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Posts Tagged ‘Kolhapur

The luxury auto madness of Aurangabad and Kolhapur

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Aurangabad city's Shahganj area: the wide and clear avenues, spacious squares, well-regulated traffic and absence of pesky pedestrians and vendors make it a pleasurable drive for the privileged BMW/Mercedes owner.

Aurangabad and Kolhapur, both cities in the state of Maharashtra, western India, have begun an alarming new trend in conspicuous consumption which is extraordinary even by the profligate standards of India’s new urban rich. Groups of residents in both cities have banded together to set records for the number of luxury cars – BMW and Mercedes Benz – ordered in a single day!

In October 2010, a group of wealthy Aurangabad residents took delivery of 150 Mercedes Benz saloons, in a deal worth an estimated 650 million rupees for the auto brand and its regional dealer (based in the city of Pune, Maharashtra). Also in October 2010, a group of wealthy Kolhapur residents decided that if there is to be a mass purchase of luxury cars, their city should be second to none. In early December 2010, according to news reports, the group had swelled to 180 and they were aiming for 200, each of whom would place an order for a Mercedes Benz. Meanwhile, the wealthy residents of Aurangabad decided now to make a mass order of 101 BMW saloons (a deal worth an estimated 400 million rupees), which they expect to take delivery of in January 2011.

Aurangabad is a city of around 900,000 residents (2001 Census) while Kolhapur is home to around 500,000 residents (2001 Census). Until 15 years ago, both cities were centres of trade in agricultural produce, cotton and sugarcane being the respective dominant crops. The economic ‘liberalisation’ in India has clearly brought about the transformation whose effect we are seeing in the mass booking of luxury saloons. Why do these residents think their action is important?

Kolhapur city's Kasba Gate area: the wide and clear avenues, spacious squares, well-regulated traffic and absence of pesky pedestrians and vendors make it a pleasurable drive for the privileged BMW/Mercedes owner.

Sacheen Mulay is the president of the Aurangabad Chamber of Commerce and Industry and a Mercedes Benz owner. He is reported as saying that the group of car buyers wanted to change the image of Aurangabad as a backward, sleepy destination. “Buying a 150 Mercedes is not a joke,” Mulay insisted. “We wanted recognition in the world. Aurangabad is not a small place. We are potential buyers and there are very upcoming entrepreneurs in Aurangabad.” Reportage on the Aurangabad mass buyers also mentioned that a huge shopping mall that opened last month has quickly become popular with residents, who are asking for more luxury brands, a bowling alley, and a nightclub.

Anand Mane, president of the Kolhapur Chamber of Commerce, is the point person for his city’s group of mass luxury saloon buyers. “More than 180 people have already registered their names with us. After the models are displayed in the city, we expect more than 200 people to buy the car. This car is a status symbol and hence, the demand for the vehicle is higher compared to other cars,” said Mane. Kolhapur district has a number of sugar mills and industrial estates. The estimate is that the city already has a population of over 1o0 Mercedes Benz cars, but their owners have to send the vehicles to Pune to get them vehicles serviced. With the big order, Mercedes Benz has started building its first service station in Kolhapur.

If the wealthy Kolhapur residents reach their target of 200 for the Mercedes Benz mass purchase, that deal will be worth about 870 million rupees and together, the luxury auto-obsessed groups in Aurangabad and Kolhapur will have given the Pune-based dealers of Mercedes Benz and BMW business worth 1,920 million rupees. Who are the people who have made these purchase decisions in the name of collective status? Businessmen, young entrepreneurs, politicians, lawyers, doctors and other professionals, say the news reports. [That there is a powerful ‘status’ logic at work in these two cities has been touched upon in an earlier post on the subject of automobiles in India.]

The car-buying groups are using their business skills to pressure the dealers and banks to giving them concessional terms for their record-breaking purchases. “We are negotiating with the dealers to find out what incentives they can give us,” Kolhapur businessman Yogesh Kulkarni told news media. “An insurance company has promised to insure the car at 50% of the normal rate. Some banks are also ready to give loans at discounted interest rates.”

Mercedes Benz and BMW dealers are being asked for discounts of 10-20%, the groups are negotiating with the State Bank of India (a nationalised scheduled commercial bank) to get a loan for seven years (against the normal five years) at 7% interest (well under the 10-11% effective rural rate of inflation), and an insurance company is said to be offering motor insurance at a 50% discount.

