BACK BAGE, P24 BRANDWAGON, P9 MELTDOWN MODE Fears of a global slowdown see metal prices tumbling INTERNATIONAL, P5 OPINION, P6 EYE ON FRESH FACES UNDER SHADOW OF WAR RBI is right, fintechs must innovate without resorting to regulatory arbitrage Brands scramble for endorsers among young sports personalities G7 nations announce Russia gold ban as summit begins MUMBAI, MONDAY, JUNE 27, 2022 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL LXII NO. 150, 36 PAGES, `10.00 P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E IN THE NEWS Chip shortage: Hyundai sitting on 135K bookings HYUNDAI MOTOR India, the country's secondlargest passenger car manufacturer, is sitting on a backlog of 135,000 bookings as chip shortage has slowed down production, reports Varun Singh in New Delhi. Coal supplies rise, but stock levels still critical at 91 units BOTH THE power and the coal ministries say coal supplies to the power plants may not face a crunch this monsoon season with power plants building up inventories, but 91 out of the total 173 thermal power stations are still in a critical-stock situation, reports Indronil Roychowdhury in Kolkata. India to turn into $30-trn economy in 30 years: Goyal INDIAWILL emerge as a $30-trillion economy in the next 30 years, commerce and industry minister Piyush Goyal said on Sunday, highlighting that the country remains the world’s fastest-growing major economy, reports Banikinkar Pattanayak in Tiruppur (Tamil Nadu). Egypt contracts to buy 180K tonne wheat from India EGYPT HAS contracted to buy 180,000 tonnes of wheat from India, supply minister Aly Moselhy said on Sunday, less than previously agreed, a deal that is part of the country's efforts to diversify its wheat supplies, reports Reuters. ONGC finally gets a director on HPCL board AFTER OVER five months, Oil and Natural Gas Corporation (ONGC) has finally got a director appointed on the board of HPCL — a firm it acquired for `36,915 crore, reports PTI. FE SPECIALS ■ PERSONAL FINANCE, P7 Stay invested for high returns Go for investment horizon of seven years, staggered investments and SIPs ■ eFE, P10 AI can go rogue without due checks Organisations need to guard against poisoned artificial intelligence PSUs too falling for cloud’s charms SBI General Insurance is using cloud to enhance customer experience and raise growth TRAI TO RECOMMEND RESERVE PRICE DoT to auction spectrum in E & V bands E-band spectrum to be provisionally allocated to telcos to aid upcoming 5G launch; market rates to be collected later TALE OFTWO BANDS KIRAN RATHEE New Delhi, June 26 THE DEPARTMENT OF Telecommunications (DoT) has decided to auction spectrum in the E and V bands, which havethepotentialtoprovidehigh-speed broadband services especiallyin remote areas and for better in-building coverage.Itwillshortlysendareferencetothe Telecom Regulatory Authority of India (Trai)toseekstakeholders’commentsto finalise pricing and other allocation methodologies to telecom operators and technology firms. However, since 5G auctions are scheduled to start from July26,the DoT has decided to provisionallyallocate the E-band spectrum to telecom operators to aid the launch of 5G services.Telcos, however,will have to give an undertaking that whenever the auction for this band happens,theywill paythe marketdetermined price for it. Earlier, the DoT was considering the option to allocate the E-band spectrum administratively to all the companies, but there was opposition from telecom firms, particularly Reliance Jio, which demanded that all the spectrum ■ InAug 2014, Trai had recommended light-touch regulations and no auction for E &Vbands ■ For 8 years, no action on Trai proposals as tussle between tech & telecom companies continued ■ Tech firms seek administrative allocation; telcos want auction DoTnow feels auction best way to allocate E &Vband spectrum as times have changed be auctioned. Though theTrai in 2014 had recommended a light-touch licensing approach and no auction for the bands, the DoTnowfeels that the situation has changed over the past six-seven years. Continued on Page 2 Tata,Adani among 5 to exit RCap resolution RAJESH KURUP Mumbai, June 26 FIVE PROMINENT BIDDERS for debtladen Reliance Capital’s (RCap) assets have backed out of the race,as the bankruptcy process of the former Anil Ambani group firm inches towards a close.There are nowonlyfive active bidders, including Piramal Enterprises, actively pursuing the process. This is in contrast to the nearly 54 expressions of interest (EoIs) the firm had received in March. The latest to pull out of the processareprivateequitymajor Blackstone, HDFC Ergo, insurance firms of ICICI Lombard and Tata group,andAdani Group,sources close to the development said. Tata AIG General Insurance Company,a subsidiary of Tata Sons,had earlier evoked interest to buy RCap’s general insurance arm. Apart from Piramal Enterprises, the prospectiveresolutionapplicants(PRAs) who are actively engaged with the administrator are Yes Bank and Torrent Group. Further, Zurich Insurance has shown interest forRCap’s general insur- ance cluster, and Cholamandalam Group for its life insurance cluster, the sources added. According to the Request For Resolution Plan (RFRP) issued by the lenders, the bidders have