New Delhi: Hewlett-Packard (HP), Acer India (Pvt.) Ltd and HCL Infosystems Ltd are in the race for the biggest government order for tablets in the country, according to an official at UP Electronics Corp. Ltd, which is managing the tender, and officials at HCL and Acer.
In the run-up to elections in the state last year, Uttar Pradesh’s Samajwadi Party had promised to distribute tablets and laptop computers to school students if it came to power.
It did, and the consequent order it placed—2.6 million tablets and 1.5 million laptops—is significant because, at 2.6 million, the number of tablets the state is seeking to buy is almost as large as the market for tablets in India. According to estimates by CyberMedia Research, around 3 million tablets were sold in 2012 and the market is expected to double this year.
HP won the laptop order from Uttar Pradesh in January, and will supply 1.5 million laptops at just under Rs.20,000 apiece. Companies submitted their bids for supplying tablets only last week. The tablets could cost below Rs.10,000, although there is no indicative price range for them.
The Uttar Pradesh government has allocated Rs.2,721.24 crore for distributing laptops and tablets to students in the current fiscal year.
Officials at both HCL and Acer confirmed having put in their bids to supply tablets. A spokesperson for HP declined to comment.
While HCL and Acer have tablets that cost less than Rs.10,000 in their portfolio, HP doesn’t have an offering at this price point. It isn’t clear whether HP is working on a low-cost tablet that can serve the government’s needs that would appear to be immediate.
The stringent conditions placed by the government for interested bidders skews the field in favour of large companies. UP Electronics Corp. is in charge of the technical evaluation of bids, and is also the agency placing (and paying for) the order.
Milind Shah, chief executive officer of Wishtel, said his firm was keen to participate, but couldn’t because the eligibility criteria, “which includes a turnover of Rs.1,100 crore and operational experience for three years, made companies like ours ineligible”. In the past few months, several companies have launched tablets priced between Rs.3,000 and Rs.10,000 in India, most of them manufactured in Taiwan and China.
The bid norms were also designed with an eye on keeping out companies that are merely importers and not in a position to provide after-sales support.
“The tender for the project has been designed very well to make sure that only companies with a good track record of quality products and after-sales service can bid for it and fly-by-night operators relying on imports are kept out,” said an official at a hardware company that did not bid for the project.
An analyst said the Uttar Pradesh order could see the launch of high-quality and low-cost tablets in India. CyberMedia’s lead telecom analyst, Faisal Kawoosa, listed economies of scale as one reason for this.
For companies, orders such as the one from Uttar Pradesh—other states have placed similar orders in the past or are looking to do so— seem to have come at the right time.
“This large student-centric buying by the government is resetting the industry size, especially at a time when the consumer spend is low,” said Harsh Chitale, chief executive officer of HCL Infosystems.
Tamil Nadu was the first state to place such an order when it decided to buy 906,000 computers to be given away to students of state-aided colleges and high schools in 2011. While Uttar Pradesh has followed suit, states such as Rajasthan, Goa, Punjab and Madhya Pradesh are working on similar orders.
S. Rajendran, chief marketing officer of Acer India, added that such deals have a “multiplier” effect by having a positive impact on education and employability.
Several states looking to place similar orders will lean towards tablets, said Kawoosa.
“The tablet is a very aspirational product and politics is all about aspirations,” he said.
Companies looking to tap government orders and states looking to issue such would do well to learn from the example of Aakash, India’s much-hyped low-cost tablet that has suffered from bad publicity in the wake of supply and quality concerns, added Kawoosa.
Companies may not be able to serve up huge numbers of tablets, he said, and the Uttar Pradesh government may have set unrealistic targets in terms of post-sales service—it has asked for support at the tehsil level, an administrative unit, several of which make up a district.