Financial Daily from THE HINDU group of publications
Wednesday, Sep 29, 2004
Industry & Economy
`Thai trade pact no threat to CTV sector'
New Delhi , Sept. 28
DESPITE the Thailand-India free trade agreement (FTA) in place, the domestic colour television (CTV) industry need not fear any immediate threat due to imports from Thailand, say industry insiders. Even multinational companies in India that have large capacities in Thailand do not seem to be turning to Thai imports just yet. However, after March 2005 imports may become a lucrative alternative.
From September 1, the customs duty on imports of CTVs and colour picture tubes (CPTs) from Thailand has been slashed to 12.5 per cent from the current rate of 20 per cent.
And though, on the face of it, Thai manufacturers enjoy certain cost advantages over their Indian counterparts, imported CTVs will have to bear additional costs of customs duty, freight, insurance, and warehousing.
"Thus, even at a duty rate of 12.5 per cent, imports will lose their sheen, as importers will lose the cost advantage," say industry analysts. This would make the import threat from Thailand negligible till March 2005, though after this period competition will begin unbarred, with customs duty slashed further to 6.25 per cent and to zero from September 1, 2006, analysts pointed out.
"To remain competitive, local manufacturers will have to lower manufacturing costs and rely on duty cuts on inputs in the forthcoming budget," a CRIS INFAC report states.
Most MNCs such as LG, Samsung, Sony, Panasonic, and Sharp are present in India and have capacities in Thailand, then why would they not import from there? A close study reveals that in the short term, key MNCs are not too keen on importing from Thailand.
"In the short term, LG and Samsung, accounting for nearly 40 per cent of the market, do not plan to import CTVs from Thailand. In fact, they have already stepped up their local production activities to meet the expected increase in demand during October and December 2004-05, on account of festival season," the report pointed out.
It further states that in addition to stepping up production, key players already have significant capacities, around 13 million units in 2003-04 in India.
"Imports from Thailand would lead to idle capacities in India, therefore imports would not work in the interest of most CTV players," analysts argue.
Regarding the impact of CPT imports from Thailand on domestic players, analysts feel that the impact will be negligible in the short term. Indian CPTs are globally competitive, with exports worth 1.5 million units in 2003-04 and expectations of exports of around 3 million units in 2004-05. "This indicates the global acceptability of the product and the increasing efficiency of domestic CPT players," according to the report.
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