Disappointed consumer durables cos to hike price post Budget

Consumer durables makers such as Videocon, Samsung and LG today expressed disappointment  over the lack of incentives in the Budget to counter sluggish demand in the industry.

The firms also said the excise duty hike by 2% will be passed on to consumers and it may hurt sales further.

"In this Budget, we were expecting some relief from the government in terms of taxation, infrastructure set up, reduce customs duty, encourage domestic manufacturing especially set top boxes etc. However, not all of it has happened," Consumer Electronics and Appliances Manufacturers Association (CEAMA) President Anirudh Dhoot said in a statement.

Dhoot, who is also the Director of Videocon, said the manufacturers had hiked the prices by 5-10% as the last quarter of 2011 was not favorable due to factors like inflation, fuel prices and rupee depreciation against dollar.

"The increase of excise duty and service tax from 10% to 12% will straight away affect the end consumer, right from lower middle class to upper class of the society," he added.

He, however, said removal of customs duty on LCD and LED panels and mobile phones parts, and the five year extension for weighted deduction of 200% on R&D expenditure for in-house facilities are welcoming decisions.

"In the Indian consumer durables industry, majority of the products are still being manufactured in India. So the growth of durables industry would be a challenge," Dhoot said.

Consumer durables major Samsung India said it may hike the prices of its products due to increase in excise duty.

"The rise in excise duty may lead to an increase in prices of consumer electronics products," Samsung India Vice President (Home Appliances) Mahesh Krishnan said.

He said the benefits announced for key sectors like infrastructure, agriculture and education are bound to improve the overall economic scenario.

"However, the Budget does not bring any relief to the consumer electronics industry, which has been reeling under the impact of rising input costs and rupee depreciation in recent times," Krishnan said.

Another consumer durable major LG India said rolling back of financial stimulus package will affect consumer sentiment even as the industry is still struggling with steep dollar exchange rate and input cost increases over the last one year.

Expressing disappointment, LG India Managing Director and President South West Asia Region Soon Kwon said: "Strong shot in the arm for consumer sentiments was expected. With inflation and fiscal consolidation being the key themes, Union Budget 2012-13 was expected to help consumer sentiment and control inflation, but it doesn't fulfill that."

While the raise in income tax exemption will provide some increase in disposable income for consumers, but it will be offset by the two% hike in excise duty, he added.

Kwon, however, said: "Custom duty exemption on LCD/LED panel and part of memory card of mobile phones is definitely a welcome step, though it will only partly affect our costs."

According to CEAMA, the consumer electronics and durables sector is currently estimated to be around Rs 30,000 crore.

Finance Minister Pranab Mukherjee announced raising of excise duty to 12% from 10% at present.

Full exemption from basic customs duty on LCD and LED TV panels for 20 inches and above have been proposed. Besides, to promote investment in research and development, the government decided to extend the weighted deduction of 200% for R&D expenditure in an in-house facility beyond March 31, 2012, for a further period of five years.