ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Diseconomies of Making Cars

Diseconomies of Making Cars Hansavivek HINDUSTAN MOTORS complains that the government's pricing policy prevents the company from generating sufficient funds to meet the various needs of business. The Supreme Court by its judgment in November 1971 had directed that the prices of cars be so fixed as to allow a net return of 16 per cent on the capital employed after providing for all outgoings including depreciation, but excluding warranty charges, bonus and interest on borrowings. The company's contention is that this principle is not being followed by the government in fixing prices of cats and that the prices fixed by government leave manufacturers without funds even for provision for depreciation and development rebate. It is stated that the company brought to the notice of the authorities the increase in wages payable to workers in the engineering industry from May last, following 'an announcement to this effect by the West Bengal government, but this increase was not taken into account when prices were revised from July this year. The company also says that over the last 14 years ended March 1973, prices of major raw materials have risen by 4 to 4.5 times, those of bought-out components and utilities by 2 to 4 times, and the cost of labour by 4.6 times, while the price of HM's car has been allowed to be increased by only 53 per cent. It is also pointed out that prices of trucks and jeeps have increased in recent years to a "far greater extent" than the prices of cars, although the former 'are far less sophisticated products than the latter. Refuting the oft-repeated allegation that cars produced in India are costlier compared to those produced in foreign countries, the company says that while a medium-range car (1485 cc) costs Rs 20,206 in Britain.

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