Durables grow 12% in 2007 despite tax axe

Written by Mona Mehta | Mumbai, Dec 30 | Updated: Dec 31 2007, 05:34am hrs
The Rs 25,000 crore consumer durables sector has registered a double digit growth (12%) in 2007, despite an inverted customs duty structure and high excise duty on white goods. The industry body, Consumer Electronics and Television Manufacturers Association (CETMA) believes that the central government would be receptive this year in eradicating certain anomalies. This sector could then further grow at the rate of 20% in 2008-09.

The year 2007 witnessed liquid crystal display (LCD) TVs, split air conditioners (ACs) and microwave ovens (MOs) contributing maximum to the 12% growth. Although the potential of these categories to grow is quite huge, the penetration levels are low. CETMA feels that unfortunately, the government policies for the growth is not conducive. On the one side, the government imposes over 35% tax on consumer electronics (CEs) goods, whereas, on the other hand, tax exemptions are given to manufacturers in Uttaranchal and Himachal Pradesh. This leads to segmentation of capacities where there are logistics and quality issues.

CETMA has pleaded to the government to reduce the central sales tax from 5% to 2% apart from imposing similar state VAT on IT products and CEs. This is to have prices of CEs at par with IT products while bringing in IT convergence. For example, 4% VAT is currently imposed on LCD monitors, whereas, on tuner LCD, it is 12.5%. This differentiation makes the products expensive. Besides, the durables industry, according to a FICCI survey, has demanded granting 40% abatement on MRP-based excise duty on CTVs and ACs from the existing 35% and 30% respectively.

According to ORG, as on October 2007, Samsung leads the LCD TV market with a 45.7% share. In flat TVs, Samsung holds the number two position with 22% market share and number three position in refrigerators with 16.7% share, and, 22.6% share in frost-free (FF) refrigerators, compared to LG Electronics India which leads the market with 23.3% share followed by Whirlpool. By December-end 2007, Samsung hopes to hold number two position in FF refrigerators market. Whirlpool is growing at over 35% in frost-free refrigerators, 10% in direct cool refrigerators and 20% in washing machines.

With the modern CD retailing formats gaining momentum in Indian and contributing 6% to 7% to the overall durables industry, retail majors are expanding their stores with premium and value stores formats.

Home Solutions Retail (I) Ltd, part of the Future Group, plans to expand its e-Zone (premium CDs retail store) from 26 to 100 apart from Electronics Bazaar (its value durables retail store) from 65 to 250 stores in the next 24 months in India, at an investment of Rs 500 crore.

While Reliance Retail plans to open 10 specialty stores, Tata Sons Infiniti Retail-owned Croma stores is opening 40 Croma stores by the next financial year. F ollowing the acquisition of Planet M by NEXT, the consumer electronics retailing arm of Videocon Industries, for Rs 200 crore, Hyundai Electronics and Electrolux Kelvinator are charting out new plans to set up Hyundai and Electrolux branded high-end shop-in-shops within Planet M stores in 2008.