IIPM ARTICLE BROADCAST

Saturday, August 07, 2010

‘V’iciously ‘A’bnormal ‘T’ax!

Inter-State VAT variations are proving to be the chronic ulcer for trade and commerce in the country. And the problems are visible. Will the yet to be implemented GST prove a breather? by Savreen Gadhoke

Kerala’s coconut farmers also faced troubles when the State Government levied 12.5% VAT on copra and other coconut products. Subsequently however, the government was forced to waive-off the tax to support exports to Tamil Nadu.

While Tamil Nadu levies a VAT of 12.5% on automobiles, marbles, tiles, refrigerators, ACs and timber, the State of Puducherry charges just 4%. So why would you buy your next car or your new twin-door refrigerator in Tamil Nadu? A VAT of 12.5% is levied on silk in Karnataka, J&K and Maharashtra, while in Delhi, Punjab, Himachal Pradesh, West Bengal, Andhra Pradesh, Goa, Bihar & Uttaranchal, the tax applicable is just 4%. Tyres and tubes attract 8% VAT in Haryana, while in Delhi they attract 4%. The stark difference shows up as on as much a burger at Kentucky Fried Chicken (KFC). Delhi levies a tax of 12.5% on a KFC snack, while the hungry buyers end up shelling out 13.5% more as tax in UP! Naturally, these differences in VAT hamper sales of certain commodities in select States. “Traders are at a disadvantage due to variations in VAT. If any commodity is charged 12.5% somewhere and the neighbouring states charges 4%, certainly, the higher VAT state will lose. And, if that commodity is a high value product, the difference is much. So, obviously the buyer will get it from the adjoining state,” says D. P. Nag, Secretary, Bengal National Chamber of Commerce and Industries. The culprit – the Constitutional Right that the States have, exercising which, they can to charge VAT. And this causes discrepancies in prices, despite there are friendly treaties and trade agreement between neighbouring States.

Be that as it may, VAT, which was implemented with a view to simplify the taxation structure has had negative impacts on certain businesses. However, efforts are being made by various State Governments to keep the VAT rates in sync with the neighbouring States. For instance, the Chief Ministers of Delhi, Haryana and UP are soon scheduled to meet to mull over how to reduce variations in VAT levied on diesel, so as to save the aggrieved diesel retailing lot of Delhi. But the truth is: despite efforts on the part of the State machineries, uniform tax remains the only working hypothesis. There is some hope with the Ministry of Finance’s target of implementing Goods & Services Tax (GST) by 2011, which will impose uniform tax rates at a national level. But as market experts believe, it seems a far-fetched dream for now. “At this juncture, no state can be tamed. The GST regime is showing some hope, but the road to that is not as easy as we have a Quasi-Federal Constitution. Under this, states enjoy some autonomy, particularly in List II, where states enjoy full rights to tax as per their whims. Will any state want to lose that autonomy?” questions Ramendra Nath Ganguly, Former Assistant Commissioner – Sales Tax, Ministry of Finance.

A uniform GST is a dream. The asymmetrical VAT is reality. Simply said, the answer lies in market economics, and only the simple Marshallian Law of Demand and Supply can perhaps wipe off what the traders hate for now.

With regional inputs from N. Asokan (Chennai), Anu Warrier (Kerala) and C. S. Bhattacharjee (West Bengal)

Savreen Gadhoke

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Friday, August 06, 2010

Walk out, or not?

If generation X thought ‘family is foremost’, for generation Y, are parents a pest?

Oprah: So now both of you are living with your (Abhishek’s) parents…
Aishwarya Rai and Abhishek Bachchan: Yeah.
Oprah: Now how does that work?!
Abhishek: You live with your family?
Oprah: No…
Abhishek: How does that work?!

…and there was a roaring applause. For years now there have been discussions and debates over India aping the West, and one of the bones of contention being youngsters wanting to separate from their families and lead an independent life. I was often puzzled when my friends would want to have a separate home, until one day I had an elaborate discourse with my cousin who is now happily settled in the US. “The motivation to move to the US was the thought of being away from my parents”, he’d mentioned. “For one, it’s an escape from the everyday explanations of one’s whereabouts. Apart from that, I wanted to handle my own life without being pestered about issues like cleaning, studying, spending money, watching TV or calling friends over. I used to have an argument almost every second day with my parents, but now that I’m away, our relationship is beautiful.” With the newer generation striding ahead of the past generation, such problems are prevalent in most homes. Sushma Virk, school teacher and mother of twin girls, gives a parent’s point of view, “There’s a point in time where parents have to control the children; probably during those early teenage years. And then there are times, early 20 onwards, when parents have to listen to the children because then they are mature enough to understand what’s good for them.” On being asked if she’d allow her girls to separate if her rules don’t go down well with them, Sushma said, “Not at all! As far as possible I will try to find a middle path. I guess this is the time when children want to have fun. So, why not let them live their way?”

