Posts Tagged ‘impact’
The Government of India (GOI) has passed a mandate that all cable services in the four metros be digitized by 30th June, 2012. From 30th June, the four metro cities will cease to receive analogue television broadcast signals. The target for complete digitization in urban areas is September 31, 2014 while the entire country is expected to achieve digitization by December 31, 2014.
Currently, the cable operators transmit the channels in analog signal mode which is very hazy. In a digital signal, the receptivity is much clearer and all the channels have the same reception quality. As both the signals are received at the same time, there are no issues with the synchronization of sound with video. There is a huge cost involved in digitization of cable signals and many cable operators are shying away from this kind of investment, barring few organized and large scale cable operators.
Meeting the deadline is very difficult
Following government directives broadcasters will relay only encrypted digital signals that will then be accessible to customers with set top boxes (STBs). However, meeting this deadline is just impossible. This deadline implies installing over 1.5 lakh STBs per day in the four metros. Currently, the number of daily installations in the four metros together is only 10,000.
Benefits to Viewers
Unlike the earlier scenario, wherein subscribers were forced to choose whole packages of channels even if they did not watch them all, in the new regime, they will be allowed to choose channels on a la carte basis. In other words subscribers will have much better choice at picking only the channels that they want. This will surely bring in price regulation for both the Direct To Home (DTH) & digital cable operators. Also, the Cable TV networks are now free to recover digitization costs from broadcasters through ‘Carriage Fees’. Earlier they were charging the consumers for it. Carriage fees borne by broadcasters are estimated to be around Rs. 4,000 Crores (US$ 752 Million) annually.
Impact on Viewership Ratings
One of the expected benefits of digitization is much better transparency on viewership. This is one of the reasons why the legislation involved has been so contentious. Many channels are highly creative with their viewership numbers. Most like to retain that freedom to stay fuzzy. With digitization, data on media content consumption is much more concrete.
Globally, in most countries, TV channels earn 70% of its revenue from its subscription and only 30% from advertising. In India, the revenue split is exactly the reverse, with 70% of the channel revenues coming from advertising. Digitization is expected to bring down carriage fees and reduce dependence on television rating points. TV Channels fighting for high TRPs to woo the advertisers will see a decline, with reduced dependence of revenues from advertisers. With HDTV providing more control to viewers to filter the content (esp. advertisements), there is a fear that viewers may chose to cut advertisements for an additional subscription fees.
This is a double edged sword. On the one hand, digital broadcasting can help launch high-quality niche channels that cater to a specific, paying customer base. The lack of Indian equivalents of the UK’s BBC and America’s Public Service Broadcasting Service, with their formidable non-fiction programming is frequently lamented.
Friction-free access to new channels can remedy this and chances are that as the medium evolves in the years ahead, the paucity of quality programming may turn out to be a matter of the past. But,on the other hand, this can end up as a new war for eyeballs. And that will lead to the same approach to content that plagues our print media: where readers often pay little to nothing to be fed dubious content. This move is supposed to democratically benefit all stakeholders in the value chain. Only time will tell: Will it benefit all equally or Will it lead to new power-players?
To understand how Goods and Services tax (GST) will help companies optimize their supply-chain, one needs to understand a little bit taxation and the existing warehouse strategy.
Let us take the example of a company whose manufacturing facility is present in Delhi, and it moves its goods down to South India. As the company sells in South India, it has to transfer its manufactured goods across the States. According to the current taxation, if you’re moving the goods from one State to another and selling it in the other State, then you’re liable to pay the Central Sales Tax (CST). The important point to note here is that you’re liable to pay the tax only if you’re transferring the goods for a sale. However, if you’re transferring not for a sale but for a stock transfer, you don’t need to pay the CST.
So, to avoid paying the CST, companies show the goods movement as a stock movement than a sale. But, to do this, they have to have a warehouse within the State where the goods are going to be transferred and stored. As a result, currently companies have warehouses within each State and show their goods movement as stock transfer than a sale. This essentially means that the current locations of warehouses are chosen to avoid the taxation, rather than to best service the customer.
For example, let us take the case of a city Hosur, which is a part of Tamil Nadu but it just 30km from Bangalore. So, geographically speaking, to service the customers in Hosur, the goods have to be shipped from the Bangalore warehouse. But unfortunately Hosur is a part of Tamil Nadu, which means the company has to pay the Central Sales tax (CST). So, instead of shipping the goods from the Bangalore warehouse, they are forced to have a warehouse in Chennai and ship from Chennai, which is 250km from Hosur.
With GST coming in, companies will be freed from this problem and they can setup their warehouses to optimize their costs and best service the customers. This is going to save considerable costs for companies and improve the servicing levels.
Also refer to Tax_Structure_and_Supply_Chain_Network_Optimization_in_India.26491837 for an understanding of taxation from a supply chain perspective.
The new flagship programme from the UPA government is the Food Security Act (FSA). The scheme proposes to provide BPL families with 25kgs of grain (Rice & Wheat) per month at Rs. 3 per kg. This is a bold step towards right to food for the poor.
Two major problems with this act now are:
1. Definition of a BPL family
There is no fixed definition of a BPL family. Everybody has their own definition for their own stakes.
We all know the efficiency of our Public Distribution System (PDS) with leakages, corruption, and with lesser capacities. There is little trust that the existing PDS can deliver this to the needy.
Impact of FSA on the FMCG companies
The Food Corporation of India (FCI) will need substantially more wheat to supply three out of four Indian households, meet the new buffer stocking norms that stipulate larger quantities, and also keep aside a strategic reserve for emergencies. Unlike rice, wheat cultivation is limited to less than a dozen states.FCI already buys one out of every two bags sold by Indian farmers. In Punjab and Haryana, it buys virtually every kilo for sale. To meet its new obligations, FCI will have to redouble purchases across Uttar Pradesh, Rajasthan, Madhya Pradesh and Bihar.
When a commodity is in short supply, a bidding war breaks out with simple supply-demand economics. Companies would bid for the supplies and will be ready to pay more than the minimum support price (MSP), which the govt pays the farmers. This is one of the things expected to benefit the farmers, but it has to be executed well. Overall, the price rise is guaranteed with our faulty PDS, corruption, leakages, pests, unfavourable climate etc. One may say, we could increase the wheat production. This is not easy as our National Food Security Commission is yet to achieve its targets for the year, and from the last few years productivity has increased only by a margin. The only hope for production increase is that the farmers when paid well will invest in high-yield seeds that can increase the productivity per hectare.
Meanwhile, FMCG companies that manufacture biscuits, atta, and other food FMCG are under tremendous pressure. With already existing food inflation hitting them hard, most FMCG companies made a price increase. Most of the consumers for these categories are price sensitive and are switching to alternatives and the volumes are going low. With this status quo,the FMCG companies will be forced to increase the prices once again. This means you’re biscuits, packaged atta, and other food FMCG is going to become costlier.
Companies that are more lean and have a value perception are more likely to come out successful. This is a big challenge for the companies and it is to be seen who will emerge out of this battle.