Govt breather on IT imports: Festival cheer comes early for PC makers

Original equipment manufacturers (OEMs) like HP, Dell, Lenovo and Apple heaved a sigh of relief on Tuesday after the government said it is considering a new registration mechanism for the import of personal computers, without quota and licensing requirements.

For the current financial year, the government would only monitor the source and value of devices as part of an import management system, officials said.

The quotas and other compliance requirements would come into play from the next financial year.

“Imports have been going smoothly for now, and it will continue to remain so if the new registration mechanism is put in place. The move has given us some breathing space,” a PC manufacturer executive said.

“However, there is still a lot of uncertainty. Conversations about this are still ongoing and there hasn’t been any official word from the government on when it is going to be implemented,” he added.

The development has given much-needed respite to PC manufacturers, who have long been protesting the contentious import restrictions.

In an official notification on August 3, the government announced that the imports of laptops, tablets and personal computers were restricted with immediate effect, in a bid to curb Chinese imports and push local manufacturing.

After strong pushback, the deadline was extended to November 1 this year, before discussions arose about pushing it further to the next financial year.

“These extensions were expected…It will give companies some time to localize their operations in India, be it component sourcing or assembly,” said Tarun Pathak, Research Director, Counterpoint Research - a market research firm.

Faisal Kawoosa, founder and chief analyst at Techarc -- a market research firm, sees this as a win for consumers as well.

“It is in the interest of the consumer that such an allowance has been made. Otherwise, companies would have resorted to hoarding and sold devices at exorbitant prices. People would also be getting older devices, which would be sold to them at a premium,” he said.

Currently, less than one-third of devices from the entire Indian PC market are assembled in the country. Around 80 per cent of the country’s laptops are imported, and most of them are from China.

"The government has dug themselves a hole and now they are trying to get out of it. They realised that there is nothing to be gained from setting the deadline in November. It isn’t viable for companies to shift their manufacturing units to India on such short notice. Unless they give at least a year's time, it is not going to be possible for companies to start manufacturing here,” said another executive of a large OEM.

This also comes at a time when PC makers have been ramping up their imports in anticipation of the upcoming festival season. IT hardware imports rose by as much as 35 per cent in August from July. This is only expected to increase over the next few months.

“Although imports have increased slightly in August, the import cycle takes around 30-40 days in total. So, we will see a greater uptick in September, and October will be way bigger than September,” the executive said.

The festival season brings in around 20 per cent of the overall revenue generated by the PC market during the year.

“It’s not just the festival season, we also have the back-to-school period, the new financial year, enterprise deals, which also play an important role during this time…Relaxation coming at this stage is obviously good news for OEMs, especially HP, Dell, Lenovo, and more importantly Apple,” Pathak added.

Analysts say that the new registration mechanism would also mean that festival season sales would not take a hit. The lack of import restrictions would ensure no shortfalls in supply. Nevertheless, companies are prepping for a price hike due to the uncertainty.

“Since there is a lot of uncertainty, some front loading will happen among companies in preparation of the festival season. This might lead to price hike, unless the government puts in place this new import mechanism,” a person aware of the developments, said.