ITC lights up a tobacco war

ITC is apparently using its political clout for blocking FDI in tobacco, leaving foreign investment proposals high and dry. Intense lobbying on ITC’s part has even led to a shift in the government’s stance

Indian tobacco-to-hotels conglomerate ITC Ltd (formerly Indian Tobacco Co) is apparently up in arms against foreign investment in cigarette manufacturing, its principal profit source. Its intense lobbying for blocking foreign direct investment (FDI) in tobacco has not only caused a distinct turnaround in the government’s stance, it has even split government opinion on the matter.

The department of industrial policy and promotion (DIPP), which is responsible for FDI policy, was, at first, a strong supporter of allowing foreign investment in tobacco in existing joint ventures. In a clear case of government flip-flop, the same department recommended a ban on such a move. It moved an inter-ministerial note in October last year, asking for a complete ban on FDI in cigarette manufacturing. Indeed, commerce and industry minister Anand Sharma, citing health concerns, has put forth a strong case for blocking the proposed FDI move. This is the same tune which was sung by the previous commerce minister, Kamal Nath.

However, opinion within government offices appears divided. While the finance ministry is for allowing FDI in cigarettes, the commerce ministry is vehemently standing by its opposing stance. The issue came to fore last year when the foreign investment promotion board (FIPB) considered a proposal by Japan Tobacco International to raise stake in its Indian subsidiary, JTI India, to 74%. The DIPP had, at that time, supported the proposal, allaying concerns that it would lead to raising fresh capacity for cigarette manufacturing. The government does not allow creation of fresh cigarette manufacturing capacity under the current rules. The DIPP’s call for a complete ban on the proposal late last year marks a complete turnaround. Philip Morris, one of the largest tobacco companies in the world, has made similar attempts to bring in FDI to acquire its partner KK Modi’s stake in Godfrey Philips.

In 1994, ITC was involved in a battle of its own with British American Tobacco (BAT) Industries, which held a 31.5% stake in the company. The British conglomerate had tried to oust ITC’s then chairman, Krishnan Lal Chugh, in a bid to gain control of ITC. However, ITC’s top management and government financial institutions worked hand-in-hand to deal a crippling blow to BAT’s India plans. It also sent a strong signal to other foreign tobacco manufacturers.

ITC is leaving no stone unturned to protect its Indian ownership. It has ensured the government’s nearly 34% stake in the company remains undiluted. When the Specified Undertaking of the Unit Trust of India (SUUTI), which holds an 11.86% stake in the company, was looking at selling its stake in ITC, it was met with severe opposition, which deterred it from doing so.

With foreign players making desperate attempts to break into the Indian tobacco space, Indian counterparts like ITC are going all out to protect their turf. The matter is expected to come up for discussion at an inter-ministerial meet soon. If the government were to accept the proposal to ban FDI in cigarette manufacturing, it would be the final and telling blow to foreign players seeking a larger share of the Indian pie.
 

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On-road price of the Tata Nano may touch Rs2 lakh

Tata Nano, the much talked about ‘lakhtakia’ car, may actually cost you around Rs2 lakh, including registration, insurance, taxes and loan repayment charges

Tata Motors’ ambitious ‘lakhtakia’ car, the Nano priced at Rs1 lakh—excluding taxes and duties—is in fact costing customers nearly Rs2 lakh. According to both new and used car dealers, when you include registration, taxes, insurance and the total value of instalments to repay the loan, the real cost of even the basic version of the Tata Nano goes up to Rs2 lakh.

“People had booked the car under the perception that the vehicle will cost only Rs1 lakh. But it comes to more than that or nearly Rs2 lakh, when all things (additional expenses) are considered,” a car dealer said.

Tata Nano comes in four different variants, namely Nano, Nano CX, Nano CX-Metallic and Nano LX. Including registration and insurance charges, the Nano’s on-road cost comes to Rs1.53 lakh, Nano CX costs Rs1.81 lakh, Nano CX-Metallic costs Rs1.85 lakh and the Nano LX comes at a cost of Rs2.09 lakh. Nearly 70% of the total bookings for the Nano have been done through bank loans. So when you add the interest component into the on-road cost of the basic version, it goes up to nearly Rs2 lakh. Prospective buyers had taken a loan ranging from Rs90,000 to Rs1.40 lakh—depending on the version of the Nano that they had booked—which attracts an interest of 10%-12% per annum.

