Nomura Equity Research believes that better April 2013 volumes could possibly be an initial sign of potential improvement in the demand environment, going ahead
Most of the Indian automobile manufacturers have reported their April 2013 sales numbers. Overall, volumes have been above expectations across all major segments (except utility vehicles), according to Nomura Equity Research in its Quick Note on the sector. UV volumes for Mahindra & Mahindra (M&M) were up 6% y-o-y as against the brokerage’s expectations of 15% growth. Even UV volumes for Toyota were weak, Nomura believes. Post 3% increase in excise duty for SUVs (in 2013-14 Budget), there were expectations of a roll-back of duty increases in April; this could have impacted volumes to some extent. One will have to wait for a few months to see if there is some slowdown in this segment, says Nomura.
Nomura believes that better April 2013 volumes could possibly be an initial sign of potential improvement in the demand environment going ahead. Petrol prices have been cut by Rs3 per litre (4%) a couple of days back; this should further help demand in passenger vehicle (PV) and possibly in two-wheeler segments as well, Nomura believes.
Car industry volumes declined 9% in April: Volumes in the car industry declined by around 9% y-o-y; better than Nomura’s estimates of 15% decline. On the other hand, Maruti Suzuki (MSIL) surprised positively with flattish domestic volumes (Nomura estimate: -6%) led by some improvement in petrol segment. MSIL’s market share was around 50% (around 46% in FY13).
Performance of other unlisted companies was mixed; Honda and General Motors have seen y-o-y growth while volumes of Ford and Toyota have seen sharp declines. Honda dispatched around 4,850 units of its newly launched Amaze sedan in April. Hyundai’s volumes have seen around 8% decline, but SAAR has improved from March 2013 levels and is indicating some growth in FY14F.
Two-wheeler segment records flattish volumes: According to Nomura’s analysts, two-wheeler industry volumes were flattish in April 2013 as compared to its estimate of 4%-5% decline. Bajaj Auto’s domestic volumes were above expectations (flat versus estimate of 5% decline) while Hero MotoCorp’s (HMCL) volumes were marginally below estimate. Honda Motorcycle & Scooters’ (HMSI) volumes were strong and increased by 30%; Nomura was expecting around 15% growth.
MHCV industry shows some improvement: Nomura estimates that the medium and heavy commercial vehicle (MHCV) industry volumes declined by around 5% in April 2013 as compared to 20%-40% decline seen over the last six months. The brokerage was expecting a 10% decline in April. Tata Motors’ volumes were above expectations (up 2%) while Ashok Leyland disappointed as volumes declined by 19% y-o-y (Nomura estimate: 12% decline). Eicher’s total CV volumes declined by 7% y-y.
Sharp improvement in tractor industry volumes: M&M’s tractor volumes increased by 38% y-o-y (Nomura estimate: 2% decline) in April 203. Tractor volumes of Escorts increased 43.6% y-o-y to 6,402 units. This could possibly be initial signs of revival in the tractor industry, Nomura believes.
The potential increase in government spending before elections will be positive for rural income and can have a positive impact on the tractor industry in FY14F. “We are currently building around 5% volume growth for M&M’s tractor volumes in FY14F; however, if this trend continues, we may even see strong double-digit tractor growth in FY14F,” said Nomura in its report.
Civil aviation ministry has permitted five domestic airlines to charge for various facilities, including a charge for the complementary check-in baggage. This has sent shock waves among the travelling community. Is this practical? How will it affect the regular traveller?
The ministry of civil aviation made an announcement, permitting the five domestic airlines to charge for various facilities, including the issue of charging for the checked-in baggage (currently at 20 kg free), may be good news for the airlines but not for the travellers. The only good news is bottled drinking water will be given free, as hitherto!
These airlines can now charge for the customarily free check-in baggage (20 kg free allowance); in-flight meals, snacks, soft drinks, etc. Even the hand baggage, classified as “cabin baggage”, including the computers, with pre-set size/dimensions and weight, not exceeding 7-9 kg (depends upon airline and the mood of check-in-counter-staff), may also be subject to a charge.
Luckily, the ministry officials, or whoever, forgot to put a charge for the in-flight music or movies; one never knows, they may include this at a later stage!
On the top of these, for choosing one's ‘lucky’ seat or a comfortable seat with lots of leg space will now attract a price! All these will be additional costs to the price of the ticket, irrespective of the base price, or when one booked it as an early bird or bought it in a hurry at the airport!
The ministry has neither announced the date when these will be effective nor any MRP fixed for each of these facilities.
One wonders if this proposal has been announced on the basis of applications made by the airlines, jointly or severally? Or is it the brainwave of the ministry?
