Date:19/11/2008 URL: http://www.thehindubusinessline.com/2008/11/19/stories/2008111952170100.htm

Back Difficult to cut prices: India Inc

Mr Rahul Bajaj

Our Bureau

New Delhi, Nov. 18 The Finance Minister, Mr P. Chidambaram’s call to India Inc to slash prices of products in order to spur demand was met with lukewarm response from industry captains. Automobiles, real estate, airlines and hotels were among the sectors that were advised by the Minister to effect price cuts.

Mr Rahul Bajaj, Chairman, Bajaj Auto, laid the onus on the banks to generate demand through increased lending at lower rates. He ruled out price cuts, which, he said, would not, by themselves, help boost demand of two-wheelers and felt that industry on its part was not in a position to reduce prices.

“Our margins are not more than 4-5 per cent, and in some products there is no margin. This year, the industry may see a negative growth,” warned Mr Bajaj. “My buyer is not buying an aircraft, he’s buying a Rs 40,000 motorcycle, please help him buy this,” he added.

Mr Brijmohan Munjal, Chairman, Hero Honda Motors, echoed the sentiments. Mr Munjal said price cuts would not boost demand, and in any case Hero Honda could not cut prices any more.

Mr Kushal Pal Singh

India’s largest real estate company DLF also said that the decline in raw material costs (cement and steel) would bring down the realty prices. DLF Chairman, Mr K.P. Singh, reacting to Mr Chidambaram’s suggestions said that the home loan rates should ideally come down to seven per cent. “I do not believe that there is a point where anyone has to give a directive on how to reduce or not to reduce…Already real estate prices are down and they will further come down as input prices come down…So we are with the FM’s view and definitely the industry is acting in the same direction so there is no difference of opinion,” he said.

Mr Vijay Mallya

Mr Vijay Mallya, Chairman, Kingfisher Airlines, after meeting the Finance Minister told a television channel that if the Government would provide declared goods status for ATF for larger aircraft, Kingfisher airlines would cut prices from the next day.