LCDs get a sharper picture, fridges in the deep freezer

Consumer durable industry is in a quandary. Growth is either flat or negative in some segments. And here comes a budget which will hike prices by 3%-4% for excise duties have been hiked across the board. Above all, the cost scenario looks anything but rosy.

On a refrigerator costing, say Rs 10,000, a consumer would have to pay Rs 300-Rs 400 more. While on an air-conditioner priced at the same level, the consumer could end up paying Rs 500 more.

Soon Kwon, MD, LG India, said, "While the raise in income tax exemption should provide some increase in disposable income for consumers, it will be offset by the hike in central excise duty from 10% to 12%. The custom duty exemption on LCD/LED panel and part of memory card of mobile phones is a welcome step, though it will only partly affect our costs."

The last quarter of 2011 was not favourable for the Rs 35,000-crore consumer durables industry due to factors like inflation, petroleum prices and depreciation of rupee against the US dollar. The industry was forced to increase the prices ranging between 5% and 10%. The increase of excise duty and service tax from 10%-12 % will straight away affect the end consumer, right from lower middle class to upper class of the society.

Manish Sharma, MD-consumer division, Panasonic India, said, "For LCD & LED TVs, Panasonic is still quantifying the impact of increase in excise duty and the decrease in import duty on LCD panel to zero."

George Menezes, COO, Godrej Appliances, said the proposal will have a dampening effect on sentiments, thus impacting market performances. "This year, the growth in refrigerators was flat, while that in air-conditioners was a negative 20%. We are passing down the cost increase to consumers. There is no way we can absorb this excise hike," said Menezes. The last time around the industry took a price hike in the range of 4%-15% was 3-4 months back.

"It's not a good sign as the market was not doing well at all," said Nilesh Gupta, managing partner, Vijay Sales.

Anirudh Dhoot, director, Videocon Group said majority of the products are still being manufactured in India, making it challenging for the players to register growth.

The one silver lining in the budget for consumers was the announcement of exemption of basic customs duty on mobile phone parts. This could help boost local manufacturing of mobile handset makers and prices may come down for made in India handsets.