People all over the world look up to India’s culture, especially because of our strong family bonds, and it’s a sad sight when tiny tiffs lead one to an impulsive decision of walking out of home. Opines Dr. Sanjay Chugh, “Living on your own makes you learn new things about life and your own self. It makes you more independent, self-reliant and responsible, if the freedom is rightly used. All these are desirable qualities, that’s why, if there is opportunity along with resources, rarely would anyone like to ignore it.” But the days ahead might not turn out to be all rosy. “Separating is an important decision and so, the family’s mental preparedness is crucial. If both the parents and the child are mentally and emotionally ready, then the whole shift could be far more peaceful and stress free. If not, the chances of emotional breakdowns are high”, said Sanjay.

To avoid reaching a crossroad of heartaches, both parents and children need to realise that where there’s love and understanding, a little adjustment can definitely be accommodated.

Spriha Srivastava

Thursday, August 05, 2010

ONE YEAR AFTER LTTE

One year after the Tigers were silenced, the victorious Mahinda Rajapakse is stronger than ever. But as the Tamil Diaspora nurtures the dream of a Tamil Eelam, N. Asokan finds that only a meaningful political solution can bring permanent peace

The Fourth Eelam War in Sri Lanka finally came to an end on May 17, 2009, with the LTTE international relations head, K.P. alias Selvarajha Padmanathan, announcing that “The LTTE have decided to silence the guns.” Over 25,000 Tamils died in the final three months of the Fourth Eelam War which started in 2006. LTTE had waged armed struggle against marginalisation of minority Tamils in the island nation for almost three decades. From a position of controlling over 15,000 square kilometer, they were pushed to 2 square kilometer at the end of the War, with scores of Tamil civilians moving along with them. The end of LTTE came when its supremo Veluppilai Prabhakaran’s body was identified from the Nandhikadal lagoon.

Selevaraja Padmanathan, who was trying to revive the struggle with support from the Tamil Diaspora, was also arrested in Malaysia and brought to Colombo. As the first anniversary of the end of the war passes, the island nation has witnessed a series of important events in the last one year. In the political front, riding over the euphoria of triumph, Mahinda Rajapakse secured a massive victory in the presidential elections, he arrested war hero-turned political opponent Sarath Fonseka. Rajapakse’s party also secured a massive victory in the parliamentary elections. Rajapakse and his brothers have brilliantly strengthened their individual positions in no time.

But what has happened to the Tamils battered by the war? As the war progressed, LTTE was continuously on the run in the northern areas. It had already withdrawn from the east as their renegade ‘Col Karuna’ teamed up with Colombo. As a strategic move, it took three lakh Tamils along with it when it withdrew from its operational headquarters at Kilinochi. For three months, all these men, women and children were continuously on the run. These civilians became sitting ducks for the Lankan forces’ heavy artillery and planes. Everyday, scores of people died. When it was all but obvious that the LTTE would be defeated, they escaped the clutches of the Tigers and came to the side of the Lankan army. The strategy of the Tigers had been to get international involvement to force a ceasefire and simultaneously trying to bring about a possible turnaround in the fate of the war. It did not follow the script. Even the emotions whipped up in the state of Tamil Nadu in the run-up to the parliamentary elections did not yield the desired results. The octogenerian leader, M. Karunanidhi, addressed Tamil sentiments by taking part in a three-hour fast.

Wednesday, August 04, 2010

‘Smart’phones or just a ‘dumb’ call?

Michael Dell is betting big on smartphones to make up for the lack of any ‘killer app’. Is this a two-years-too-late strategy? by Neha Saraiya

On a fine Tuesday afternoon in Tokyo, a year back, Michael Dell made public his intentions to enter the smartphones market. The world was taken aback. Not because this sounded like a far-fetched dream for Dell, who had been facing some tough quarters in the laptop market of late, but because this announcement came some good quarters too late, for speculations about Dell’s intentions to acquire Palm had been doing the rounds for quite some time then. Cut to the present, his wish to get into the smartphones arena has turned out to be real; getting hold of Palm didn’t. [Hewlett-Packard, the number one vendor in the PC market acquired Palm for $1.2 billion on April 28, 2010.]

