Financial Daily from THE HINDU group of publications
Thursday, Jul 15, 2004
Zenith sees only 2 pc cut in PC prices; cites excise anomaly
New Delhi , July 14
PC manufacturer Zenith had initially estimated a price drop of about 10 per cent for its computers following Budget announcement of a full excise exemption on PCs.
The fine print of the Union Budget has now made it clear to the company that price benefit to its consumers will be only two per cent unless the existing anomaly of full excise exemption on PC without a similar exemption in CVD on inputs is resolved.
"Due to the Budget anomaly our inputs costs remain the same while the excise duty has been fully exempted. If the anomaly is not removed the reduction in Zenith PC price will only be about two per cent," said Mr Raj Saraf, Chairman and Managing Director of Zenith.
Mr Saraf, who was in the Capital to attend a post-Budget meeting of hardware association MAIT, said that the industry has made representation to the Government on the issue and was hopeful of a favourable response.
"The Budget announcement initially made it seem as though the PC price will go down by 8-10 per cent, as we assumed that the removal of excise will mean a similar exemption on inputs and components. But that has not happened," Mr Saraf said.
"If this anomaly is removed, the price of Zenith PCs will come down by 10 per cent. If it is not removed and the current situation persists, then the reduction will be only two per cent," he said.
Mr Saraf also said that in the current situation, the imported PCs could be about six per cent cheaper than the ones manufactured in India.
"Sure, it hurts our competitive edge and effects business. But we are waiting and watching the situation, and hope a clarification will come in a week or 10 days."
The Finance Minister, Mr P. Chidambaram's Budget announcement of a full excise exemption on PCs had evoked a mixed reaction from IT hardware players such as with players like Zenith and HP saying that it would result in significant price drop of computers, even as others such as Wipro estimated a benefit of only two per cent.
The mood of the hardware industry had turned into dismay as the implication of a full excise exemption on PCs, without any change in CVD on inputs and components (such as motherboard, monitors, keyboard, mouse and speaker) sunk in.
The PC players get a tax credit, which is the difference between the duty paid on importing inputs and components and the excise levy.
In a case where the CVD on inputs and components remains at the same level while excise duty is exempted, the benefit is taken away.
The industry has been demanding that CVD be exempted on the entire value chain, including inputs and components, so that the desired result of the price reduction can be achieved, or reinstatement of the pre-Budget duty structure.
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