A two-way street

It's a pre-emptive move by phone company Bharti Teletech. The company which makes Beetel brand phones is about to slash the price of its cordless models.

Why? To take on giant competitor Panasonic which is likely to benefit when the FTA with Thailand comes into force. Says Pawan Kapur, CEO, Bharti Teletech: "We reckon that the Panasonic cordless will be cheaper by Rs 150 because of duty cuts. So we also have to drop our prices."

Will all of Indian industry face a deluge of competition from the Thais? Not really. It will be a bit of a two-way street. Take fan manufacturer Bajaj Electrical which doesn't see any threat from Thai imports.

India, makes around 20 million fans annually and has very low production costs. The Thais, by contrast, make only niche ornamental fans. Says R Ramakrishna, CEO, Bajaj Electricals: " Thailand makes ornamental fans which are priced between Rs 5,000 to Rs 7,000. There is hardly any market here for such products."

The fact is that most Indian manufacturers aren't losing too much sleep over the FTA with Thailand. In the air-conditioner business, for instance, duties on Thai products will fall from 20 per cent to 12.5 per cent.

But Indian manufacturers are mostly located in excise free zones so they save 10 per cent to 11 per cent. Says Rajeev Karwal, CEO, Electrolux India: "The excise advantage more or less makes up for any fall in duties in the FTA agreements."

Similarly, colour TV manufacturers don't believe there will be an overnight Thai invasion. But Indian manufacturers are watching closely because Thai TV manufacturers pay zero duties on components that are used in exported sets.

Says R P Khaitan, president, Cetma: "Indian companies are surely gearing up in case there are imports from Thailand as their costs would be cheaper because of cheaper input costs."

Khaitan concedes, however, that the Government is making sure there's a level playing field in the industry. It has already reduced duties on picture tubes and various other components. Also, it has brought down duties to zero on raw materials used by the TV component industry.

That is why even the picture tube manufacturers aren't concerned. The Thais only have two large CPT plants and they don't have large surplus capacities.

Says a senior executive of the country's largest CPT manufacturer: "We have no reason to worry. While CPT duty is at 12.5 per cent from Thailand, the government has brought down duties on our inputs dramatically. On a 21-inch picture tube the reduction will mean a benefit of Rs 300 to Rs 400 on each tube."

At least for the time being the liberalisation in imports from Thailand has not raised the hackles of industry.