Analysts say tariff plans may be tweaked if the roll-out is slower
Not out-of-box: Jio’s pricing is 12-23% lower than Airtel’s but is similar to or even higher than local players. Reuters
The pricing of Reliance Jio’s broadband services JioFiber may not be as disruptive as it was in the case of the company’s mobile telephony service launched three years ago, according to analysts.
“Its target of 20 million homes in 18 months is aggressive and we expect the roll-out to be more gradual given that pricing is not as disruptive as in the case of mobile and challenges in roll-out,” wrote Jefferies in its research report.
“We believe its success will depend on customer service, including support during downtime and other issues. We expect incentives in terms of content to increase from the current announced ones to achieve the target roll-out. There would also likely be tweaking of plans if the roll-out is slower,” added Jefferies. On Thursday, Reliance Jio unveiled ‘JioFiber’ with monthly plans starting from ₹699 and going up to ₹8,499.
Reliance Jio is targeting 20 million homes and 16 million enterprises across 1,600 towns and aims to complete the roll-out in the next 18 months. Given the current fixed broadband subscriber base of 18 million, it implies doubling of the market.
Compared to Bharti Airtel, Jio’s pricing is 12-23% lower but is similar to or even higher than local players. “We expect maximum adoption of Bronze and Silver plans due to affordabilty,” said Abneesh Roy, executive vice-president, Edelweiss Securities.
Home broadband market in India is under-penetrated with only 18 million connections of which 50% are those of BSNL/MTNL. Also, only 7% of the connections are on fibre.
“There is no clarity on digital TV bundling yet. Although prices are lower than Airtel Xstream box offering, we will not call it disruptive from a pricing perspective. We believe that subscriber addition will be a function of reach, customer service and quality of the product. We believe that reaching 20 million subscribers outside its existing Den and Hathway network will be a slow process,” Mr. Roy added.
“We do not foresee free TV with annual plans as a big draw, and do not foresee a meaningful negative impact on pay TV operators like Airtel and exhibitors like PVR,” said Goldman Sachs.
‘Government is yet to decide on use of surplus funds transferred by RBI’
Hands full: Efforts are being made to understand and address challenges in each sector, the Minister says. Sandeep Saxena
Finance Minister Nirmala Sitharaman said on Friday that while the government will look into any challenges being faced by the economy, it will not allow Budgetary allocations to the social sector to be affected.
She said this in response to a query on whether tax targets would be met in the wake of economic slowdown. The Minister also said the government was yet to take a call on the utilisation of surplus funds transferred by the Reserve Bank of India.
Ms. Sitharaman, who was accompanied by the Revenue Secretary and the CBDT Chairman, said as part of an initiative to improve transparency, any notice issued by the Income Tax Department for tax claims from October 1 will have a distinct document identification number (DIN). This will be issued through a centralised process and with approval.
“We are adopting technology to make the process non-discretionary and transparent, she said.
No threat from e-vehicles
She allayed any apprehension regarding the continuance of non-electric vehicles, saying they would be allowed to run for the entire validity of their registration period.
The Minister was unwilling to comment on when the GDP growth rates would be restored, saying that all efforts were being made to understand and address sectoral challenges.
‘Issue to figure in GST Council meet’
Stating that the central government was willing to put forth the auto industry’s demand for a rate cut at the upcoming meeting of the GST Council, Minister of State for Finance Anurag Thakur asked the sector to also take up the matter with the States, who together have the majority vote in the Council.
“We have received representations from carmakers, dealers and other stakeholders regarding GST rate cut from 28% to 18%,” Mr. Thakur said at the 59th Convention of Automotive Components Manufacturers Association of India (ACMA). He added that any GST rate cut needed to be first approved by the GST Fitment Committee, post which it would be taken up by the Council. “I request all of you to reach out to the State Finance Ministers who are part of the GST Council... FM [Union Finance Minister] has already suggested that we are open to take it to the Council.”
The next meeting of the GST Council will take place on September 20. However, the auto industry is seeking an earlier resolution, as it fears that buyers will postpone purchases in anticipation of a reduction in prices.
Mr. Thakur said: “If there is reduction in interest rate after RBI’s announcement, you [the industry] are also giving discounts, many other initiatives taken by the central government... why are we still not seeing the same kind of demand?... is it only the global demand or is demand coming down locally? Are people looking for cabs or for newer BS VI vehicles and electric vehicles? Or is it cyclical?”
A member of the audience interrupted the junior Minister and said that this was due to the delayed effect of demonetisation and that people don’t have money to spend.
Mr Thakur responded, saying, “Thank you... If that is the delayed effect... How do you move forward?” Speaking at the session, Union Minister Arjun Ram Meghwal said the problems faced by the auto industry were “minor” and would be quickly resolved.
‘Need uniform 18% GST’
The ACMA pitched for a uniform GST rate of 18% for all auto components as well as some export incentives for the industry from the Centre. Assocation president Ram Venkataramani said that about 60% of auto components attract 18% duty and the remaining high-value parts are taxed at 28%.
Citing a survey, he said there were indications that in Q1 of FY20, firms with diversified portfolios, be it across vehicle segments, market segments, product groups or different geographies, have performed better than others.
Sees 20% job loss if demand stays poor
The slowdown gripping the auto sector has pushed foundries to the brink. Declining auto sales have resulted in a deterioration in demand for forgings, which could impact jobs unless things improve, a top industry official said.
“Currently, there is a huge inventory build-up due to poor demand, and to curb this, many forging units have been making cuts in working hours and production,” S. Muralishankar, president, Association of Indian Forging Industry and Joint MD, Super Auto Forge, told The Hindu.
“If [this] continues, we anticipate further cut in production, leading to job loss,” he added. “The Centre must take a holistic approach to revive the auto sector.”
Trends have shown that despite the onset of the festive season, there had not been any major improvement in overall demand, he said. The forging industry is witnessing a slowdown in the range of 25-30%, he added. “The forging sector employs more than 3 lakh. If the situation does not improve, 20% of these people can lose jobs.”
IRDAI for linking motor insurance premium with violations
The noose is set to tighten on traffic offenders with insurance regulator IRDAI on Friday forming a working group to examine and recommend linking of motor insurance premium with traffic violations.
The move comes close on the heels of steeper penalties for traffic offences, post amendments to the Motor Vehicles Act, taking effect. It is expected to improve compliance to rules and pave the way for more business for insurers. For those with more traffic violations, it would eventually mean a higher insurance premium.
Listing the terms of reference of the nine-member working group, the Insurance Regulatory and Development Authority of India (IRDAI) said it would recommend implementation of a framework and methodology to link insurance premium with traffic violations.
Study by working group
The group will study international practices and recommend best practices suitable to India. It will evaluate the current point system for traffic violations implemented by States and evolve a standard point system considering each violation.
Other terms of reference include developing data fields required to implement traffic violations as a rating factor in motor insurance.
The setting up of the working group followed a request to the IRDAI from the High Powered Committee for Traffic Management in the NCT of Delhi, under the chairmanship of the Union Home Secretary, to examine the issue of linking insurance premium with traffic violations.
Subsequently, at a meeting under the chairmanship of the Special Commissioner of Police Traffic, Delhi on Integration of insurance and traffic prosecution data, it was decided that a Working Group will be formed to take the idea forward.
Insurance companies have to undertake the pilot project in NCT to implement the premium escalation formula, IRDAI member (non-life) T.L. Alamelu said in the order constituting the working group. The group has been given eight weeks’ time to submit the report.