There should be market-based pricing of fuel

Written by Rachit Vats | Updated: Aug 15 2013, 11:00am hrs
Amidst a slowdown that has gripped the auto industry with sales of passenger vehicles declining 7.5% for the April-July period and commercial vehicles sales dipping 9.9% during the same period, Mahindra & Mahindra president (automotive & farm equipment sectors) Pawan Goenka hopes a good monsoon will keep tractor sales growth in double digits. He also hopes the government will consider some measures to help revive the industry. On the sidelines of the announcement to de-merge its trucks and buses business from Mahindra Trucks & Buses into M&M Goenka spoke to Rachit Vats. Edited excerpts:

Other than good monsoon, are there any fresh triggers that could help reverse the sentiments for the sliding industry sales numbers

July has been one of the worst months for the auto industry, almost all the segments de-grew barring pick up segments. As of now, August-September does not look any better than July in terms of sales, but one can always hope the festival season to bring along some cheer. Still, to project beyond a month is very difficult. Unless there is some external stimulus from the government, turnaround will be difficult.

What is going good for the industry right now, which happens whenever the industry is down, is that the commodity prices are very well behaved. Thus, there is not much cost pressure. In the first four months we have taken about 0.5% price increase and it will be significantly lower over the next few months.

When things are not going well, you tend to cling on to any good sign for recovery. Monsoon in itself is not a complete package. We hope the government will take some measures and there has been a formal request from the industry. We do not know which way the government is thinking but we hope some positive measures are taken.

The government may consider a one-time hike in diesel prices along with monthly increases. Do you support this proposal

We have always supported that there should be market based pricing of fuel and not controlled. We believe the gap between petrol and diesel should be maintained at fixed levels. A gap of 25% between the diesel and petrol prices is good. Right now it is 28%, so there is still some room for diesel prices to go up.

The tractor business seems to be doing well with 26% jump in sales for the June quarter. Will the demand sustain

FY14 is going to be a good year for the tractor industry as it looks like monsoon will continue to drive growth. The current level of growth will at least be not in 20% range but will go in that direction. So, there will be a double digit growth.

What sort of synergies will the de-merger of the trucks and buses operations from MBTL into M&M have

With the demerger, all assets and liabilities, which the company has today, will come on the M&M books, on book value. As of now we have about R250 crore of positive asset liabilities, which will come in the M&M books. Also, the current losses for to the trucks and buses business will come to M&M, about R900 crore as of end of the last fiscal.

What is the outlook for the trucks business in the short and long-term

Truck business is related to the GDP growth. You produce, you transport. It is also dependent on infrastructure. While government sops can bring some long-term benefits, the economy has to grow.