IT products get pricey

The Central Board of Excise and Custom's move of implementing excise on MRP

of all IT products on January 25, has left the IT industry in a state of disquit.

While few vendors have already increased the prices of their products others are

in a wait and watch mode. According to sources from the industry, Logitech has

hiked the prices of their products by five to six percent. HP on the other hand

already increased its prices in January to eight percent. Intex increased its

prices this month to eight percent. However, vendors like Canon, Zenith, Lenovo

and Sahara are waiting for the government to peep into the situation and are

currently in discussion with senior managers in the industry before they take

their step.

Mixed reactions



Talking about the hike, Rajnesh Sinha, Business Manager-Peripherals, Intex

said, “Earlier the duty was charged on the invoice but the government has

changed the model and will now be charging duty on the MRP of the product with a

rebate of 25 percent. This means that the margin between the dealer costing and

the MRP will decrease further. This high MRP will affect system integrators and

LFR the most while the dealers and the resellers' business will also be affected

to a considerable extent. In the process the end-consumers will get maximum

benefits.”

Clarifying further Sinha stated, “LFRs and dealers used to put the MRP of

products at a slightly higher price in order to earn their share of margins.

With the government implementing duty on MRP they will have to now lower the MRP

or else they end up paying more duty on the same. Thus customers are in an

advantageous position as they will get products at a reasonable price.

Intex has rationalized their price so that the channel does not get deeply

affected. While they have lowered the MRP of their high-end products to the tune

of 10 percent, in the lower segment the company has decreased it to 30 percent.

Subroto Biswas, Country Manager, Logitech India said, “We have tried our best

to hike the prices of Logitech products to a minimal level so that the channel

do not have to bear the brunt of the price rise. For our peripherals we have

hiked it in the range of five to six percent.”

Amit Kedia, MD of Delhi-based Sree Sagrmatha Distributors and owners of

Tech-Com brand stated that this step by the government would impact their

business to a large extent. “The channel already keeps cribbing about the margin

issues and this will decrease their margins further,” he added.

Puneet Datta, Senior Manager Marketing-Business Imaging Solutions, Canon

stated, “We are currently in the process of evaluating and don't want to

increase the prices immediately. The government is offering an abatement of 25

percnet as of now and we are aligning with senior managers in the industry and

CII to approach the government. With the budget round the corner the government

is not looking into the matter seriously. We want to explain to the government

officials that the move is not logical. We will hike the prices only after we

have reached a level of agreement with the government.”

Ashish Taneja Director of Bhopal-based Galaxy Company and dealers of zenith

products stated, “We haven't received any notification from Zenith as far as the

hike is concerned, as the company is currently in the process of monitoring the

situation and factoring the prices. This hike is hitting the importers both from

the excise front as well as owing to rupee appreciation.”

George Van Dan Merwe, COO, Sahara stated, “We are waiting for the budget to

be out and the moment it is out we will be hiking the prices of our notebooks in

the range of one to three precent. This hike will be higher for high-level

products and reasonable for the entry-level products.”

LFRs: Most affected



However, in this entire exercise, LFRs will be the major sufferers. Talking

about the same, Delhi-based sub distributor, Sunny Puri of Delhi-based Computer

Empire opined, “Till date it was FMCG products that were subjected to duty and

there was no definite rule for IT products. This hike will not affect the

dealers as much as LFRs as they (LFRS) were selling the products at unrealistic

prices.”

Ashwini Agarwal, Country Manager-IPG, HP said, “We increased the prices of

our products on January 12. This hike will affect LFRs the most.”

Stating the government's move as unjustified Subram Natrajan, Chief

Energizing Officer of Mumbai-based Sam7 Computers and Networks stated, “This is

an attempt to take money away from the IT industry. As it is the margins were so

low and this hike leaves us nowhere. The retail segment will be affected the

most as they used to sell it at an even higher price than the MRP.”