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Industry notes FM’s concern, but no price cuts

business Updated: Nov 19, 2008 22:10 IST

Hindustan Times
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Realtors non-committal

Real estate companies were non-committal about reducing property prices following the finance minister's suggestion on Tuesday. From reducing the prices of housing units to giving more incentives to buyers, real estate firms are applying every trick in the trade to keep themselves afloat. They have sought incentives from the government including liberalising norms for external commercial borrowings for residential projects as well. ECB limit has been raised to $500 million but only for infrastructure projects.

DLF said it has reduced “pre-launch” booking prices for some projects in Bangalore.

Steel-makers in no mood

With a cut of more than 30 per cent already in place, steel makers may not be in a position to cut prices. Slackening demand in the realty sector has hit the steel makers as well and with the cost of coking coal, a key input, continuing to remain high, steelmakers say there is very little elbow room for another cut. "Prices have already hit the bottom and going forward it would stabilise at the current levels. Let markets determine prices," said Naveen Jindal, head, Jindal Steel and Power.

With domestic prices higher than international prices, the five per cent import duty is not expected to benefit domestic players much.

Airfare cut not feasible

It is not feasible for the airline industry to cut airfare and sacrifice its earnings when finances are precarious. Airlines have accumulated losses of over Rs 4,000 crore over the years, and another Rs 7,000 crore losses are looming this year.

The depreciation of rupee against the dollar also offset the benefits of jet oil price reduction. “The gain on account of oil is negligible and at the moment there is not much scope to reduce prices,” said M Thiagarajan, MD of Paramount Airways.

“Why is the government not asking oil companies to cut prices of petroleum goods which affect many,” asked another airline official.

Hotels can cut, but won’t

Unlike aviation, the hospitality sector is on solid ground and can reduce room rates to spur growth. But it won’t. India’s top hotel companies and multinational hotel chains preferred to ignore Chidambaram’s suggestion though their profits have been growing. No hotel made losses and the multinational hotel brands made even more money. So should not they cut room rates to spur growth?

“We understand the concern of the finance minister,” said Mithu Basu, general manager, Hotel Leela Venture. “Prices are driven by market forces. At this time, all our four hotels give us no reason to cut prices.”

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