Duty cuts to make TV sets, phones cheaper

Television sets, washing machines, air-conditioners, mobile phones, electrical appliances and a host of other consumer products may get cheaper next month. A duty reduction on these and a variety of other manufactured items, including hybrid cars and cement, is in the offing to boost their production and sale. This comes on top of a round of duty cuts announced in the Union Budget last month. In the Budget, the finance minister, Mr P. Chidambaram, announced an across-the-board duty cut from 16 per cent to 14 per cent.When he replies to the Budget debate in Parliament towards the end of next month, Mr Chidambaram is likely to announce a further cut from 14 per cent to 13 per cent. A three percentage point cut in excise, in two steps, is no small gain for manufacturers. And only if they pass on this benefit through a price cut on the end-products will the consumer benefit.The consumer has not seen lower prices after the two percentage point duty cut announced in the Budget as few manufacturers passed on the benefit. Will they do so after the next round of cuts? Manufacturers are reserving decision. “We would be able respond only after a formal announcement is made on a further excise duty cut,” said Mr Venugopal Dhoot, chairman and managing director of Videocon, the country’s largest producer of TVs, washing machines and a range other home appliances.“We have to wait and watch,” said Mr Manoj Gaur, executive chairman of the Jaypee group, among the largest cement makers. “We have to consider the increase in input costs in taking any decision to cut cement prices.” But a three percentage point duty cut is likely to give a leg up to industry that reported a sluggish growth of 5.3 per cent in January 2008. The consumer durables sector, which reported a negative growth of 3.1 per cent, will be the biggest beneficiary if the duty cut spurs consumer spending on these goods as Mr Chidambaram expects.A 1 per cent cut in excise duty means the government has to forgo Rs 3,000 crore in revenue. But the finance ministry sees it as a necessary sacrifice. A ministry official said: “The measure is being contemplated to ensure that industry gets out of the slowdown.” Mr Chidambaram has targeted Rs 98,880 crore in excise revenue in the next financial year, up from Rs 90,934 crore collected in the year ending this month.