two options — either to bid for the entire assets of the company or one or more of its clusters (subsidiaries). The subsidiaries are Reliance General Insurance, Reliance Nippon Life Insurance, Reliance Asset Reconstruction Company, Reliance Securities,RelianceCommercial Finance, and Reliance Home Finance. Earlier, RCap’s lenders had decided to extend the deadline for completion of the firm’s resolution processbyanothertwomonthstoNovember2andtosubmitresolutionplanstoJuly 11. This followed a cold response from prospective bidders and even as certain bidders had sought“more time”to completetheduediligenceprocedures. The decision to extend the deadlines was taken bythe committee of creditors (CoC) at its meeting on June 16. Continued on Page 2 Indirect tax reforms: A job half done GST underperforms for its faulty design, rate hike agenda regressive KG NARENDRANATH New Delhi, June 26 AS INDIA'S GOODS and services tax (GST) completes five years on June 30,it has,at best,just begun to exhibit flashes of innate brilliance. Revenueshavebeenverybuoyantin recent months, so the Centre now expectsreceiptsfromthismainindirecttaxinthecurrentfinancialyear to be a fifth higher than the Budget Estimate (BE) announced in February.Inthelastfinancialyear,thecollectionsgrewarobust30.5%,albeit on a contracted base (-7%). GST, however, produced suboptimal outcome over the halfdecade,primarilybecauseofitsserious design flaws and policy ad-hocism.The period nevertheless bore testimonyto the fact that even an imperfect GST can be decidedly superior to the system of assorted indirect taxes with wider cascade effect it replaced. Asadestination-basedconsumptiontax,GSTwastobringaboutadditional revenue productivityand significant“outputeffect”astaxinggets confined to only the value added at each stage and B2B transactions assumeavirtualpass-throughstatus. These gains were hard to detect, at leastuntillately(GSTrevenuetoGDP ratiowas around 6.3% in both FY19 andFY22). There is no cogent evidence either of a big reduction in the tax incidence on capital investments and production inputs giving a leg uptotheeconomy,thoughthis,too, was one of the promises. Meanwhile,since the pandemic distorted the economic landscape, opposing views on GST's efficacy have remainedjust that:views. Tobefair,itwasanarduoustaskfor thethenfinanceministerArunJaitley tostrikeadealonGST’sstructurewith state governments after driving a grandbargain.Implicitinthatagree- Then finance minister Arun Jaitley (centre) and others during the first Goods and Services Tax Council meet, held in September 2016 at Vigyan Bhawan in New Delhi 5 GST - I GST yielded much lower revenue buoyancy than intended... YEARS OF GST receipts-GDP ratio almost flat (%) Centre-state consensus building went behind the July 2017 launch of GST. It was supposed to improve ease of doing business and add its share to GDP. Has the tax reform lived up to promise in the last 5 years? FE takes stock in a series starting today ment and the laws that soon ensued weremajorchangesinthewayadministrative powers and revenues are shared between the Centre and the statesandstatesinterse. Whatwasbestpossiblewasdone, anditwasepochalinitself.Allmajor elements of indirect taxes levied by the Centre and states, except the basic customs duty (import tariff), collapsedintothenewtax.Butlarge chunks of economic transactions were kept outside its purview,most INDIA, ALONG WITH 80-odd developing countries, has sought a revision of the over three-decade-old external reference prices of farm commodities that are used by the World Trade Organization (WTO) to calculate the current domestic farm subsidies extended by the developing nations,officialsourcestoldFE. While not much headway was made on these issues at the recently-concluded 12th ministerial of the WTO, as the focus was shifted to deals in curbing fisherysubsidies and a patent waiver for Covid vaccines, the multilateral body is TATA MOTORS HAS emerged as the market leader in the compact SUV segment in FY22, beating Hyundai Motor India and Maruti SuzukiIndia.Thecompany’sNexon (the internal combustion engine variant)emergedasthelargest-sellingcompactSUVat122,000units, more than Maruti Suzuki’s Vitara Brezza (114,000 units), Hyundai’s Venue (105,000 units) and Kia’s Sonet (74,000 units). Other compact SUVs in India (Mahindra XUV300,Toyota Urban Cruiser, Nissan Magnite, Renault KigerandTataPunch)togethersold 260,000 units. Automotive analysts FE spoke with said multiple reasonsworked in favour of Tata Motors in FY22, including the fact that customers knewHyundaiwouldbelaunching ■ Mahindra (Rates for over 200 items [15%] cut since GST's July 2017 launch, most tax cuts in 2018 & 2019) Yet, FY22 collections up 21% over FY20 Addressing structural issues key Gross collections up 30.5% to `14.83 trillion in FY22, albeit on shrunk base (-7%), as fake invoices, excessive ITCs curbed Broadening the tax base will accelerate revenue further notably of auto fuels, natural gas, land, real estate (construction for factory and civil work),alcohol and electricity. As a result, sections of industryincludingsteel,cementand transportationareunabletogetfull credit of input taxes paid while OTHER DEMANDS ■ They are seeking protection against disputes on any food procurement or other support programmes launched after 2013 or to be rolled out in future XUV300, Tata Nexon ■ Toyota 122,000 Urban Cruiser, ■ Nissan Maruti Suzuki Vitara Brezza 114,000 Kiger & ■ Tata Punch Hyundai Venue 105,000 Kia Sonet 74,000 the Venue facelift and Maruti Suzuki the all-newVitara Brezza in June this year. “When a car is in its outgoing phase, sales tend to drop for that Magnite, ■ Renault together sold 260,000 units Source: Carmakers model unless there are heavy discounts that can boost sales,” one analystsaid.