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The excise duty cut of two per centage point announced on consumer durables will not impact the price points of products significantly. Here’s why: The net impact of the cut actually works out to 1.25 per cent, according to C M Singh, chief operating officer, Videocon Industries, a key maker of television sets, washing machines, refrigerators in the country. The excise duty cut also includes computers.
“Excise is calculated on 65 per cent of a product’s MRP (maximum retail price). So the net impact will not be significant. At best, it will be Rs 500 if you look at the top selling products in any category. I don’t think that is enough to swing demand in favour of manufacturers. For consumers to be enticed to buy, a manufacturer would have to reduce price by Rs 1,000 at least, which is unlikely with this cut.”
Singh says that Videocon has no plans to pass on the excise duty cut to consumers.
Executives at chaebols LG and Samsung, the two leading consumer durable marketers in the country, said they are studying the fine print before they arrive at a decision regarding how much could be passed as a price reduction to consumers. Eric Braganza, president, Haier India, also said that he is yet to arrive at a decision concerning price cuts. “We should take a call shortly,” he said when contacted over phone.
Executives at Godrej and Whirlpool were not immediately available for their comments.
Manish Sharma, managing director, Panasonic India, says, “This two per cent cut in excise is a welcome change even though it is unlikely to impact prices.’’
Y V Verma, former CEO of Mirc Electronics, the maker of Onida brand of consumer durable and electronic products, says that manufacturers at best may pass a 1-1.5 per cent price cut to consumers. “If you take the average price of a good flat panel TV, it works out to Rs 20,000. A two per cent cut is Rs 400. At 1.5 per cent, it is Rs 300. Similarly, a frost-free refrigerator on an average costs Rs 25,000. A two per cent cut will mean Rs 500. A 1.5 per cent cut is Rs 375,” he says.
