronics which had announced moderate results with divided of only 7 per cent is quoting at Rs. 96 at present ( for its Rs 10 face value shares). The management is the main buyer and TVS Investments. has acquired 17 lakh equity shares (9.99 per cent) of the company. I expect further rise in the market price of this scrip. Some second-rate but more or less neglected shares of many companies of the old economy, have moved up during the last fortnight. The list of such companies includes Balmer Lawrie (at present quoting around Rs. 106), Gujarat Alkalies, Colour-Chem, Vanavil Dyes, Vardhman Spinning, Balmer Lawrie Van Leer, GTN, Patspin, Casil Hospital Products. Larsen & Toubro has declared its annual results. Larsen & Toubro’s net profit is higher by 10.07 per cent and the company has recommended a divided of 70 per cent (as against 65 per cent declared last year.). But its results for the fourth quarter are disappointing. The net profit for the quarter is down by about 25 per cent. The share price has slightly dipped, but I believe that there is distinct prospect of a substantial rise in the market price of this company. I base my analysis on three factors. First, the company has pre-paid a large part of its debts and has decided to reduce its debts further by Rs. 450 to Rs.500 crore. This should help the company to improve its profitability. The second factor is its large cement manufacturing capacity. It is the largest single cement manufacturing company in India. Now the government is committed to building roads to improve its infrastructure facilities, there is bound to be a greater demand for cement. The third factor is their close connection between AV Birla Group and Larsen & Toubro, and this would make for better synergy between them in cement. AV Birla Group has recently purchased Reliance-held shares in Larsen & Toubro. More recently, it has raised its holding in Larsen & Toubro equity shares by 2.84 per cent, taking its total share-holding in the company from 10.05 per cent to 12.89 per cent. |
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by Pushpa Girimaji Deal effectively with spurious goods On the heels of the news of Delhi police unearthing a huge racket in spurious medicines comes more disturbing news of parallel trading in fakes. On May 29, officials of the Bureau of Indian Standards(BIS) and the police confiscated in Amritsar, 2000 kilogram of food colours of doubtful quality. They not only carried the name of a well-known manufacturer, but also imitated the quality seal of the BIS. Prior to that in the second week of May, Delhi police had seized about 400 kilogram of spurious colours. Not many people are aware of this, but under the Prevention of Food Adulteration (PFA) Act, only certain specific synthetic colours are allowed to be sold as food colours and even here, the law prescribes specific quality standards for them. And in order to ensure this, the PFA Act stipulates that no manufacturer can sell food colour without the quality seal from the BIS. So those who were caught manufacturing and selling spurious colours were violating three laws: PFA Act, BIS Act and the Trade Marks Act. But much more than that, they were selling food colours which could well be injurious to health. Talking of unsafe food, the police also during this period raided units manufacturing and selling spurious soft drinks and bottled drinking water. That was not all. The last week of May saw Delhi police uncovering parallel trading in circuit breakers, distribution boards, switches, plugs and sockets, besides bulbs. The anti-auto theft squad also busted a gang of ‘manufacturers’ and dealers trading in recycled shock absorbers in the name of a well known brand. Earlier raids have revealed that the problem of fakes is not limited to only some products. Paints, cement, LPG cylinders, stoves, pressure cooker spare parts, ground spices, textiles, disposable syringes and needles, batteries, cosmetics, well, you name any product and there is bound to be a ‘duplicate’ . The raids show that the police have become active and they should be congratulated for it. In fact the government should come up with a scheme of incentives for the police personnel that crack down on fake goods. Since most of these raids come about on the basis of tip off received from the public, there should be rewards for informers too. The raids should also force us to take cognizance of the magnitude of the problem and take appropriate measures to deal with it effectively. Alongside, there is need to educate consumers on how to avoid fakes. In all these cases, those involved in the manufacture and sale of fakes are prosecuted under the relevant laws - Drugs and Cosmetics Act, PFA Act, Trade Mark Act, BIS Act, etc. However, no case is filed against them under the Consumer Protection Act seeking damages from those who manufactured and sold such sub-standard, hazardous goods. And this needs to be very seriously considered. In fact several new provisions in the Consumer Protection (Amendment) Bill now before Parliament are meant to tackle trading in spurious products as well as goods which are unsafe or hazardous and these should be fully utilized to deal with the menace.. For example, sale of spurious goods has been brought under the meaning of unfair trade practice. Two other new provisions dealing with hazardous goods in the Bill also give the consumer courts the power to deal effectively with spurious goods. While one is the provision to award punitive damages “in such circumstances as it (the court) deems fit”, the other is the power direct the offender to “ pay such sum as may be determined by it if it is of the opinion that loss or injury has been suffered by a large number of consumers who are not identifiable conveniently”. The Union Ministry of Consumer Affairs should take up this issue at the next meeting of the Central Consumer Protection Council, which is the policy making body constituted under the Consumer Protection Act. The members of the Council include ministers and secretaries from all the States who handle consumer affairs, besides members of Parliament and consumer representatives. The Union Minister for Consumer Affairs is the chairperson of the Council. Since the CP Act gives the government too the right to seek redress before the consumer courts on behalf of consumers, Consumer Affairs Ministries in the States as well as at the Centre should constitute a special cell against spurious goods and consider filing cases against those caught on charges of manufacturing and trading in spurious goods. If it is not possible to identify individual consumers who have bought such goods, the compensation amount should go to the consumer welfare fund. The motive for those who take to manufacturing and selling spurious goods is the huge financial gain. So substantial amounts awarded by consumer courts as damages would also discourage them from continuing with the trade. The CP (Amendment) bill also provides for recovery of amounts ordered to be paid by the consumer disputes redressal agencies, as arrears of land revenue. So collecting the amount due from the opposite party would not be an impossible task either. |
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