Channel reels under duty cut

Hyderabad is seeing an 80 per cent drop in the sales. This has been the
immediate impact of mini budget and the following waiv-ing of excise duty on
hardware components earlier this month.

According to KVR Menon, President, Twin-Cities Compu-ter Dealers’
Association (TC-CDA) in Hyderabad market alone the collective stock is nothing
less than Rs 15 crore if you take just five to eight big dealers. The retailers,
particu-larly those, who hold stocks over Rs 1 crore are reeling under the
impact. Ready to liquidate fast and at the best possible price there are no
takers.

"Even the corporates have postponed their purchase," said T Kishan
of Kishan Trading Company and the walk-in customers after having a good look at
everything want to know when can they pick up the purchase on the new price, he
added, emphasizing that more the time taken to liqui-date the stocks higher will
be the losses.

In the ordinary circumstan-ces, channel partners plan their stocks keeping
the February budget in mind but this is different and beyond anybody’s
calculations. While channel partners saddled with stocks are crying hoarse
distributors are not lagging far behind–even when everybody has welcomed the
drastic reduction in the custom and excise duty.

There is no denying the move will expand the market but only in the long run.
The immediate future remains unsorted. The question plaguing the channel
partners is: ‘With wafer thin margins of one-two per cent, how can one expect
the dealers to absorb the loss?’

Soon after the mini budget was announced, TCCDA called an emergency meeting
to take stock of the situation and the result is the deadlock between dealers
and distributors.

Distributors have refused to absorb any loss from the stocks already sold
unless their principals pitch in. "Our plight is much worse. Who is
respon-sible for the stocks lying in our warehouses?" questioned a vexed
Venkata Subramanyam, Branch Manager, Redington (India) Ltd.

The representations of channel partners to distri-butors have evoked little
response.

"They are trying to wash off their hands from the stocks lying with
dealers," said Menon who has advised the dealers who are facing
unmanageable losses, to stop payments to the distributors for the stock bought
20 days before the government announcements.

The vendors have been slow to react and though some have announced a certain
percen-tage cut from some items there has been no sign of anything being
actually passed down to the market yet.

The further waiving of excise duty from hardware compo-nents took the
importers also in the net of woes. Now that just about anybody can import who
will come to us and the loss on the stock on which tax has been paid will just
have to absorbed, they voiced stating that not only immediate future is
difficult to negotiate and even in the future the business model needs a change.

Nandita Singh

Hyderabad (CyberMedia News Service)