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Hike in custom duty may impact coming festive sales, consumer durable industry

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Hike in custom duty to 10 percent on compressors, used for air conditioners and refrigerators, can be a ‘set back and may have an impact on the coming festive season sales, according to the consumer durable industry.

According to a PTI report: Although, Government’s decision to double the basic custom duty on ACs, refrigerators and washing machines to 20 percent from the existing 10 percent would encourage domestic manufacturing, said the Consumer Electronics and Appliances Manufacturers Association (CEAMA).

“Increase in the basic customs duty on ACs, refrigerators and washing machines will bring back the emphasis on Centre’s ‘Make in India’ vision at the same time drive momentum for local manufactured goods and develop new capacities in India,” Manish Sharma, President, CEAMA was quoted by PTI as saying.

However, he further told PTI: “Price rise for compressors can be a set back for the industry but, we are keeping a close track of the price impact as festive season is around the corner.”

The Government on Wednesday doubled the import duty on ACs, household refrigerators and washing machines (less than 10 kg) to 20 percent.

The basic customs duty on compressors and speakers are also raised to 10 percent and 15 percent, respectively from 7.5 and 10 percent.

South Korean manufacturer LG said that it would have to immediately hike the price of its ACs and high end refrigerators.

“We would have to immediately hike our price. We are importing the compressors for our air conditioners, which are fully based on invertor technology. Besides we are also importing high end big door refrigerator (500 ltrs),” Vijay Babu, Business Head, LG was quoted by PTI as saying.

While, Haier India President Eric Braganza said that this would led to increase of prices and may have impact on the coming festive season sales, which constitutes around 30 per cent sales of the industry.

“Prices would go up. … as it is the dollar has gone up… might effect demand during the festival season,” Braganza told PTI.

However, Godrej Appliances Business Head and EVP Kamal Nandi said that there would be little impact on the industry as it would only impact large size imported products which constitutes very less in numbers.

“As far as our industry is concerned, large size televisions, large size refrigerators – side by side and large size front load washing machines are the ones getting imported, which are very few in numbers as compared to the overall size of the market,” Nandi was quoted by PTI as saying.

Large size refrigerators with 500 litres and above capacity, sells only one lakh units which constitutes roughly one per cent of the industry volume.

“Moreover, as the consumers of this segment are value driven and not price sensitive, the increase in custom duties should not impact the sale for this segment,” he further told PTI.

While, home grown Mirc Electronics, which manufactures product under brand name Onida, has termed it as “good move”.

“Overall, duty increase is going to help in fiscal prudence and will strengthen the rupee, which will even benefit the industry at large,” Vijay Mansukhani, MD, Mirc Electronics was quoted by PTI as saying.

He also said that increase in customs duty on AC would not have much impact as this is not the season for AC sales.

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