The Hindu Business Line : Imported PCs may cost less than assembled ones

Even as MAIT continues parleys with officials of IT Department, it is learnt that removal of CVD on components and inputs may prove to be difficult as some of these are dual usage items.

New Delhi/Bangalore , July 11

THE Finance Minister, Mr P. Chidambaram's decision to exempt personal computers (PCs) from excise duty could make imported computers significantly cheaper, making it more attractive for companies to import a complete unit than have the same assembled or manufactured in India after importing components and inputs.

Industry sources said that the price of an imported computer could be about 8 per cent lower than its locally manufactured version.

At present, Dell is a prominent player that imports computers for selling them in Indian marketplace, while other players including HP and IBM import components and inputs and assemble them here. Domestic manufacturers such as HCL and Zenith, too, import components and inputs. "The fully finished PCs are cheaper to import in the present context as compared to the locally manufactured ones because of the anomaly arising due to the 16 per cent Countervailing Duty (CVD) on the key components which go into a PC. "

Acer estimates that fully imported PCs could be cheaper by as much as 2.5-3 per cent," Mr S. Rajendran, General Manager, Marketing, Acer India, said.

The industry says that the Budget announcement fully exempts PCs from excise or CVD, but leaves the CVD on components and inputs like monitors, keyboards and mouse unchanged at 16 per cent. PC players get tax benefit, which is the difference between the duty paid on importing the items and excise duty. In a case where import of components and inputs continue to attract CVD, the advantage is taken away, they point out.

This, in turn, has led to a situation detrimental to PC manufacturing in the country, they say.

According to Manufacturers Association for Information Technology (MAIT), as much as 90 per cent of the market comprises PCs that are either assembled or manufactured in India, while the balance 10 per cent is the imported ones. The industry warns that if the situation is not rectified, it would encourage MNC players to shelve assembling operations and start importing the PCs, in effect reversing the manufactured-to-imported PC ratio. The biggest loser would be the Indian players.

The hardware companies are, however, hopeful of a resolution. Asked whether Acer would prefer to import rather than assemble here, Mr Rajendran said, "We are watching the situation... .We would like Government to set right the anomaly by removing the CVD on components and are optimistic that by middle of next week some correction would be effected as MAIT has already taken up the issue with the Government."

The industry is demanding that the CVD on all components, as well as the inputs that go into the components should be brought down to zero. "This has already started happening, as players have orders pending which they cannot ship" sources said.

However, removal of CVD on components and inputs may prove to be difficult as some of the se are dual usage items.

As MAIT continues hectic parleys with officials of IT Department, major players including HCL and HP are still unwilling to talk about the issue.

Wipro Infotech, however, feels that although the Budget announcements have reduced the price differential between imported PC and locally manufactured PC to certain extent, imported computers will still be expensive compared to their locally manufactured counterparts.

"Imported PCs will still be expensive compared to the locally manufactured ones as the cost of logistics, transportation, distribution, service charges still remain. The removal of 8 per cent excise will not have any significant impact on the prices of Wipro PCs," Mr Anil K. Jain, General Manager - PC business, Wipro Infotech said.

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