Prices of televisions in India are likely to increase from October as the 5% import duty concession offered on open cell panels comes to an end on September 30. With prices of fully built panels, another critical component in TV manufacturing, rising by over 50%, the television industry is already stressed and this additional 5% could further add to an increase in prices of televisions.
The custom duty exemption on Open Cell was given last year as part of a Phased Manufacturing Plan (PMP) of television and its components to bring the television industry out of the crutch-walking (of mere television assembling while being totally dependent on imports for all its parts).
Companies say they are constrained to pass on the additional costs to the consumer if the import duty concession is not extended beyond September. The industry has argued that customs duty of 5% on open cell would lead to a rise in the price of TVs by roughly 4% as it is the major component for TV. The prices may go up by a minimum of Rs 600 for a 32-inch television and Rs 1,200-1,500 for a 42-inch TV and even higher for a large screen television.
This comes especially at a time when consumer durable brands such as Panasonic, LG, Samsung, Sony are gearing up for the festive season, a period that sees increased sales for these companies, especially in new-age premium products such as large screen TVs and big-size refrigerators. Consumer durable industry witnessed a loss of around 20% during the past few months and this festive season we are hopeful of recovering some of the losses, said Manish Sharma, President and CEO, Panasonic India and South Asia.
Manish added that from an industry (TV) point of view, rather than imposing an import duty, GoI (Govt. of India) must look at offering a long-term solution in the form of Phased-Manufacturing-Programme (PMP). “PMP can offer self-reliance to the industry, help boost manufacturing and further add to local value addition. We can look at introducing a duty structure of 5% annually from the third year onwards in case manufacturers do not localise by then. In the capacity of Chairperson, FICCI - Electronics Manufacturing, we are in discussions with the government on this matter,” he said.
Manish said Panasonic India is keeping a close eye on the matter and will look at offering a price that works best in favour of both company and consumers.
Meanwhile, government officials reportedly dismissed claims of substantive price hikes due to the imposition of this 5% duty, saying that prices will not increase more than Rs 250 per TV.
“Manufacturing in India cannot survive on support of import forever,” a finance ministry source told PTI.
Explaining the rationale of imposition of a marginal duty of 5% on Open Cell, a top government source told IANS that critical items shall start manufacturing in India. "No real manufacturing growth of television could happen unless Open Cell is domestically made. The present activity carried out by the industry is only the assembly of television after importing most of the parts. This cannot go on for long as assembly of television does not entail any significant value addition. Deepening of value addition in the domestic market must happen in a phased manner."
Xiaomi says that while there will be an overall impact, the company has factored this in at the beginning of the year itself.
Eshwar Nilakantan, Category Lead - Mi TVs, Mi India told TNM, “We were notified about the end of the Import concession, a little ahead of the official announcement. While there will be an overall impact, we had factored in the developments at the beginning of the year itself.”
He said 85% of the TVs sold today under the Mi portfolio are Made in India and there are some components that are imported for the same, which indirectly affects the price of the final product. “We have currently worked on a robust plan to ensure smooth uninterrupted business continuity. As a company which is dedicated to the cause of ‘Make in India’, we are evaluating next steps and will continue delivering on our philosophy of providing innovative products of high quality with the best specs, and making it accessible at an honest price to all,” he said.
On how the withdrawal of 5% import duty concession is likely to affect Xiaomi’s TV business in India, Eshwar said despite the new changes to the import duty, the company will continue to maintain only a 5% profit margin on every Mi Smart TV sold in India.