TVS may raise international price post duty drawback cut

The government has reduced the export duty drawback from 5.5% to 2%. In an interview to CNBC-TV18, HS Goindi, president-marketing at TVS Motor says the company is assessing the situation post 3% duty drawback cut.  "We may look at raising prices in the international markets," he adds.

According to him, it is difficult to assess impact on margins at this point. Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy. Q: What is the likely impact on TVS Motors, given your exposure to the export market, from this duty drawback reduction? A: First of all, we do not know about the duty reduction. The government must look at the comparative scenario. Hence, only after that, the decision should be taken. We have to look at the impact of the duty drawback cut. On the top of it, the distributers’ currency depreciation in his country, our currency depreciation and all and then we will decide what kind of price increase we need to do. Q: If indeed this 3 percent cut does come on board, how much of a price hike will you eventually have to take? Will you get any kind of compensation from the bilateral treaty? A: I do not know about bilateral treaty, any compensation will be available or not. We have to look at a complete picture and not just this cut of 3 percent. So, we will be looking at a complete impact from the distributor’s point of view, the country’s point of view and our other cost point of view. And then we will decide from country to country how much of price increase we can take at what point of time. Q: But it seems likely that whatever impact is going to be neutralised through a price pass-through or do you think it might lead to any kind of sacrifice on margins? A: I do not know. It will be very difficult for me to answer right now. Everything cannot be on transaction basis, 2 percent goes up or 2 percent goes down and we start increasing and decreasing prices. That’s not how our business normally runs. We will have to look at all sorts of impacts. I am not in a position to comment how much of price increase we will take up or not take up. We will have to look at country by country and product by product. Q: How much percentage of your total export comes from the India market? A: Last year, we would have done close to about Rs 1,000 crore of exports from India.