Spending | I, the consumer

Spending | I, the consumer
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First Published: Sat, Feb 27 2010. 12 30 AM IST

Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint
Updated: Sat, Feb 27 2010. 12 30 AM IST
Get ready to shell out more for that bigger refrigerator and the air conditioner you were planning to buy this summer.
Finance minister Pranab Mukherjee has announced a 2% increase in excise duty and consumer durables companies making air conditioners (ACs), refrigerators and other appliances are likely to pass on this cost to the consumer. In fact, the cost of most white goods is likely to go up, owing to the impending hike in fuel prices and rising raw material costs.
Illustration: Jayachandran/Mint
The good news is that microwave ovens and mobile phone accessories may be cheaper if the companies pass on the excise duty benefits to the consumer.
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“Special additional duty on mobile phones has been rolled back. This will benefit the mobile companies which import packaged mobile phones,” said Moon B. Shin, managing director, LG Electornics India Pvt. Ltd. “Abolishing the 2% excise duty on mobile phone accessories is also encouraging for consumers.”
Expect prices of refrigerators and ACs to go up in the coming week as most appliances and electronics makers, including Godrej Appliances, Samsung Electronics India Pvt. Ltd and LG Electronics India, say that it will be difficult for them to absorb the additional cost in a challenging environment.
Several companies announced price hikes in January to offset rising cost of inputs such as steel, aluminium, copper and plastic.
“There will be another hike of at least 2% across products,” said George Menezes, chief operating officer (appliances division), Godrej and Boyce Manufacturing Co. Ltd, adding that the industry cannot absorb the increased pressure of duty hike, higher freight and logistics cost due to the increase in fuel prices.
The actual price rise could be nearly 4%, according to leading companies in this space. Samsung is expected to announce its new prices in a couple of days, its spokesperson said.
However, “microwave ovens could be cheaper by anywhere between Rs150 and Rs 500,” according to A. Srinivasa, director, Vivek Ltd, which operates a chain of 53 electronic stores in Tamil Nadu and Bangalore.
V. Ramachandran, director (sales and marketing), LG Electronics India, does not see any significant price cuts on microwaves on account of a custom duty cut of 5% on magnetron—a key component used in making microwaves.
Although duties have been reduced on LED lights and water purifiers as well, according to experts in related industries, consumers will not enjoy any significant benefit from the change.
Lowering central excise duty on replaceable kits for household water filters, other than those based on reverse osmosis technology, to 4% will not bring down the price of the final product.
“Also, the reduction in excise duty on LED lights to 4% will not lead to any significant benefit as most LED products are imported,” says Anil Chugh, vice-president, Wipro Consumer Care and Lighting.
The Budget is also unlikely to change the way you buy personal and home care products. Although there has been an increase of 2% in excise duty, these companies are wary of passing on the burden to the consumer.
According to analysts tracking the segment, prices of products from Nestle India Ltd, Godrej Consumer Products Ltd and Dabur Ltd, which have units in excise-free zones, will not be impacted.
Other companies not in these special zones could be affected but are unlikely to increase prices of soaps, shampoos and toothpastes for fear of losing sales.
For food products, no company is in a position to pass on the increased burden as consumers are already facing the heat of rising food prices.
According to Anand Ramanathan, an analyst with audit and consulting firm KPMG, “The burden of the excise duty hike will be balanced by the rise in purchasing power of consumers both in rural and urban areas.”
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First Published: Sat, Feb 27 2010. 12 30 AM IST