Time to buy datacard, DVD or MP3

DAY-2 BUDGET 2008-09 IMPACT/ IT

It may be time to opt for that satellite cable connection for your TV or internet (wireless datacard) connection for your notebook or a DVD or MP3 player to play soothing music.

The finance minister, P Chidambaram, has proposed that specified parts of set-top boxes and raw materials used in the IT/electronic hardware industry should be exempted from customs duty, whereas the customs duty on convergence products should be slashed from 10 per cent to five per cent.

This will lead to a drop in prices, albeit small in some cases, after reading the fine print, according to industry experts and analysts.

"If one reads carefully," noted Ramesh Vaswani, executive vice-chairman, Intex Technologies, "the reduction in customs duty and one per cent reduction in central sales tax (CST) will not really reduce the retail prices of portable media players such as MP3, MP4 and DVD players by a significant margin."

The prices could fall anywhere between Rs 100 and Rs 200 for an MP3 player that costs Rs 3,000, said Vaswani.

Meanwhile, the cut in excise duty -- from 16 per cent to nil -- on wireless data cards would accelerate the internet penetration among middle-class laptop users. Notebook sales have been growing by over 70 per cent annually.

"Since notebook sales are primarily driven by consumption in the household segment, according to MAIT, it makes economic sense to have cheaper wireless data cards for home browsing," noted R Muralidharan, associate director, PricewaterhouseCoopers.

Both Airtel and Tata Communications said they will pass the entire benefit to customers. Manoj Kohli, CEO and president, Bharti Airtel, said, "The benefit of duty cut on wireless data cards would be passed to the consumers completely."

Muralidharan, though, added a word of caution: "We are not sure if wireless data cards include the USB dongles, which have become quite popular lately."

A quick calculation shows that if the duty cut benefit is completely passed on to consumers, a USB data dongle priced at Rs 3,000 will be cheaper by almost Rs 500.

A dampener, though, was the budget proposal wherein the finance minister imposed a National Calamity Contingent Duty (NCCD) at the rate of 1 per cent on mobile phones. Sourabh Kaushal, industry manager, Frost & Sullivan , said this could marginally increase the cost of handsets manufactured in India, mainly the low-end hand sets used by the masses."