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Officials from the high-end luxury goods industry are looking at FTWZs as a profitable option. A few of them are positive that price benefits derived from these zones would be passed on to customers
Free-trade warehousing zones (FTWZs) are expected to benefit most of the players across various segments in India. However, the high-end or luxury items segment could benefit the most from such zones. Industry officials also expect a relief in the prices of such products.
“The net cost of high-end luxury products could be brought down by around 5%-7% through such zones. However, it is entirely upon the client if he will pass on this benefit to customers or not,” said Nijay N Nair, Strategic Initiatives, Arshiya International Ltd. The company is planning the first FTWZs in India.
Sudip Majumder, CEO, Acme Consultants Pvt Ltd, who has been instrumental in bringing ‘O2 Sparkling Vodka’—a high-end liquor—to India, said that these zones would help. “This will definitely help save a considerable amount. Surely, the proposed FTWZs at Mumbai, Delhi and Nagpur will make things more comfortable and profitable. With Mumbai and Delhi being the main hub and Nagpur being the central part of the country, these zones will definitely help importers. High-end customers will also get some amount of benefit on product prices,” said Mr Majumder.
“It will benefit customers. When my investments are lower, finance cost is definitely lower and I will pass it on to my customers. It will help as the investment on import duty is divided into small amounts depending on the demand and not at one stretch,” said Sarat Kumar Parsan, head, Parsan Brothers. Parsan has been involved in the import of alcoholic beverages.
FTWZs are zones created near a port or a hinterland, which allow duty-free storage of imported goods. The client using this space will have to pay the import duty on these goods once they are moved out of the FTWZ. The zone also provides space for assembling products.
Imported luxury items in India at present have to pay high import duty, ranging anywhere between a low of 24% to a high of 150% depending on the product being imported. A considerable inventory of such imported items has to be maintained in order to cater to the client on time.
However, if the maintained inventories fail to find a market within a suitable period, they have to be re-exported. Goods which have been re-exported qualify for a duty refund. However, the duty-refund period could be as long as six months. Thus, the amount paid as high import duty is locked in for a long period and is unavailable as working capital. “These zones help in duty deferrement and a large working capital would be available,” added Mr Parsan.
For an import duty of 24% on a luxury watch costing around Rs5 lakh, the amount paid is Rs 96,777. Typically, an inventory of 500 watches is maintained with an average holding period of 60 days. Thus, you spend Rs4.80 crore as duty to maintain an inventory of 500 watches.
If these watches are not sold in the given 60-day period, they are re-exported to some other market where there is a demand for such products. Assuming a six-month period for duty refund of Rs 4.80 crore, this translates into working capital of Rs 4.80 crore blocked for that period. “The interest that can be earned on this amount for a period of six months assuming a working capital return of 20% is around Rs8 lakh,” added Mr Nair.
The savings could be higher on high-end products with a high import duty of 150%. Taking a high-end tax of 150%—for a wine bottle that costs around Rs50,000—the duty paid is Rs 30,000. To maintain a modest inventory of 2,000 bottles you spend Rs6 crore. This working capital, if not blocked for six months, could earn around Rs15 lakh as interest.
Joshua Brown, who runs a great blog at www.thereformedbroker.com, has decoded the various categories of mutual funds, after 14 years of observation. Here is his interpretation of what a fund brochure says and what it means. He has asked investors to use this as a guide to evaluate funds.
Ultra Funds: Leveraged to the hilt.
Global Growth Funds: Fund managers chase stocks in markets...
Google's new mobile handset Nexus One will not be available for consumers in India. In the US, it is being sold only through the Google Web store for $529 without a service plan
Internet search giant Google has launched its much-awaited, and correctly predicted by Moneylife along with some other media, its mobile handset titled as Nexus One. Google will sell the phone through its Web store. However, it will currently be available only for US consumers.
"The Nexus One belongs to the emerging class of devices which we call 'superphones'. It's the first in what we expect to be a series of products which we will bring to market with our operator and hardware partners and sell through our online store," Google said in a release.
Google said the Web store would allow consumers to purchase the Nexus One without operator service or with service from T-Mobile USA. Google further said that it expects to add more operators, more devices and more countries in the future, including Verizon Wireless in the US and Vodafone in Europe.
The Nexus One, which was garnering favourable first reviews on tech websites and forums, ships immediately from Google's online store for $179 with a two-year contract from Deutsche Telekom's T-Mobile USA, or $529 without a service plan.
According to Techcrunch.com, Google has a lot riding on this launch. Sure, it would be nice for the phone to be a popular device in its own right. But, as many have pointed out, it’s the disruptive distribution model that’s going to have the biggest impact down the line. Google needs to show that this new online distribution model is something that people are willing to actually use, it added.
Manufactured by HTC, the Nexus One features dynamic noise suppression, a large 3.7-inch organic light emitting diode (OLED) display and a 1GHz Qualcomm Snapdragon chipset for blazing speeds. Running on Android 2.1, the newest version of Eclair, the software includes innovations like a voice-enabled keyboard so that you can speak into any text field, fun Live Wallpapers, a 3D photo gallery for richer media experiences and lots more. Of course, it also comes with a host of popular Google applications, including Gmail, Google Voice and Google Maps Navigation.
Nexus One's launch, especially in the US, assumes significance as T-Mobile and AT&T's exclusivity deals with Apple for its iPhone are about to come to an end. Google's phone would prove to be a shot-in-the-arm for these carriers, who so far had to depend on iPhone for higher-end mobile handsets.
The move also marks a rare foray into direct sales for Google. With the exception of an appliance it markets as a search tool to businesses, the company hasn't sold hardware in the past.
Google became a high-profile player in the mobile arena two years ago, when it launched its Android software. A number of leading handset manufacturers, including Motorola, built phones running the software, some of which contain branding "powered by Google". But the phones—many of which hit the market in recent months—haven't sold nearly as well as Apple's iPhone.
As far as India is concerned, Google's website says "Sorry, the Nexus One phone is not available in your country". Officials from Google India were not immediately available for comments. So for Indian enthusiasts, the wait could be a little longer.