Gadkari promises to take up industry’s plea for cut in GST with Finance Minister
Offering hope: Road Transport and Highways Minister Nitin Gadkari speaking at the SIAM convention. Kamal Narang
Offering some solace to the crisis-hit auto industry, Road Transport and Highways Minister Nitin Gadkari on Thursday assured ‘full’ support from the government to help overcome the free fall in vehicle sales. He said the Centre was looking at steps, including export sops and GST incentives, to help create demand in the sector.
“As far as the present economic data is concerned, automobile sector is facing a slowdown because of the global economy... because of demand and supply. The government is with the automobile sector,” the Minister said at the 59th SIAM annual convention.
The Minister also clarified that the government did not intend to ban ICE (internal combustion engine) powered vehicles.
He, however, added that the government would promote the use of alternative fuels and electric vehicles to tackle issues of a high crude oil import bill and pollution. Thursday’s statement comes as a relief for the industry, given that it was Mr. Gadkari who had in 2017 asked car makers to move to electric or they would be “bulldozed” into doing it.
Mr. Gadkari also promised to take up the industry’s request for a GST cut with Finance Minister Nirmala Sitharaman. “The industry's demand for reduction in GST is understandable. I will take your suggestion [to reduce GST] to the finance minister... even if it can be done for a limited period of time. I will follow this up. This sector needs help at this time and that help should be in such a manner that it helps increase sales,” he said. Noting that the GST on electric vehicles had been reduced to 5% from 12% earlier, he said the government was mulling to extend the same benefit to hybrid vehicles.
Any decision on GST on automobiles would be taken up for discussion at the upcoming meeting of the GST Council on September 20. However, the industry is seeking an early solution as they fear that customers would defer purchases anticipating further reduction in prices.
Mr. Gadkari also said that his Ministry would award 68 road projects worth about ₹5 lakh crore in the next three months, which, in turn, would help generate demand for commercial vehicles.
SIAM president Rajan Wadhera sought introduction of a scrappage policy and a nodal Ministry for the industry, in addition to GST cuts. CII president designate and MD and CEO of Kotak Mahindra Bank Uday Kotak said that there was enough liquidity in the banking system to finance any form of vehicle.
‘At current production levels, every carmaker is overstaffed’
Homegrown auto major Mahindra & Mahindra has deferred 10%, or about ₹1,000 crore, of its planned capex to cope with the prolonged slowdown in the auto sector, the company’s managing director Pawan Goenka said on Thursday.
Mr. Goenka also warned that if the industry did not return to positive growth for the remaining months in the current fiscal, the sector may see more layoffs as almost every carmaker is overstaffed, based on the current level of production.
Pointing out that the company’s investment in products had not slowed down, he said the investments in building capacity and discretionary capital expenditure would slow down.
“The capacity that we expected 2-3 years from now is less than a year ago. So, there will be a slowdown in capacity investment. And probably about a year’s deferral... discretionary capex like repair and maintenance will be deferred as much as possible. At Mahindra, we will probably end up deferring 10% of capex... about ₹800-1,000 crore.”
Mr. Goenka pointed out that that the current slowdown was different from the previous three slowdowns that the industry witnessed. This one was “more domestic”, while the previous ones were caused more by global scenarios. “Therefore, a little bit of intervention by the government could easily get us out of trouble. But this time, there is no magic wand that can work... a variety of things need to be done together to get us out of the current situation,” he said.
Stating that it was “unkind” to say that the industry was not doing anything, he said it was only after attempting everything from product launches to price incentives, the industry had turned to the government.
On layoffs in the company and the sector, he said M&M has had to lay off about 1,500 temporary workers, of a total of 30,000.
“That is like 5% reduction when volume is down by 20%. We are not removing people just because volumes are down, but if it continues beyond a certain point then the industry would be unable to carry the extra people.”
He also said it would be more difficult for commercial vehicles to turnaround than the passenger vehicles, as the latter was a discretionary purchase, while CVs were purchased based on the demand. “For CVs, just a reduction in GST may not help; you need more of an economic turnaround.”
Tariff plans start at ₹699 a month and go up to ₹8,499
Reliance Jio on Thursday announced the commencement of JioFiber, its fibre-to- home service, across 1,600 cities in India with the basic pre-paid ‘Bronze’ plan starting at ₹699 per month and going up to ₹8,499 a month for its ‘Titanium’ pre-paid plan.
Under the Jio Welcome offer, the basic plan offers 100 GB of data (with 50GB extra), free voice calls to anywhere in India, TV video calling, conferencing, gaming, home networking (content sharing at home and outside) and device security for up to five devices.
On payment of ₹2,500 for installation, which includes a security deposit of ₹1,500, the subscriber will get Jio home gateway worth ₹5000, 4K set-top box worth ₹6,400 and bluetooth speaker worth ₹2,999 and annual subscription for Jio content.
“With JioFiber, Jio continues to deliver on its promise of connecting the unconnected while bringing about transformational changes to Indian homes, that it started with its mobility service three years ago, on September 5, 2016,” said Jio in a statement.
