PC companies not keen on passing 2% reduction in excise duty to customers

Written by P P Thimmaya | Bangalore | Updated: Feb 19 2014, 21:19pm hrs
PC Industry IndiaAcer India says the company is not laying too much stress on the 2% cut. (AP)
The PC industry in India is in no hurry to pass the benefit of 2% cut in excise duty as proposed in the Union interim budget as the overall market sentiment still remains subdued with challenges of low consumer demand as well as regulatory hassles.

The budget on Monday had proposed reduction of excise duty on all goods falling under chapters 84 and 85, from 12% to 10%. Speaking to FE, Acer India chief marketing officer S Rajendran said, We are not laying too much stress on the 2% cut as it is not going to bump up demand in any big way and the next few months are going to be uncertain. However, he added that benefit to the consumer could get passed on in four to six weeks depending on the inventory level each player holds.

The year 2013 has not been good for the Indian PC industry, which had to deal with the volatile foreign exchange market spiralling costs, coupled with bureaucratic delay in getting Bureau of Indian Standards (BIS) certification, a new regulation put in by the government.

According to IDC, the overall India PC shipments for CY2013 stood at 11.5 million units i.e. year-on-year growth of 4.8% over CY 2013. The overall market improved marginally on account of buying across different state governments as part of their free laptop distribution spree.

The overall consumer PC market recorded 4.8 million units in CY2013, a YoY drop of 7.4% over CY2012. In the commercial segment, PC sales hit a high of 6.7 million units in CY2013 with YoY growth of 15.8% but this was driven largely by various governments programme of free distribution of laptops.

Manufacturers Association of Information Technology executive director Anwar Shirpurwala said the 2% reduction in duty is a good signal for the industry but much cannot be read into it as all the players were absorbing costs in 2013. Any price reduction will probably balance out the costs incurred by the industry, he added. The PC market in 2013 had to absorb higher inputs due to volatile forex market and many players effected a 6-8% hike in prices. However, the biggest bugbear for the PC industry has been the government order on compulsory certification from BIS.