Again, the fact that customers have to pay the interest first and then posses the car has not been well received by many prospective Nano buyers, car dealers said.

Most dealers said that customers did not like the fact that the price of the car was much higher than what they had initially expected, as the vehicle had always been touted as a Rs1-lakh automobile.

“They (Tata Motors) advertised the price of the Nano at Rs1 lakh, so everyone believed that they would get the car within that amount. However, that is not the case. Even the bare minimum or basic version of the Nano has an on-road cost of Rs1.35 lakh,” added a dealer. Also, since the Nano has a minimal resale value, potential customers are thinking twice before buying the vehicle, he added.

Last year in August, Moneylife had published news items regarding Nano cancellations from prospective buyers due to the delay of the actual car delivery date coupled with higher interest rates being charged by various banks.

However, according to media reports, Tata Motors managing director Prakash M Telang had said that cancellations are not very large in numbers and a few cancellations “here and there” were normal. According to reports, he said that the company was doing its best to ramp up and start production at its Sanand-based plant.

If at all you have to spend nearly Rs2 lakh for a small car, then why not go for something that can offer more features, asked a dealer. He said, “If you intend to spend Rs2 lakh on a car, then go for any second-hand Santro or Zen.”
 

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COMMENTS

Azam Ali

7 years ago

I m resides in Hyderabad. i want to purchase of Tata Nano

Wellness centres to get themselves accredited

The wellness & healthcare sector is looking at building up credibility for its services through a self-regulatory process of accreditation

The wellness and healthcare business has so far been unregulated and subject to quackery by players who make money using whatever means possible. These businesses are now looking at building up credibility for their services through a self-regulatory process of accreditation. 

On 7 January 2010, the Federation of Indian Chambers of Commerce and Industry (FICCI) jointly with Quality Council of India (QCI) and National Accreditation Board for Hospitals & Healthcare Providers (NABH) released ‘the accreditation standards’ for wellness centres and healthcare institutions with the objective of striving for continuous excellence and better standards for both the organisation as well as the customer.

Milind Soman, model, actor and founder of Breathe Fitness, said, “There are a lot of organisations that are taking advantage of the ignorance of the public, the plethora of myths, misinformation about fitness and wellness just to make a quick buck. This can not only be detrimental to the physical wellbeing of an individual, but also the emotional wellbeing and has to be stringently guarded against. Malpractices by these people will adversely affect the credibility, profitability and growth of the industry in the long run.”

In order to make a difference, it is important to get oneself accredited. Accreditation is defined as a public recognition by a national accreditation body of the achievement of the accreditation standards.

Dr Girdhar Gyani, secretary general, QCI said, “Every player should adopt best practices and adopt self-discipline to become a role model. Whatever regulatory mechanism that is made will only improve the level of adoption of standards which most of you are already following.”

He added, “Customers would be the biggest beneficiary among all the stakeholders as accreditation results in high quality of care and customer safety, leading to satisfaction. It stimulates continuous improvement enabling the wellness centre to demonstrate commitment to quality service. It raises community confidence in the services provided by the centre and provides an opportunity to the wellness unit to benchmark with the best.”

Dr Harish Nadkarni, chief executive and managing director of Quality Care said, “The idea of accreditation is not to go and find out how many institutes will fail. The idea is to see how many you can pass or assist to pass.”

While this is a long overdue development, it does have its share of drawbacks. A major issue that was brought up by the industry was the capability of employees in providing acceptable levels of service. It was pointed out that some training programmes give an individual a certificate after just twelve hours of training. While the technical committee of the NABH washed its hands of the issue saying that it doesn’t accredit training institutes, industry professionals felt that setting acceptable standards of training was a topic that needed serious discussion.

A group even sat back after the conference to discuss and debate this issue of setting standards for the quality of service, stating that if the education minister doesn’t set a standard, they as an industry would set it themselves.
 

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