“InFY22,wedidn’tsee major discounts at the showroomlevel because car availability itself meeting theiroutput tax liabilities. Continued on Page 2 ■ Sectoral impact: Auto & e-commerce, Page 2 Tomorrow: Corporate India’s compliance burden eased Online car sales rise as companies change gears VARUN SINGH New Delhi, June 26 dealers were able to deliver it to customers in less than three months,”Vangaal said.“There are highchancesofcustomersmoving from competitors to Tata because ofthelatter’slesserwaitingperiod; if a customer wants a car, she usuallywants it‘now’.” Vinkesh Gulati, president, Federation of Automobile Dealers’ Association (Fada),recently told FE that Tata Motors is among the few carmakers to have raised car manufacturing capacity of late. “Tata Motorshasbeenabletoraisecapacity and could even reach 45,000 cars permonth,”Gulati said. In May, Tata Motors became India’s second-largest carmaker, overtaking the legacy No. 2 Hyundai India. Tata Motors sold 43,341 cars, beating Hyundai India’s 42,293 unit sales. END-TO-END ONLINE salesofpassengervehicles(PVs)haveseenanupswinginthelastthree years as Covid-related disruptions led companies to focus more on such channels and customersgettingmorecomfortablewiththeidea. Some car manufacturers started basic online channels in 2019, which were sharpened during 2020-2021, and today, sales through the medium for leading players such as Maruti Suzuki,Hyundai Motor,Tata Motors and Honda Cars India range from 10-25%, with Maruti’s share being the largest. Companies FE spoke to said that it's the youth as well as the population in the metro cities which are driving online sales. For instance, in April 2021, Hyundai expandeditsend-to-enddigitalplatform‘Click to Buy’to pan-India level after launching it on apilotbasisafewmonthsago.Duringthesame month, similar platforms were introduced by Tata Motors (Click to Drive) and Honda Cars India (Honda form Home). While Maruti earlierhadvehicle booking and configuratorplatforms,it came out with end-to-end digital car financing platform, Maruti Suzuki Smart Finance,in December 2021. The digital platforms provide comprehensive information to customers regarding car configuration and price, promotional offers, finance options and preferred delivery locations,among others. For Maruti, end-to-end online sales accounted for 11% of its total sales in FY20, which went up to 22% in FY21 and 25% in FY22.“Post-Covid,people have realised that it is easier for them to do an enquiry online than approach showrooms,” Shashank Srivastava, seniorexecutive director- marketing and sales - Maruti Suzuki India,said. Srivastava said that increasing internet penetrationisafactorbehindpushingsalesvia the channel. “We have close to 700 million internet users and theyare almost equallydistributed between urban and rural areas,” he said.Maruti has already digitised 24 of the 26 touchpoints that a customer has while purchasing a car from the company. “Our estimate is that the industry-wide PV retails through online platforms is around 5%,”Srivastava said. Continued on Page 2 Continued on Page 2 ■ New Delhi and others have also sought a permanent solution to food security issue and permission to export grain stocks from official reserves expected to take up these issues soon at its meetings on agriculture.“These issues will continue to be raked up by India and other like-minded was a challenge.” Tata Motors also used the government’s ‘vocal for local’ campaign to its advantage. Since 2020,Tata cars come with a‘vocal for local’ sticker on them, usually on the rear glass. A Gurgaon car dealer of a competitor carmaker told FE that he has heard from buyers,and strangely so,thatTata Motors is more Indian than other carmakers making in India, even though the supplychain of all carmakers is global. GauravVangaal,associatedirector, Light Vehicle Forecasting, S&P Global Mobility, said that Tata Motors was able to raise capacity lastyearand,therefore,carssuchas the Nexon had a lesser waiting period than competitors like the VitaraBrezzaandtheVenue.“While lastyeartheaveragewaitingperiod oftheNexonwasaboutsixmonths —similartoothercompactSUVs— 6.27 14.8% 11.8% countries at every possible opportunity at the WTO,” one of the sources said. Continued on Page 2 Tata beats Maruti, Hyundai in compact SUV race SALES LEADER BOARD FY22 Revenue neutral rate* (RNR) has fallen by 3 pps Rate reductions Computed haven't before GST dented Current revenue AT 122,000, NEXON SELLS MAXIMUM UNITS IN FY22 VIKRAM CHAUDHARY New Delhi, June 26 6.23 ...but rate hikes may not be the solution India seeks new benchmark for farm subsidy at WTO BANIKINKAR PATTANAYAK New Delhi, June 26 FY19
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