“We want to show the world that Aurangabad is no more backward but ahead of metropolitan cities,” said Pankaj Agrawal, an Aurangabad businessman and one of the mass purchase group. What do Agrawal, Mulay and Mane consider as being “backward”? The news reports don’t tell us. We also don’t know how the expense of 1.9 billion rupees on 450 luxury automobiles is seen as a step out of “backwardness” and a step ahead of the metropolitan cities.

How do these purchases compare with living conditions in Maharashtra? Annual median household income in rural Maharashtra is 24,700 rupees (2005 data from the India Human Development Survey – this will have not in my view changed substantially given the debt shocks, agricultural stagnation and overall conditions of employment and from 2007 onwards) while in urban Maharashtra it is 64,600 rupees. Thus the total amount spent in this period of 2010-11 by the wealthy luxury auto-obsessed groups in Aurangabad and Kolhapur is equivalent to the combined annual incomes of 29,721 households in urban Maharashtra and to the combined annual incomes of 77,732 households in rural Maharashtra.

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Woodfuel in the Western Ghats

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Goatherds in Chikodi taluka, Belgaum district, Karnataka

Goatherds in Chikodi taluka, Belgaum district, Karnataka

The woodfuel-and-dungcakes energy mix for rural India is alive and well in the hills of Maharashtra’s Deccan. The indications are that a combination of factors is at work. There’s less income for smallholder farming households, those farming families which have earnings have seen their monthly household budgets squeezed by rising food prices, and energy costs at least the same or more. That’s why I’ve seen in November and December – when early mornings and nights are cool to chilly, and heating at home is needed – more evidence of woodfuel use.

If you ask the energy planners and econometricians, they’ll say that fuelwood markets are important and have a great influence on shaping demand. As a rule this is likely to be true, but what we’re seeing here has resulted from a variety of volatile conditions. Let’s look at some of the alternatives that rural households in the hills use. A cylinder of LPG (liquefied petroleum gas) costs about Rs 325 in a town in western Maharashtra (the 14.2 kg domestic cylinder). A sack of coal costs about Rs 300 to Rs 350 (20-25 kg) which will usually include the cost of transport (it’ll be carted along with other goods on the roof of an old jeep, in a tempo or lorry – state transport bus conductors are not partial to letting these sacks on board any more).

From the planners’ point of view, market conditions for wood are highly distorted due to government policies on fuel, energy and forests. That’s why discussing both demand and supply in the context of prices and market conditions is important, because in isolation the terms ‘demand’ and ‘supply’ for rural energy mean next to nothing.

It’s important too to a rural household that wood is a multi-use material. For instance, for eucalyptus, the thickest portion of the trunk can be used as timber, if the girth of the trunk, with bark, is more than 70 cm. Poles are used for scaffolding support and as roofing material. The dimensions of logs for use as poles are 3 to 6 metres in length, and 30 to 70 cm in girth (cut pieces of similar girth but shorter are used as pulpwood in paper mills). All smaller pieces, twigs, bark, and roots, which cannot be used elsewhere, are used as fuelwood. Thus there is no single wood market in a town or peri-urban settlement. I’ve found it safe to say that the set-up and behaviour of each market differs from others depending upon the range of species available, and the purposes for which each wood species can be put to use.

Hillside grasses, ghat in Kolhapur district, Maharashtra

Hillside grasses, ghat in Kolhapur district, Maharashtra

All that said, the main point here is that the price of fuelwood has risen in the hills of Maharashtra’s Deccan. A buyer will now pay Rs 60 for a ‘maund‘ of ‘jungli‘ wood and Rs 80 for a ‘maund‘ of babul wood. Now a ‘maund‘ is around 37 kg, so that makes a metric ton of ‘jungli‘ wood worth about Rs 1,620 (without complicating the matter with discounts for weight) and a metric ton of babul wood is worth around Rs 2,160. That’s a pretty steep annual growth rate because at the start of the 2000s – according to those who know about these things in Kolhapur, Satara and Pune – the price of a ton of ordinary wood was around Rs 1,300 and they also said that the price then was twice what it had been (around 700/ton) a decade earlier.

This is both worrying and curious. Worrying because it means that sources of energy among some sections of the rural population are defaulting to the woodfuel-dungcakes mix. Worrying also because it means that natural and protected forests, orchard and scrub are being scoured for woodfuel. Curious because we are in 2010 going to be less informed about the relative importance of the three major biofuels to rural households: has the animal population grown in the last decade? have the growing number of bio-gas plants installed during the last 15 years taken away from the dungcake source? have commercial crops reduced the available quantities of husk and straw (and what’s the effect on these as animal feed? We know a lot less than we think, but we do know what a ‘maund‘ of babul costs so that it can heat a hill household in winter.