A shopper's day out
Small cars, ice-creams, colas cheaper; not so umbrellas, glassware

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Our Bureau

New Delhi, Feb. 28

Consumers certainly have reason to cheer with this year's Union Budget. For they will now have to dish out less for small cars, ice-creams, colas, MP3 players, ready-to-eat food, footwear and textiles.

At the same time, duty changes in the Budget would result in costlier cigarettes, high-end electronic items and basic ones such as umbrellas and glassware.

In fact, with excise duty on small cars declining from 24 per cent to 16 per cent, Maruti, Hyundai and Tata Motors have announced that they will be effecting price cuts ranging from Rs 11,000 to Rs 25,000 on their vehicles.

While Hyundai is decreasing the price of its compact car, Santro, by Rs 23,000, Maruti has slashed prices of five of its models (Omni, Alto, WagonR, Zen and Maruti 800) by up to Rs 25,000.

Further, taking into account the reduction in peak rate of customs duty to 12.5 per cent, both Honda and General Motors are reducing prices of their sedans.

Honda has cut prices of the Honda City EXI and GXI by Rs 2,000, and City Vtec by Rs 10,000. The price of the Honda Accord has been reduced by Rs 15,000. General Motors has decided to drop prices of the Chevrolet Optra by up to Rs 20,000 following the drop in peak customs duty rate.

Ice cream prices are also set to decrease by 6-7 per cent with the excise duty being reduced to nil from 16 per cent. Processed meat/fish and ready-to-eat packaged food will also be cheaper, with excise for the former being done away with from 8 per cent, and for foods from 16 per cent to 8 per cent.

Gizmo freaks can rejoice with a double incentive for MP3 players.

While customs duty on MP3 players has been reduced from 15 per cent to 5 per cent, the excise duty has also been cut from 16 per cent to 8 per cent.

This would result in a substantial price decline. Prices of high-end products are, however, unlikely to come down despite the reduction in peak rate of customs duty to 12.5 per cent.

In fact, analysts say that prices of high-end products that are currently imported, such as LCD and plasma screens, certain refrigerator models and Notebooks are likely to go up on account of the 4 per cent countervailing duty imposition on all imports, which is more than the 2.5 per cent cut on peak customs duty.

(This article was published in the Business Line print edition dated March 1, 2006)
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