The Hindu Business Line : Durables industry has little to cheer

New Delhi, Feb 29 Consumers can expect a marginal or no cut in the electronic and durables segment despite a two per cent reduction in the Central Value-Added Tax (Cenvat). The industry has very little to cheer about as the duty cut will not offset the inflationary costs of raw material prices, namely steel.

In his Budget announcement, the Finance Minister, Mr P. Chidambaram reduced the CENVAT to 14 per cent (from 16 per cent).

The duty cut is aimed at dovetailing the manufacturing sector’s growth in India and driving consumption. No change, however, has been effected in the peak rate of customs duty in the Budget.

“Our goal is to take the manufacturing rate to double digits. The manufacturing sector is the backbone of any economy. It is consumption that drives production and it is production that drives consumption,” Mr Chidamabaram said.

While the consumer durables industry was expecting a tax rationalisation from Budget 2008, there is much still desired from the Government.

Consumer demand has been buoyant after witnessing a slowdown in some product categories, like appliances in 2006.

Mr Venugopal Dhoot, Chairman, Videocon Industries, said the Government’s proposal to raise the income-tax level will increase the consumer class, which is triggering the growth.

“This is a positive trend for the industry and we hope that durables industry will touch double digit growth”.

Industry body Consumer Electronics and Appliances Manufacturers Association (CEAMA) had demanded an excise duty cut to 8 per cent, arguing that such a cut would have a nominal impact on tax collections as a large part of production takes place in excise-exempt locations.

Mr Pranay Dhabhai, Whole Time Director and COO, Haier Appliances (India) said, “The duty cut would lead to a marginal reduction in the product cost. However, in the past few months, the raw material costs have gone up by about 10 per cent and we were contemplating increasing our prices in the market. But this cut in excise duty will surely reduce the planned price increase marginally, and as a consequence, the customer will stand to benefit.”

According to Mr Kamal Nandi, Vice-President (Sales and Marketing) Godrej and Boyce, the duty cut will not offset the rising prices of raw materials, hence even a price reduction is very unlikely.

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