Reversals despite Incentives

Reversals despite Incentives Hansavivek PREMIER AUTOMOBILES, after slow but steady progress over four years, has experienced a sharp reversal during 1975-76 with a trading deficit of Rs 82 lakhs against a gross profit of Rs 2.64 crores the year before. No provision has been made for deprccia' tion amounting to Rs 1.28 crores, and arrears on this account have accumulated to Rs 3.96 crores. After providing Rs 5 lakhs for investment allowance and after various other adjustments, the net deficit of Rs 80 lakhs is transferred to the general reserve, This outcome followed low demand for enger cars, commercial vehicles and airconditioners' Compared to the previous year, production of cars fell from' 14,753 to 12,229 numbers, drive-away chassis from 169 to 40 numbers, diesel trucks from 3,784 to 2,151 numbers, and petrol trucks from 177 to 100 numbers. Production of airconditioners dropped sharply from 486 to 145 units, but production of industrial/ marine engines looked up from 536 to 572 units. Net sales declined from Rs 62.57 crores to Rs 49.74 crores. Notes appended to accounts reveal that certain indeterminate demands for the past years for further bonus and other claims by employees are pending before the industrial tribunal. But the company's contention is that no liability exists in this regard. No provision has been made for gratuity liability estimated at Rs 2.88 crores on acturial valuation. The auditors were paid Rs 22,153 in other capacities, apart from their fees of Rs 30,000. The company earned only Rs 23 lakhs in foreign exchange, whereas it spent as much as Rs 5.67 crores in foreign currency of which Rs 5.35 cro res accounted for imported raw materials. The curent year holds out promise of improved results. Demand for cars has distinctly improved following substantial reduction in their price as a result of reduced excise duty and co- operation from suppliers and dealers. The company is at present producing cars at full rapacity. It has also improved the existing range of commercial vehicles and hopes to improve its share of business despite keen competition. Production and sales of cars increased from 3,153 and 3,077 numbers in July- September 1975 to 4,376 and 4,382 numbers, respectively, in the same period of the current year. While production of commercial vehicles looked up from 471 to 488 units in the same period, their sales fell from 559 to 501 units. The company has also on hand export orders for Rs 40 lakhs and is striving to secure further orders. It has negotiated financial assistance of Rs 5 crores from various financial institutions and consortium of banks.