The Hindu Business Line : Excise duty hike puts watch industry in a bind

Being a very price sensitive segment, none of the companies are revising prices of their products just yet, but admit that it would be difficult to do so in the long run with margins under pressure.

For instance, Maxima, for which the below Rs 500 segment contributes about 55 per cent of sales, would be absorbing the burden, at least for now. "The excise duty increase does put a considerable burden on margins. However, it is too early to make a decision on any revision of prices right now," Mr Manjot Purewal, Managing Partner, Maxima Watches said.

Titan too has decided not to revise prices on its Titan Sonata (which starts at about Rs 350) range in the immediate future.

Industry officials further point out that the excise increase may eventually provide a further impetus to the grey market. At present watches priced below Rs 500 account for about 75-80 per cent of volumes for the total domestic watch market. Out of this, more than 50 per cent are being sold in the unorganised/grey market.

"The earlier reduction of excise duty to eight per cent had helped to shrink the grey market. However, with this segment being a very price sensitive one, the market may again shift to grey following the excise duty hike. This segment works similar to that of mobile phones. The lesser the duties, the more the sales through the official channels," said Mr Yashovardhan Saboo, Managing Director, Kamla Dials and Devices Ltd.

Officials further fear that the excise hike may result in a greater inflow of price competitive Chinese watches in to the country through the smuggled route.

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