Industry reactions on the Budget

Hasan Abdul Kadhar, Director, CCS Infotech, one of the leading
manufacturers of PCs in Chennai

Nothing big for IT in this budget. Earlier, we, the manufacturers, have been
adjusting eight percent excise duty with 6.5 percent through MODVAT claim. So,
now, with this excise duty abolition, the net difference is just 1.5 percent,
which will be hardly few hundred rupees on a PC. Whether budget or not, the
competition is going to be the same and it is service and support that only
define the success of the players.

SK Hari Kumar, CEO, Logtech Systems, a leading player in
Thiruvananthapuram

I hail the abolition of excise duty system as a welcome move as it will save
us from all tedious and cumbersome procedures of maintaining records and papers
for all claims. It also frees us from excise duty hassles. Although, the excise
duty cut is going to offer only a discount of around Rs 400 on a PC, the
manufacturers should think it from the point of freeing from all the procedures
and hassles. With the zero duty regime coming in April 2005, India can become
like Singapore and Dubai where people come for tourism and shopping because of
low prices.

I Sadiq Batcha, Director, SSS Systems

I would like to call all this duty restructuring a mere gimmick than
reality. Taking this year's case, government says it is abolishing excise duty
of eight percent on PCs completely. However, one cannot take into account this
completely (eight percent duty cut) and pass it on to the customers because
normally excise duty is being adjusted with CVD through MODVAT process. Overall,
in value terms, the abolition of excise duty will bring a difference of only 1-2
percent on PC cost, which is very negligible with only a couple of hundred
rupees. Unless manufacturers reduce on cost, PC prices would not come down just
because of this duty gimmicks. Moreover, the abolition of excise duty system
will make unorganized assembling a more legal business now.

A Rakesh Jain, CEO, Supreme Computers

As usual we need to wait for sometime to really understand the finer aspects
of budget before we come to any conclusion. Presently, there are two different
news making rounds, with one report saying only excise duty is being abolished,
while the other report indicates duty on components also being cut.

Mere excise duty cut would not bring PC prices down since it
will have a marginal discount of only Rs 400 - 500 on a system. However, to make
PCs really cheaper the government should abolish CVD (Counter Veilance Duty),
which is presently 16 percent for most of the IT products, which will make the
net effect. Overall, PC prices are coming down every year and with zero duty
regime to set in by 2005, PCs will be an affordable commodity for all bringing
in knowledge and information revolution in the country.

Jitendra Kulkarni, CEO, Redington (India) Ltd

The abolition of excise duty will really help for the growth of branded PCs
in the market. There will be minimum drop of six percent in the branded PCs,
which will help for the shift of buyers from assembled to branded computers. The
exemption of inc-ome tax for salaried class below one lakh will increase the
disp-osable income among this group. Today over 1.5 crore tax payers fall within
this bracket and on an average the disposable income (saved on tax) of this
group will be around Rs 5000-8000. We can expect this disposable income to be
invested on PCs.

Gopal Srinivasan, Director, TVS Electronics

It is a positive move by the government to abolish / drop the excise duty
completely on PCs. It is a pro consumer, pro marketing, pro development move by
the government and we can expect 5-7 percent drop in PC prices due to this. This
will also increase the annual growth rate of PCs from present 34 percent to 45
percent. All the people oriented programs announced by the UPA government needs
IT for effective imple-mentation and speedy completion of projects. The Rs 750
crore government outlay on development and promotion of IT is a wel-come move.
Domestic manufa-cturing can only be compe-increased or decreased.

Sailesh Gumidelli, Presi-dent, Twin Cities Compu-ters
Dealers Association

Not many surprises or sho-cks for the people in the IT industry. But surely
the assem-bler market is going to take a paradigm shift. As the cost of the
branded systems comes down to say six percent to eight percent there can be an
improvement in the sales. And the meager reduction of the custom duties from 23
to 20 percent is not enough. We were looking out for an abso-lute lifting away
of custom duty, which can be brought into affect only in 2005. The increase in
service tax will not have an impact on the industry. Maintenance of systems is
essential and hence it's not going to affect the market in a larger way.

R Sridhar, Dealer and Secretary of the Karnataka Dealer
Association

It will benefit only the bran-ded players. The FDI increase will boost the
networking busi-ness. If the duty is reduced, it would mean that domestic co-mputer
manufacturers would lose out to multinational brands.

Most dealers and assem-blers in Bangalore feel that they have
been ignored in the budget. There also seems to be confusion in the community
whether the removal of excise duty holds good for individual components or only
branded whole PCs.