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
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
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
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.