The Hindu Business Line : …while durables makers get set to pass on excise cut benefits

It is perhaps the right time for consumers planning to buy durables and appliances to go ahead with their purchases as all durable majors are likely to effect a 1-4 per cent cut in prices.

Backed by a four per cent cut in excise duty from 14 per cent to 10 per cent, the consumer durables industry said it is looking at passing on the benefits to the consumers.

Boost to demand

Industry players say the excise cut will give a boost to the sagging consumer demand besides bringing down the price differential in the grey market in certain product categories.

“Even though in the durables and appliance industry, most products are manufactured in excise-free zones, the excise cut is positive. Though it is difficult to put an estimate on the benefit to the industry, the move will certainly have a psychological impact on consumer sentiments. We are assessing how much of the benefit can be passed on to the consumer,” Mr Kamal Nandi, Vice-President, Sales and Marketing, Godrej and Boyce Appliances, said.

Currently, most products such as television, air conditioners, DVD players and televisions are manufactured out of excise-free zones.

Executives at LG India, Haier and Samsung India too have similar views. The LG Electronics India Vice-President, Sales and Marketing, Mr V. Ramachandran, said, “High-end products such as LCD and plasma TVs, refrigerators and washing machines will see a reduction in prices by around 1.6 per cent.”

Mr George Menezes, COO, Godrej Appliances, affirms that the excise cut benefits will be passed on to the consumer. “Being a discretionary spend, durables, as a category, has been reeling under recessionary pressures and this excise benefit has given us a respite. There will be an almost equivalent drop in the market operating price or the price at which the trade sells to the consumer,” he said.

The Consumer Electronics and Appliances Manufacturers Association Secretary-General, Mr Suresh Khanna, said, “The industry has been witnessing sluggishness post-Diwali and some contract manufacturers had to cut down on production. Rupee depreciation by about 25-30 per cent too has affected profitability. The cut in CST will boost demand and manufacturers are likely to pass on a two to five per cent cut in prices to the consumers.”

Mr Francis Xavier, Managing Director of market research company, Francis Kanoi Marketing Planning Services, said, “Input prices like steel too may witness a dip following the excise cut.”

Direct-to-home operators such as Dish TV and Tata Sky welcomed the reduction in CenVAT. “It will help contain the spiralling cost of the set- top box, especially for the DTH industry. This will have an impact on the capital expansion plans of the sector and will improve bottomlines,” said Mr Jawahar Goel, Managing Director, Dish TV.

However, the benefits may not be passed on to the consumers.

“We are currently in the middle of price discounting consumers; we will not be able to pass on the benefits. We welcome the change, but as an industry we are already overburdened by taxes,” said Mr Vikram Kaushik, Managing Director and CEO, Tata Sky.

More Stories on : Outlook | Consumer Electronics | Excise and Customs

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