Television sets will be available to customers committing to long-term plans starting at ₹1,299 per month.
43-inch TV set
Under the Jio Titanium offer with a monthly rental plan of ₹8,499, users will get a 43-inch 4K TV worth ₹44,990 and an annual subscription of leading OTT apps along with Jio home gateway worth ₹5,000, along with the 4K set-top box. Titanium subscribers will get 5,000 GB of data at a speed of 1 Gbps.
Jio’s Diamond, Platinum and Titanium subscribers will get immersive, virtual reality (VR) experience (theatre- like personal experience on a VR headset) and premium content, which includes first-day, first-show movies and special sports content.
“Currently, the average fixed-line broadband speed in India is 25 Mbps.
‘In top five soon’
“Even in America, which is the most developed economy, it is around 90 Mbps. JioFiber, India’s first 100% all-fibre broadband service, will start from 100 Mbps and go all the way up to 1 Gbps. This will propel India to top five broadband nations globally,” said Jio.
Commenting on the launch of JioFiber, Akash Ambani, director, Reliance Jio Infocomm Ltd., said, “Our customers are at the heart of everything we do, and all of JioFiber has been designed with the sole purpose of giving you a delightful experience.”
‘Asset quality may remain unchanged’
The consolidation of 10 public sector banks into four will be credit positive due to increased operational scale and capital, and improved corporate governance in the long run, rating agency Moody’s said on Thursday.
“The consolidated banks will have larger operating scale, which will result in improved competitiveness in corporate banking and retail lending, where their market share is low,” Moody’s said.
Last week, the government announced the consolidation of 10 banks into four. The process is expected to be completed by the end of the financial year.
“A larger scale will also enable PSU banks to increase technology investment, which is an area where they have lagged private sector peers,” the rating agency said, adding that these benefits would not be realised until the medium term.
“Based on the announced allocations, all rated PSU banks, after consolidation, will have a pro forma Common Equity Tier 1 (CET1) ratio of more than 9%,” Moody’s said.
As most of these banks have higher bad loans, Moody’s expects no significant change in asset quality and profitability, post merger.
“Asset quality and profitability will remain broadly unchanged after consolidation. PSU banks already score poorly on these two factors, and there is no reason to assume that the merged entities will make significant improvements in these metrics,” it said.
“While boards have been given more power, their roles and responsibilities will remain significantly circumscribed compared with boards of private sector companies, including private sector banks,” it said.
Moody’s added that flexibility in PSBs’ human resources practices, compared with private sector peers, remained limited.
“There is little latitude to provide incentives, which tends to stifle work performance. This is compounded by the rigidity of recruitment, compensation and career progression, which makes it very difficult to set goals for employees,” Moody’s said.
Company likely to appeal against the order seeking various reliefs from statutory authorities
Ray of hope: BPSL’s profit during insolvency period must be distributed to creditors, says NCLT. B.M. Siddalingaswamy
The National Company Law Tribunal (NCLT) on Thursday approved JSW Steel’s ₹19,700 crore bid for Bhushan Power and Steel Limited (BPSL).
However, the company is likely to appeal against the order as NCLT had disposed of JSW Steel’s petition seeking various reliefs from statutory authorities under the Income Tax Act 1961, Ministry of Corporate Affairs, Department of Registration of Stamps and Reserve Bank of India (RBI), said sources in the know of the development.
“We do not feel persuaded to accept the prayer made in the resolution plan yet the resolution plan applicant may file appropriate applications before competent authorities which would be considered in accordance with law because it would not competent for adjudicating authority— NCLT — to enter into any such area for granting relaxation, concession or waiver, which is wholly within the domain of competent authorities,” said the order.
A JSW official told The Hindu,“Our bid for BPSL has been approved by NCLT today. We are going through the fine print of the order and as per our legal input, we will take a call tomorrow.”
The NCLT ruled that the profit made by BPSL during the insolvency period must be distributed to creditors, in accordance with a ruling by a higher tribunal in a case involving ArcelorMittal-Essar Steel India.
“National Company Law Tribunal, Principal Bench, New Delhi, has today, in its pronouncement approved the resolution plan submitted by JSW Steel Limited in respect of the corporate insolvency resolution process of Bhushan Power and Steel Limited.
“The written order containing the details and terms of such approval, if any, are awaited,” said the company in filing to the exchanges.
A two-member principal bench of the NCLT, headed by Justice M. M. Kumar, also said the criminal cases against the promoters of BPSL for siphoning of the funds from the company would not impact JSW Steel as it was a new promoter.
The NCLT rejected the objections raised by Tata Steel over the bids submitted by JSW and its erstwhile BPSL promoters.
Tata Steel had objected to the improved financial offer of JSW Steel before the resolution professional and the committee of creditors of Bhushan Power and Steel.
JSW Steel shares on the BSE rose 0.77% to close at ₹216.25 in a weak Mumbai market on Thursday.