Tata Motors hikes passenger vehicle prices by up to Rs35,000

Finance Minister Pranab Mukherjee had proposed to raise excise duty to 12% from 10%.

Auto major Tata Motors said it has increased prices of its passenger vehicles, including the Nano, by up to Rs35,000 with immediate effect due to hike in excise duty in the Budget for 2012-13.
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"We have raised the prices as per the excise duty hike in the Budget. In passenger cars, the increase will vary between Rs2,000 and Rs8,000 depending upon various models," a Tata Motors spokesperson told PTI.

Under the passenger car division, the company sells small car Nano, hatchback Indica series and Indigo family of sedans. The company, however, did not specify the model-wise break up of the price increase.

In case of utility vehicles like Safari, Aria and Sumo, the hike will be from Rs8,000 to Rs35,000, he said.

"Regarding the commercial vehicles, we have decided to pass on the additional burden of 2% to consumers. We have a wide range of products in this category," the spokesperson said.

Finance Minister Pranab Mukherjee had proposed to raise excise duty to 12% from 10%.

The excise duties for petrol cars with engines under 1,200 cc and diesel cars with engine capacity under 1,500 cc, but the length exceeding four metres have been increased to 24% from the previous 22% with a fixed duty of Rs15,000.

Petrol and diesel driven vehicles having length exceeding four metres and engine capacity of over 1,200 cc and 1,500 cc respectively will now be charged with an ad valorem duty of 27%, instead of the earlier 22% with a fixed duty of Rs15,000.

Besides, basic customs duty was also hiked to 75% from 60% for fully imported vehicles priced over USD 40,000 and with engine capacity of over 3,000 cc and 2,500 cc for petrol and diesel driven vehicles respectively.

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Economy & Nation Exclusive
Foreclosure procedures and global housing markets

What is true for the US is true for countries. While countries like Canada and Spain might be able to deal with a housing price collapse in a few years, a housing collapse in India and Brazil might take decades to clear. In China with few laws at all, the impact could be devastating and long lasting

How do you determine when a real estate market hits bottom? Determining the strength of any particular housing market may be difficult when an overhang of distressed properties represents a drag on the market. But this is not only a problem between various markets in the US; it is also a major issue in determining the strength of markets around the world.
    
Recessions caused by a real estate collapse all have a major problem. The market can inflate rapidly, but the recovery can take a very long time. This occurs for a very simple reason. Buying a piece of property can take days or weeks. Foreclosing on a piece of property can take months or years. Add to the issues of foreclosure to the dissimilarities between properties and you end up with a very inefficient or ‘sticky’ market.
    
The problems with the housing market in the United States have also exacerbated the jobs market in two ways. First, since the property construction market makes up a large percentage of GDP (gross domestic product), a downturn causes massive unemployment. This is especially a problem in China where it makes up about 13% of the economy well over twice the percentage of more developed markets. Second, the inability of owners to sell their homes makes movement to local—where jobs are more plentiful—difficult.
    
A lengthy foreclosure procedure can exacerbate the level of distressed property. A large number of distressed properties create asymmetries of information. Buyers do not know the size of the overhang, when the properties will come to market, how many properties will come to market and the prices. Without information, the markets freeze up and cannot clear. If the market cannot clear, there is no way to know when it hits bottom.
    
Obviously the best way to increase the efficiency of these markets is to make the foreclosure process as fast and efficient as possible. However, efficiency of the market is not really on the minds of a large number of the populace who are in danger of losing their homes. The political issues produce large differences in property rights between jurisdictions. This is true not only between countries, but also between different states in the US.
    
Basically there are two types of foreclosure processes in the US. One is a judicial process that requires the supervision of a court. The other is a non-judicial process that does not. Although a court might provide better protection of the property owner’s rights, judges and courts everywhere are not known for their speed.
    
In the US the time necessary for foreclosure can vary substantially depending on the jurisdiction. The faster procedures are found in Georgia at 37 days or Maryland with 47 days. The fastest is Texas at just 27 days. In contrast a foreclosure in New Jersey and Pennsylvania take 270 days. In Illinois it takes 300 days and the slowest is New York, where it takes 445 days—almost 15 months.
    
As one might expect, the real estate markets in states with faster foreclosure laws have probably already bottomed out. Phoenix, a city in the state of Arizona, was one of the worst hit by the housing bust. Its foreclosure procedure lasts only about 90 days. Thanks to an improving local job market and people often from Canada looking for warmer weather, the inventory of unsold homes has declined to about the pre-crash average. After price declines of as much as 55%, the market has most likely cleared and house prices are rising again.

Where the market is the most rigid in places like New York, prices are probably still falling. For example, the median house price increased substantially from 2000 thru 2006 in California and New York. But after the crash, California prices in 2011 fell back to the 2000 level, while New York prices remain well above the prior level. California’s foreclosure procedures take about one quarter of the time required for a foreclosure in New York. So the presumption is that California prices are nearer equilibrium while New York prices are expected to fall further.

What is true for American states is true for countries. The US is hardly the only country to have a real estate bubble. There are possibilities of real estate bubbles in diverse countries including China, India, Canada, Brazil and Spain. Although I have not found a comparison of global foreclosure laws, the World Bank Doing Business report does give a rough guide to insolvency procedures.

These indicate that countries like Canada (ranked 3rd) and Spain (ranked 20th) might be able to deal with a housing price collapse in a few years. However, in India and Brazil, ranked 128th and 135th respectively, a housing collapse might take decades to clear. In China with few laws at all, the impact could be devastating and long lasting.

(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages. Mr Gamble can be contacted at [email protected] or [email protected]).

 

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Service tax exemption to leave advertisers with surplus funds

“It is good news for growing sectors like outdoor and digital. The service tax exemption would ultimately benefit the advertisers who spend a lot on outdoor and Internet,” Madison World chairman and managing director Sam Balsara said.

Service tax exemption on advertising on media platforms, excluding TV and radio, could result in availability of up to Rs1,500 crore more to advertisers for spending on campaigns, according to industry experts.

“Given that marketing budgets of companies always take into account the service tax component, now there will be more money available to be spent on media other than TV and radio (which are not exempt from service tax),” ZenithOptimedia managing partner Navin Khemka said.

According to him, the total annual advertising spend in India is currently estimated at USD 5 billion (around Rs26,000 crore), of which around 45% is spent on television and radio.

“Now if other advertising media (like print, outdoor, digital) are exempt for service tax, around Rs1,500 crore, which was earlier spent on service tax by marketers will now benefit advertising and media planning companies,” he added.

In the Budget for 2012-13 Finance Minister Pranab Mukherjee announced that “selling of space or time slots for advertisements other than advertisements broadcast by radio or television” will come in negative list and will be exempt from 12% service tax.

“It is good news for growing sectors like outdoor and digital. The service tax exemption would ultimately benefit the advertisers who spend a lot on outdoor and Internet,” Madison World chairman and managing director Sam Balsara said.

According to the 'Pitch Madison Media Ad Outlook 2012' (PMMAO) report the Indian media advertising industry has been pegged at Rs25,594 crore in 2011.

Commenting on the impact of the Budget proposals on media and entertainment sector, KPMG partner Himanshu Parekh said: “Earlier advertising in print was only exempt from service tax, while TV and radio were not exempt. Now even other media like outdoor and digital are exempt.”

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