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Another eventful year has passed by and I am happy to share my thoughts with you yet again on our performance and prospects through this annual report. However, before I proceed further, I would like to express my heartfelt grief at the unfortunate natural calamity in Uttarakhand. Let us take a moment to remember those who have lost their lives or have been impacted by this tragedy.
Last year, I had communicated to you the difficult economic conditions that prevailed in 2011–12. The economy had substantially slowed down; there was high inflation; interest rates were adversely affecting demand; rise in petrol prices was unprecedented, while the difference with diesel prices had reached a level that was resulting in a massive swing away from petrol to diesel cars. I have to regretfully report that 2012–13 was even a worse year for the economy, and for the manufacturing sector. GDP growth that had fallen to 6.2 per cent in 2011–12, declined further to 5 per cent in 2012–13. The manufacturing sector's growth decreased from 2.7 per cent to 1.9 per cent. The current account deficit for the year was 4.8 per cent, as against 4.2 per cent in the previous year. The dollar fell from Rs. 51 on 31st March 2012 to Rs. 54 on 31st March 2013. Consumer sentiment, which plays a significant role in influencing decisions to buy cars, had become even more negative during the year.
And then there was a silver lining. The fiscal deficit was controlled at 5.2 per cent. A decision was taken that diesel prices would be increased by about Rs. 0.50 per month, and the under–recovery on this fuel would end in about 18 months or so. The gap between petrol and diesel prices has narrowed from Rs. 25 in 2012–13 to Rs. 13 presently. To reduce the outgo on subsidies, a scheme of direct transfer is being gradually introduced. However, results in terms of better sentiment, or higher investments, or rising consumer demand for cars are yet to be seen.
The general adverse operating environment was not the only handicap facing us. In July 2012, a section of the workers indulged in a blatantly criminal activity that led to the death of a valued senior colleague. There was no cause for the workers to go on a violent rampage, and there was no warning or notice of any brewing dissatisfaction. In fact, the workers' demands raised in 2011 had been all addressed and resolved. A lock out had to be declared, as the Company decided that the safety and welfare of our employees had to be given overriding priority. The management and supervisors of Manesar showed great resilience and courage, and work resumed after a month when adequate safety arrangements had been made. Production gradually increased to normal levels.
Your Company has shown that its employees have great resilience and can work with great resolve to overcome the most difficult situations. During the year, sales volumes increased by 3.3 per cent, while profits increased from Rs. 1,635 crores to Rs. 2,392 crores. Our market share also went up from 38.3 per cent to 39.1 per cent. I am sure all of you will join me in saluting the workers, supervisors and management who made this happen.
During 2012–13, following the increase in diesel prices and narrowing of the gap with petrol, the demand for diesel vehicles also started to fall. During the first three months of this year, the industry recorded a fall of 10.4 per cent in passenger cars, while utility vehicles' demand grew by 5.2 per cent.
We are convinced that your Company will remain the market leader and its products will be the choice of most customers. The first four best selling cars in India are MSIL products. We are determined to keep introducing products that will ensure our preeminent position. Consistent with that objective, we are continuing with all our planned investments to increase production capacity and introduce new products from time to time. Work on the Gujarat site has commenced and we expect to start production by the end of 2015–16. The Manesar 3rd line will be commissioned soon, as also phase 1 of the diesel engine line in Gurgaon. The R&D centre continues to develop. We are also investing in strengthening our sales and service facilities all over the country. The capital investment proposed this year is approximately Rs. 3,500 crores. And this will only increase as we go ahead.
Suzuki Japan has decided that India will now be responsible for the export markets of Africa, the Middle East and our neighbouring countries. We have to ensure adequate sales and marketing arrangements in these countries, with the help of Japan. We also have to determine the products to be manufactured for these markets and, if necessary, establish assembly plants overseas. This decision will greatly help the growth of our exports.
We are continuing with our efforts to reduce costs, and localise inner parts. Quality improvement has also to be a priority. We believe that in the difficult times ahead, the Company has to make greater efforts than ever before in these directions.
We are now in the election year, and traditionally, the governments in power are reluctant to introduce unpopular measures at this time. The UPA Government, aware of the way manufacturing activity is progressing, the current account deficit and the weakness of the Rupee, is promising several reforms. The Prime Minister is also pushing for the implementation of infrastructure projects under the PPP model. If all these happen, I believe there will be a change in sentiment, and car buying may again pick up. The festive season is also not far away. We are hoping that with steps undertaken by the government, and our own efforts, we will lead a resurgence in the automobile industry. After all, the leader has that responsibility.
We all have to be optimists. Along with that, we have to work with determination, resolve and resilience, and nobody can stop us from being successful. All those who proudly say that they are Maruti Suzuki employees believe in this, and on their behalf, I can assure you that we will overcome all obstacles and ensure that the Indian automobile industry has a respected position in the world.
R. C. Bhargava