Truth is that even 13-months after Dell first announced its entry into the mobile category (a period during which it has already launched a pair of smartphones – one with Google’s Linux-based Android OS – the Dell Mini 3i smartphone, which was launched in the Chinese market in November 2009 and another – the Dell Aero smartphone, which will soon hit US market through AT&T), many in the industry still doubt its future. The whisper in the woods at present however is that Dell is planning to launch five new smartphone models within the next 12 months, which include four Android OS-based and one Windows Phone 7 OS-based smartphones. Ron Garriques, President of Dell Global Consumer Group says, “Our entry into the smart phone category is a logical extension of Dell’s consumer product evolution over the past two years.”

To hit back hard at critics, Dell is also exploring strategic tie-ups to move into newer geographies, the latest being announced on April 14, 2010, with telecom provider Telefonica. The strategic implication of this deal is that, while it will improve Dell’s chances at newer hardware and services, on the other it will give Dell’s smartphones access to the Latin American and European markets. Dell is also looking at strengthening its presence across emerging Asian economies like China & India. So can smartphones do to this once-Lord-of-the-PC-Ring, what the iPhone did to Apple (the iPhone is the highest selling product under the Apple unbrella today, acccounting for 40.33% of its revenues in Q1, 2010)?

From a category perspective, Dell may just have taken the right gambit. As per the Q1, 2010 report by IDC, the global smartphone market grew by twice as much as the overall mobile phone market on a year-on-year basis (56.7% vis-a-vis 21.7%). Better still, as compared to the previous year, the quarter gone by saw smartphones account for 18.8% of all mobile phones shipped during the quarter, as compared to 14.4% a year back. Also, all the other players have contributed in a fairly equal proportion to this growth. While Apple grew by 131.6%, other players like Motorola, HTC, Nokia and RIM also maintained high double-digit improvements in volumes (growth figures of 91.7%, 73.3%, 56.9% and 45.2% respectively). The report also highlighted how a total of 54 million smartphones were shipped in the first quarter of this year – an increase of 56.7% from the same quarter a year ago. These are statistics enough to prove a heated-up table, enough to justify Dell’s timing to call it a bluff, with smartphones market on a higher growth trajectory as compared to even the overall mobile phone market.

Tuesday, August 03, 2010

Fiends on the prowl

A TSI sting operation finds how paedophilia has turned into a thriving business in Delhi, NCR and Mumbai. Taking advantage of kids’ poverty and craze for brands and gadgets, middlemen get rich by supplying minor boys and girls to satiate the desire of sick, rich men, many of them NRIs and foreigners. By Abhishek Kumar and Neeraj Rajput

TSI – I have never done it before. That’s why I am asking I hope he will not be troubled.
Rupesh – No buddy, there is nothing wrong. It is you who will have to take the lead.

TSI – Are these children not aware?
Rupesh – They know everything. These children will be with me. Rest is not a problem as I have closed their ears... that they have to be with you people... only thing is that we cannot take them to a hotel.

TSI – Where do we take them then?
Rupesh – Search for some house of someone known to you.

Rupesh – There is no problem as far as they are concerned. Only thing bothering me is that I don’t want to take you and them to any hotel, guest house etc.

Rupesh – If I quote the price, it may shock you. You asked for 1 but I have brought 2 and they are of perfect choice.

Rupesh – Earlier we have charged different rates. We have taken Rs. 25,000 and even Rs. 30,000.

TSI - Then also, please quote some amount.
Rupesh – Rs 25,000.

Rupesh gets angry:

Rupesh – I have done it many times but they are doing this for first time...If I get another client, then also my children will go..but they will not go to any place where I will get troubled.

Rupesh – You are not my first client, I have clients in Canada, Australia, Singapore and Pakistan and everywhere. But none of them are like you who disturb me so much. I have so many clients that I don’t have time for all of them.

We were astonished to find the kids in Mumbai as well as in Delhi/Noida so well trained by their handlers. They exactly knew which questions to answer and when to maintain a studied silence.

But we were still not sure if Rupesh was a hardened supplier of child sex workers to paedophiles. It could also be that he had heard from Maria that we were millionaires and decided to brainwash some kids to make some easy money.

So, we decided to pay a second visit to Mumbai. This time he had two other kids with him. Now we were convinced that this guy was in the trade for real.

Rupesh – For the time being, take these children. Later I will bring even those whom you met before.

TSI – Listen son, what have you told your mother?
Kids – I am going for a walk.

TSI – You know him?
Kids – Yes.

TSI – Since when do you know him?
Kids – I know him from before.

TSI – You know what you are supposed to do?
Kids – Yes.

TSI – Something bothering you?
Kids – No.

TSI – You have done this earlier?
Kids – No.

TSI – When you have not done this earlier, how do you know what you are supposed to do?
Kids – Rupesh told us all.

TSI – What has he said?
Kids – Smiles and giggles.

TSI – Come on, say it.
Kids – (Smiles) He has said nothing.