Anyway, let’s take a look at what is really happening at the moment.
Excepting for full service airlines like Air India and Jet Air, others also offer services of various kinds, like in-flight food (meals/snacks) at a price. A seasoned traveller either takes his/her meals/snacks at the exit point in the airport, most of which have fairly well-organized eateries or chose do so on arrival at their destination.
Now, first things first, in review of this proposal. Almost everywhere (except for international travel passengers) one check-in baggage of 20 kg has been “free allowance” so far. International passengers, if they have to connect and take a domestic airline for travel internally, are extended the courtesy of two baggages (23 kg or 50 lbs in case of US origin) to facilitate their arrival. Whether they will be affected by this new ruling is a question, though, it looks unlikely.
However, what is really happening is that passengers manage to carry several hand baggages right through the check-in counter to the security area, obtaining cabin-baggage-tags; once in a while. However, a surprise security/hand baggage check is done as the passenger boards the coach that ferries him/her to the aircraft, when it is taken away and put in as a “checked-in” baggage, at no extra cost. This needs to be curtailed as overall aircraft weight is of paramount importance for the safety of all.
Truly speaking, a visit and a surprise inspection (at any airport) will reveal the actual practice prevalent and the check-in staff turn a blind eye (at their own discretion and peril) to let this happen with impunity. This has to stop because such extra hand baggage is a hindrance for a responsible traveller when he/she finds no space to put the legitimate luggage.
This writer, who has extensively travelled for the last five decades, would like to raise the following issues that also need to be properly covered, if and when the system actually comes into force:
a) Cabin baggage rule (computers/ladies hand bags, etc) must be strictly classified and enforced; simply because the passenger has obtained and attached a cabin baggage tag alone should not give a clear ‘passage’ to the carrier of these bags;
b) If the 20 kg “free allowance” as at present is withdrawn uniformly by all domestic airlines, this should be automatically factored in the price. Any (excess) weight chargeable should be clearly mentioned on the airlines' portal. Rate factor should be uniform;
c) A declaration form, duly signed by the passenger, certifying the contents of the baggage must be taken at check in; one copy to be retained by the passenger, in case of claims;
d) Aircraft types and seat configuration must be clearly stated/shown to the passenger/booking agent at the time of reservation, particularly when extra charge is levied for the chosen seat. In case of online booking the cost of the chosen seat as well as others available must be clearly shown;
e) If after a seat allocation is made/occupied, should there be a change—because of crew/steward request—this must be in a written document and the benefit given to the seat-losing passenger (many times couples are given seats far away from each other; children are separated from parents, etc). If passengers themselves exchange seats, it should be free;
f) Similarly, if the ordered pre-paid food is not available for any reason, the passenger should be entitled to a free meal of his/her choice (available on the aircraft), plus a compensation for non-performance of the delivery of contracted food. A suitable document should be issued by the steward in charge of the flight;
g) In case of lost baggage or delayed delivery (flight missed), as a result of departure/loading problems, the passenger shall be compensated. Besides, the luggage shall also be delivered at no extra cost within 24 hours; and yet will be entitled to compensation and the quantum to be fixed. In case of ‘lost’ baggage, standard aviation rules will apply, taking into account the declaration given by the passenger at the departure point;
h) Any departure delays, beyond 30 minutes, for any reason, the passenger need to be duly compensated; if the connecting flight is lost, the carrier will provide all necessary assistance for his/her onward connection, including overnight stay, full board, transportation costs, etc;
i) Most airlines have club membership programmes for encouraging and frequent flyer ‘points’. The five domestic airlines may jointly create a frequent flyer programme that will permit inter-changeability of the points earned and passengers encouraged to use these to covert them to actual travels. Or better still, the points may be permitted for use to set off against ‘unbundled’ services like a meal, snacks or even to cover baggage charges!
By no means is this list exhaustive. Moneylife readers are most welcome to make this more comprehensive so that every passenger’s interest is duly safeguarded.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Besides real miscreants who collect deposits from public with the ulterior motive of cheating their ‘clientele’, the government and corporates too become indirect beneficiaries of accumulating “unclaimed deposits”. This is because money not paid back to the original depositors/ savers becomes surplus income or profit for them in due course
The media reports about the Supreme Court proceedings in the “Sahara bonds” case on 22 April 2013 are extremely disturbing. The helplessness of the Securities and Exchange Board of India (SEBI) and the court to ensure judicious handling of a huge amount of Rs24, 000 crore collected by two ‘corporations’ (Sahara India Real Estate Corporation and Sahara Housing Investment Corporation) is pathetic. The Sahara companies’ claim that they had “repaid investors who wanted their money” gives an impression that once an organisation collects money, even if it does not use the money for the purpose for which it was collected, the money will be refunded only if the depositor proves that “he wants the money”!
