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?
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.”
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%.
Â
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.”
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.”
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.