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Need to Buy Laptops? Go To US

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Abhishek
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Cost has always been a matter of concern;

be it for the vendor or the consumer.

Global MNCs look at India as a center

for cost arbitrage. Needless to say, their market

is explored to the maximum extent and the

only way by which they can realize profit is

by cutting down their costs. India is one such

destination for vendors where they can apply

this strategy. But why is it the other way round

when it comes to laptop pricing in India?

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The question that arises here is that how

much is the break up for taxes and margins?

In the table below we have mentioned a price

comparison of different laptops from various

companies between the US and India of similar

configuration, which is present online.

Dell Inspiron 14R laptop, configured with i3

processor, Windows 7 Genuine Home Edition,

320 GB hard drive and 2GB RAM costs $449

(Rs 20,231) in the US but in India, the same

configured laptop costs around Rs 31,800.

This India price is without the carry case and if

purchased, would cost even more. A laptop in

India costs 30-50% more than the actual price

in the US, and this is due to high duties, taxes

and margins.

PN Prasad, former president of Confed-ITA,

questions, “There is a huge price difference

between the Indian market and the other

countries and I donÂ’t understand why laptops

sold here are 30% costlier than the US market.

There are taxes and margins even in the US.

And I believe that laptops shouldnÂ’t come to

India with more than 20% additional cost.”

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The non-indigenously built laptops fall under 2 categories. First, imported ones which attracts 10.3% countervailing duty (CVD). Second, assembling imported components of laptops like motherboards, graphic cards, etc in a local manufacturing unit. Here, it attracts CVD, plus a special additional duty (SAD) of 4%. In India, again, hardware products have to go through different set of taxes including Central Sales Tax and VAT.

“

We manufacture the Inspiron

14R/15R in India; the laptops

are assembled at the Chennai

factory from imported parts.

The difference between the US

and India pricing is due to the

different duty structures,” said a

Dell spokesperson, And the typical

margins between direct and retail

is close to 15-20%.

 

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Meanwhile, earlier this year,

after the Union budget, the

Government had levied 5% excise

duty on certain IT products such

as microprocessors other than

motherboards and populated PCBs,

but this was reverted later. “Since

the taxes have been reverted,

there will be no increase in the

prices of laptops,” said Premjith

Krishnan, deputy director, MAIT

(Manufacturers Association for

Information Technology).

While talking about high

laptop prices and its implication

on the market, Prasad said that

international prices are much lesser

than in India. With high margins

involved in this whole process

and the cost of the products being

unreasonably high, parallel imports

have increased.

On the contrary, Praveen

Bhadada, manager—global consulting,

Zinnov Manage ment

Consulting said, “I don’t deny

the exis tence of parallel imports.

But with the overall cost of IT

hardware products coming down,

there will definitely be a reduction

in parallel imports. Even the

Indian manufacturers are cutting

down the costs of IT hardware

products, which will further lead

to shrinkage in parallel imports.”

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With all sharp contrasts in

prices of laptops in India, it would

be interesting to see how channel

partners resolve the problem of

high prices along with reducing

parallel imports.

Meanwhile, laptop pricing

going down in future seems bleak. “The question is not that the prices will go down or

not, but why the prices are high now? And even if

the prices go down, price disparity will still remain

between the US and Indian market,” added Prasad.

Bhadada further stated, “As the competition in the

market intensifies, I think that the prices of laptops

would come down. A lot of Chinese and Taiwanese

companies are also eying the Indian market with

laptops worth Rs 10,000, which would put pressure

on the established brands here and elsewhere in the

world. We have seen companies like Huawei do that in

the telecom/networking market as well.”

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Bhadada also added that government is a key

influence in this segment. For ‘one laptop per child’

program, the government of India is conceptualizing

an ultra low cost laptop, based on ‘Open Source’.

Not that the vendors are unwilling to somehow

retrieve the situation. Since the time DQ Channels first

spoke to Dell about the pricing disparity, the vendor has

revised its pricing model with effect from June. Earlier

the price used to be an amount excluding delivery

charges of Rs 900 extra. Now the price is inclusive of

all taxes and delivery charges. For example, earlier a

Dell Inspiron 14R laptop with i3 processor, Windows

7, 14Â’Â’ monitor, 2GB RAM, 320 GB hard drive used to

cost around Rs 30,900 plus Rs 900 delivery charges,

in India. Now the same laptop is priced at Rs 30,800

including all taxes and delivery charges.

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