Grey still rules the RAM market in India 

The well-known economist E Shumacher said `Small is Beautiful', and when it

comes to importing illegally, RAM is small, beautiful and profitable too. Today

the parallel imports constitute a gigantic 80 percent share of the total RAM

market.

Sachin Jindal, Director, Bhartiya Electronics, said, "Parallel imports

is rather easy in RAM market due to the smallness and the value that it

carries." But, he differed on the issue of calling it parallel imports. He

said it is more of smuggling, brought to India through various illegal channels.

Thus, the parties involved evade taxes.

The same opinion was echoed by PK Jain, Director, SMC International. He said,

RAM being a very important component of the PC is much sought after in the grey

market. Apart from this reason, RAM is very price sensitive, which keeps on

changing, as much as thrice a day. Because of its value, it becomes the most

sought after product to be imported illegally.

However, the question now arises from where are these RAMs coming in.

According to Jain, Singapore and Hong Kong are the main countries from where the

product is smuggled. But, it is not such a smooth journey as it seems. The

process passes through three tiers, where margin is taken by each channel before

entering India via Nepal. According to Satish Sharma, Director, CASH, Chennai

has also come up as a port from where illegal imports enter India. The most

interesting thing to note here is that even after passing through various hands

the price of the product when it enters the grey market is still less than its

cost in the legally imported RAM market. Thus, making it more attractive to

buyers. Jindal added that Taiwan is also a place to buy RAMs from.

It is not just the locally made RAMs that one can find in the grey market,

but branded ones are also present. But, one thing to be noted here is that it is

not only the RAM market, which suffers from this menace. In a recent press

release, Sony announced its commitment to resolve the problem of the parallel

imports related issue to its partners, such commitments are also required in the

RAM market.

Grey marketing in RAM is flourishing because customers prefer to buy the

product from grey market, as they get the same product but at a much lower price

compared to buying it from the legal market. Jain pointed out that the main

customers buying from the grey market are the SIs and local assemblers.

Another reason that can be attributed to the sustenance of the grey market

are the duties levied on the hardware, which is 36 percent. Thus, giving the

channels in the grey market a neat margin, as they pay no duties.

"The grey market in RAM constitutes a huge 80 percent of the total

market," said Sharma. The same view is held by Jindal.

However, Jain's views differs. According to him, earlier the ratio was 80 to

90 percent which has now come down to 50 percent.

He said, "People have started preferring to buy from the legal market

because of the warrantee support, serviceability, which is not provided in the

grey market. If something happens, customer can always come back to us."

Jain is of the opinion that if some good assembly unit for RAMs comes up in

India, grey market will die a natural death as there would not be much

difference between the prices of the RAMs sold in the legal market and that of

the grey market.

However, Jindal was of the opinion that unless government takes some action

and starts some enforcement agency the grey market will continue to flourish as

it is. But he does see a ray of hope in WTO's report on custom duties under the

heading `Custom Duties Structure -- Finished equipment's, components and

component inputs' in which it has set up a deadline of 2005 for zero customs

duties on the components and equipment. As a result of which there will be no

scope of profit left in parallel imports and the grey market will eventually dry

up.

Grey RAM market has flourished in India for a long time, with the total

number of local assemblers increasing, it might be a long time before this grey

market fades away. Meanwhile, genuine dealers and distributors are trying their

best to fight this menace through education and value added services.

Karma Negi