When the ‘bench’ laments about manipulating courts, every authority responsible for the sad state of affairs should take cognizance and start acting. One is wondering whether Kapil Sibal was right when he said in India any loss of public funds is ‘zero’ loss. During the initial days of the 2G scam, the minister had said that the losses estimated by the Comptroller and Auditor General of India (CAG) at thousands of crores were equal to zero from the GOI perspective!
Here we look at the issue from a different angle. Of late, huge amounts of money being collected from public in various forms is not being used for the purpose for which it is originally collected. This includes taxes, bank deposits and investments made by small and big savers in various instruments and with different organisations. Such funds get accumulated as bank deposits, balances in the treasury and accumulations in the corpus of provident fund or insurance and so on. With growth of huge corporates in the private sector and their counterparts in the public sector cash gets accumulated with them also without getting productively deployed.
There are several watchdogs in the form of auditors and supervisory and regulatory bodies whose job is to ensure proper accounting and right end-use of these funds. But, what we observe is, even when misappropriations or straight daylight looting of funds are brought to light, instead of proper investigation leading to recovery of loss or punishment of the guilty, a blame game between or amongst certain vested interests gets started in the legislatures and the media and the real issues get submerged.
According to one report over Rs2, 400 crore were lying in inoperative bank accounts, last year. This would have further increased by now. There was not much difference in position across public sector-private sector banks in the continued rise in number of such accounts and accumulation of balances. It is intriguing that even in a well-regulated sector like banking, a system which can take care of the need to pay back the ‘unclaimed’ balance when the account becomes ‘inoperative’ from a bank’s perspective is yet to be put in place.
Sometime back, it was reported that Centre proposed to set up a “depositor education and awareness fund” using part of the money lying unclaimed with banks. Though any move to create awareness is laudable, the sourcing of funds from unclaimed deposits for the purpose, the proposal to appropriate idle funds irrespective of their origin or ownership, is unethical. The word unethical is used consciously, as government is omnipotent to make anything ‘legal’. The funding for this purpose should have come from the profit made by banks, or still better from the surplus profits/income periodically transferred to government from the financial sector.
Such practices exist outside banking sector also. Unclaimed dividends and deposits of companies that get credited to the Investor Education and Research Fund (IERF) has to depend on paltry budgetary allocations for its existence which again gets ploughed back to government as advertisement charges paid to government-owned electronic media.
In accumulating “unclaimed money” banks are in the elite company of LIC, Employees Provident Fund Organisation and Department of Posts, besides several other organisations in the public and private sectors, in holding on to money payable to the depositors/beneficiaries after the payments have become due on maturity of deposits, death of depositors and so on.
The government should guide all organisations sitting on unclaimed deposits or maturity proceeds of other financial instruments like insurance policies to exhaust all reasonable options available to track the depositors or their heirs whose money would be transferred to unclaimed accounts before such transfer every year. From notice boards at bank branches to electronic media could be used to draw the depositors’/beneficiaries’ attention. If banks’ secrecy provisions stand in the way, necessary changes should be thought of.
It would be also worthwhile to enquire whether the organisations including banks were periodically updating the database on their folios. Last year the Employees Provident Fund Organization proposed not to pay interest on inoperative accounts in EPF accounts consequent to a proposal to freeze about three crore accounts (amount involved was about Rs10,000 crore) in which there was no fresh contribution during the previous three years or more. Such moves send out disturbing signals about safety of depositors’ funds with public sector organizations.
Ironically, the position will only aggravate with compulsory opening of more accounts to promote financial inclusion, insistence on Aadhaar-enabled accounts even before Aadhaar is yet to reach and crediting of government scheme benefits through bank accounts. The GOI and RBI may look at the issue from a social security angle, lest people lose faith in government-sponsored savings schemes and social security measures and even in the financial sector regulator.
Besides real miscreants who collect deposits from public with the ulterior motive of cheating their ‘clientele’, government and corporates too become indirect beneficiaries of accumulating “unclaimed deposits”. This is because money not paid back to the original depositors/savers becomes surplus income or profit for them in due course.
The huge accumulations under ‘unclaimed’ category point to the fact that the existing machineries for handling grievances relating to payment of dues and claims are not very effective.
In the absence of any power to fix liabilities and give directions, the ombudsmen or similar arrangements within organisations remain helpless spectators when complaints about non-payment of money from depositors/savers reach them.
It is in the above context that a statutory body to oversee accounting of the so-called “unclaimed deposits/payments” becomes relevant. Such a body should be made responsible to:
(M G Warrier is a freelancer based in Thiruvananthapuram)