Saturday, October 27, 2007

taxing of alternate technologies

If we consider the life cycle of any product, at least 30% of it is paid as some for of 'tax' to the government. The taxes are justified as the production of goods consumes some resources that are in public domain. The idea would be to balance the revenue from taxation with the costs that the government has to incur because of that industry / product. Of course there is some additional amount for general public expenditure.

The nature of costs have drastically changed. However the taxation has not. Water and air are much more dearer today than a few years ago. The taxation has to changed to reflect this. Some products that may seem to earn money for the government, may actually be a drain on the system. Cigarettes and alcohol are major tax revenue earners, at least in the Indian context. However, when this amount is compared to the money spent on subsidised public health care or the loss of human resources it may not amount to much.

If there is some product in a particular category that does not use up as much of the water and air resources, meaning it uses clean technologies, it must be taxed considerably lower. There could be a special subsidy for green products or an additional duty levied on polluting industries.

In the short run the subsidies may seem to 'cost' the government, but it the long run we may all be better off with cleaner products and technologies. But of course governments all over the world have their own ways. In this context taxing of India's first electric car "Reva" at par with other cars seems unjust.

Check the above link. Things are maybe not as straight and simple as they seem.

Ahh, but there is hope too, check the link below.

Happy weekend.

Monday, October 22, 2007

Going Green

I am sure this will not be the first post on the topic of environment friendly manufacturing. The Sri Lanka Sunday Times has reported that the worlds first clean fabric manufacturing zone (MAS Fabric Park) has opened in Sri Lanka. They plan to recycle most of the effluents, generate bio gas, compost (fertiliser) and all. Look at the link below.

A question is if such examples are mere blips in the otherwise "dirty" world of manufacturing. I strongly believe that there is no question on the need of clean technologies. Sustaining business on a long term needs clean policies.

At some level it is all a question of economics. Water is very cheap, so there is no incentive for companies to recycle. Air is free, so again, clean technologies are not really a priority. What should the governments do? This question can be a wasteful intellectual discussion and would probably have no end. A better question is what we in business should do.

All new facilities set up anywhere must be environmentally friendly. Yes, strong anti pollution legislations may not happen in the near future. But, one bout of acid rain can change all that. The recent Nobel peace prize to Al Gore has also made it difficult for governments to ignore the issue. Businesses can expect strong pressures for clean technologies in a few years. Rather than have facilities that are rendered redundant, it would be smart to start the plans from today.

Here's one more link

Kia Motors is planning mass production of its new "green"vehicle.

Thursday, October 18, 2007

One supplier?

On July 16th 2007, an earthquake struck Japan. Riken, a company making piston rings for almost all Japanese auto companies had suffered massive damage. Most automakers were forced to slow down their output. The article below highlights the damage.

More important were the questions that ere raised about the Single vendor concept of JIT. In this era where disasters are not as rare as they were earlier, would this strategy of single vendors work out? A damage to one vendor can halt the entire industry.

The article below takes a much more pragmatic view of the event.

Toyota and Honda had deployed their engineers to help Riken back on its feet. This kind of cooperation in commercial relationship is not something that we here often. The single vendor concept was forcing them to work as partners.

And at the end of the day, I believe that its almost impossible to plan for all disasters. The buffers, if created, to mitigate the impact of all possible disasters might turn out to be costlier than the disasters themselves!!

I feel JIT system will not be changed much because of this damage. Maybe one more line would be added in the formal partnership relationships that would talk about disaster management. Lets see what happens, till then, Long live JIT...

Monday, October 15, 2007

soft suicide

Have a look at the article in Times of India,

Wow, 20 new car models models in 2008. A rough assumption: 20 could be the number of new vehicles introduced by all vehicle companies in India combined from 1950 to 1975.

All said and done, I am not sure if our companies are ready for so many models. A thing to note here is that we are talking of 20 models and that may mean about 300 variants (colour, air conditioning, etc).

Most Indian plants, including lines of Suzuki, Hyundai and Tata Motors have been set up to mass produce a few models / variants. Most of them are setting up new plants and I think these new facilities will be tuned for mass customisation. So, till this time the new facilities come online, producing multiple variants from the old facilities is going to be taxing.

It is impossible for automobile companies to not introduce new models and yet get the necessary sales. It is also similarly very expensive for Indian auto companies to produce multiple variants from existing facilities. So the companies are introducing new models and hoping that the new facilities come up soon.

It is a catch 22 situation. Though it seems that the new facilities will come up in a year and two and that this is going to be a short term challenge, I think otherwise. The volumes in India are much lower than volumes in other countries. The specific challenge here is providing all the models / variants at much lower volume.

The good part is that I am in academics with zero investment in automobile equity. I can wait and watch, and maybe a year later write a few more lines. Right now, all I can say that it is going to be an interesting and thrilling journey.