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Corporate - Interview

`VAT needed to make India a single market'

Richa Mishra

Mr Rajeev Karwal, CETMA President-elect

NEW DELHI, Oct. 20

THE Consumer Electronics and TV Manufacturers Association (CETMA) is keen to better the performance of an otherwise unpredictable consumer electronics industry.

Mr Rajeev Karwal, the winner of CII's Young Manager's award this year, will don the mantle of CETMA President for the third consecutive year at the 23rd annual general meeting (AGM) of the body on October 24. In an informal chat with Business Line, he deliberates upon what would be the most `VATable preposition for the industry.'

Excerpts from the interview:

What are the major issues concerning the industry at present?

The major issues where the Government's attention is required include reduction of customs duty on colour picture tube (CPT) as well as high-technology products like set-top boxes, DVDs, projection TVs, plasma TVs, digital cameras and mounted populated PCBs for all video and audio products.

For these high-technology products, currently, the market size is small. The indigenous manufacturing is not viable due to very low volumes. The prices of these products are very high due to high rate of customs duty, thereby further restricting the market size.

One issue that is affecting the growth of the industry is the implementation of `value added tax' by the State Governments. It is very surprising that while, on one hand, we are talking about globalisation, on the other hand, we are fragmenting the Indian market by all kinds of barriers, that is, by levying entry tax and creating check posts.

This is definitely not conducive to increasing the efficiency of the system. We are firmly of the opinion that the following tax reforms need to be carried out on urgent basis - implementation of VAT, abolition of CST - for free movement of goods throughout the country by providing the whole of India as a single market.

Apart from these, exemption from excise duty on black and white TV sets and analogue audio system, and air-conditioners are also some of the issues that need immediate attention.

What are the issues where the industry needs to pay attention to?

There are certain issues where the industry needs to act. We have done well by improving supply chain management, leading to cost reduction. However, the industry needs to pay due attention to the following areas - introduction of new products such as DVD players and DVDs and set-top boxes at affordable prices, as well as pay more attention to research and development.

Now that you have been re-elected as the President of CETMA, what are the initiatives that you propose to take?

The association has planned its task for the next year. The priority areas for 2002-03 will be to liaise with the Government on hardware policy, VAT on black & white TV and audio, conditional access system (CAS), direct-to-home (DTH) and digital terrestrial transmission (DTT) standards and legislation.

Steps are also on to install, initiate and consolidate forums for Code of Conduct Committee, Consumer Grievance Cell, Purchase Committee, and Export Committee.

Apart from these, various top-level management team meetings and seminars will also be organised.

The car audio and stereo industry has been suffering because of the grey market. What are the measures taken by the industry association in curbing this problem?

The parallel market in the car audio segment and audio/video segment is certainly a problem area, particularly car audio systems. The problem is more acute for car audio because the tax element is close to 45-50 per cent and it is much easier to smuggle the product because of its small size and weight. I admit that we had not paid due attention to this segment, which has high growth potential. We hope to work on the growth of this sector this year.

You have been talking about involving the white goods players also in CETMA, but till now mostly brown goods players have been associated with CETMA. What are the initiatives taken by you on this?

Yes, we are keen to involve the white goods players in CETMA as manufacturers, distributors, retailers and consumer finance agencies are same. We have been trying to emphasise on all white goods manufacturers that this sector has not been given due attention by the policy-makers and its role in the Indian economy has not been realised. We would, therefore, continue to strive to have the white goods manufacturers on CETMA platform.

How do you foresee the year for the industry? What are the expectations from the different segments?

We are very optimistic about the growth in this sector. This year, we expect growth of about 25 per cent in the CTV segment, about 30 per cent growth in the video segment, almost 10 per cent in audio segment and refrigerators. We expect more than 20 per cent growth in air-conditioners and about five per cent growth in washing machines.

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