The Hindu Business Line : VAT uncertainty haunts consumer durables majors

Industry officials point out that not only has there been a slowdown in growth across the category, but major segments such as refrigerator and colour televisions (CTVs) have seen a dip in sales in the Feb-March 2005 period, as traders are wary to stock up in view of the uncertainty about the new tax regime.

For instance, as per the latest ORG MARG data, sales of refrigerators has dipped by 8.1 per cent (in volume terms) to 2,30,200 units during February 2005. In contrast, the segment grew by 8.4 per cent during the April-February period.

The dip in sales in March is estimated to be even more significant with industry officials expecting refrigerator sales to decline by at least 10 per cent in the month.

The CTV industry also did not have a smooth run during February with sales growing by 6.3 per cent (volume terms) and 1.7 per cent in value terms in February. The growth in the CTV industry (in volume terms) was a high 18.9 per cent during April-February. Further, the industry is estimated to see a dip in sales of about 10 per cent in March over the same month last year.

"Trade partners are not stocking up products as there is confusion on who will pay the differential tax once VAT comes in. However, we do expect the industry to bounce back in a couple of weeks after the implementation of VAT", Mr Anil Arora, Product Group Head - Refrigerators, LG Electronics India, said.

In addition, the upward movement in prices of durables (particularly refrigerators) since February has also deterred consumers from making purchases. In fact, major durables manufacturers have increased prices by about 10-12 per cent since February to offset the pressure from rising raw materials costs.

"There is also disinformation in the market over VAT, on whether it would increase or decrease end prices of consumer goods for the end consumer," an official from the Consumer Electronics and Television Manufacturers Association said.

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