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Sinha has the hardware sector frowning

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DQW Bureau
New Update

Though the tech sector couldn't have asked for more in the budget, the hardware sector has been taken for a ride this time. Industry has been quite disappointed with the way Finance Minister has given it a raw deal.

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Without any major changes in either the excise duty or customs duty structures, the Indian hardware industry seems to be solely dependent on increased IT spending from the government. The irony here is that Pramod Mahajan, the IT Minister, had announced year 2001 as the year of hardware.

There has been absolutely no change in special additional duty (SAD) and excise duty. The abolition of the 10 percent surcharge on customs duty is not expected to have a major impact on prices of hardware products in the country. "The market growth will not be price-cut led as there will be only a marginal drop in prices of servers and other fully-imported high end IT products. At best the prices would go down by one percent," said Vinnie Mehta, Director,

MAIT.

The industry has been asking to bring down the duty on imported parts and components and the items of dual usage to nil, which has not been considered at all by the FM. "The hardware industry has been looking forward to the rationalization of tariff with a reduction in excise duty to eight percent from the existing 16 percent and abolition of the four percent SAD but it wasn't taken care of," said Balu Doraisamy, MD, Compaq Computer (India) Pvt Ltd.

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Industry's expectation of the reduction in excise duty from 16 to eight percent on computers went unheeded. "Nothing has changed for the hardware sector. It continues to languish. Had the FM increased the custom duty on the finished goods, we (manufacturers) would have been much happier," said Somesh Sinha, Director, Proview Electronics Ltd.

Manoj Khanna, Secretary, Computer Media Dealers Association (CMDA), felt that the budget will have a very negative

impact on resellers since they do not get much margins. "Two percent reduction in surcharge does not help in reducing the MRP for IT products." He thinks that the budget aims high to please WTOs and other international organizations as the funds flow from these organizations only. According to him, giving a long term beneficiary budget currently does not make any sense since the industry is not prepared for it today.

Agreed JP Modi, Director, Modi Peripherals Pvt Ltd, "The budget can result in an increase in the prices by about 0.5 percent because of the import tax imposed on MRP of each product. It has been the absence of a strong lobby for the hardware sector in the financial ministry that has resulted in the segment getting no sops from the budget."

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Industry, apparently, has also been complaining about the ambiguity regarding the Counter Vailing Duty (CVD) that has been imposed on the MRP of the finished products, which might result in an increase in prices by one percent. "Confusion still remains for certain components, which are termed as computer parts and not finished products e.g. keyboard and floppy disk. So even when the surcharges has been lifted, there would not be much effect on the prices," elaborated Harsh Vij, MD, SD Computers Ltd.

The hardware industry is now betting on increased IT spending by the government on the lack of any reduction in excise duty, and is now waiting for the EXIM policy, which may help domestic manufacturing by reducing duties on some components.

"The hardware industry is very hopeful that the government will address the issues of ITA-WTO through the EXIM policy by setting up SEZs for hardware and modifications in EHTP. These schemes permit import of components--IT and non-IT--at nil rate of customs duty. However, full rate of customs duty is paid on sales of finished products to domestic market. This will be the most feasible solution for providing a boost to the hardware manufacturing in India," concluded

Mehta.

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