NACIT presents partner woes to Finance Minister

Finance Minister P Chidambaram's decision to make PCs affordable for the rural masses by completely removing excise on finished PCs has backfired.
This is because big and small systems integrators (SIs), the only segment better positioned to reach out to masses, are not benefiting by the excise
cut. In fact, the systems builder community is the worst hit because of this decision. 

To address the SI's concern, The National Association of Channels of Information Technology (NACIT) gave the Finance
Minister a presentation that predicted the death of local system builders. In its presentation, NACIT put
forward few facts. According to NACIT, this decision will affect 55,000 SIs across the country. The marketshare of local SIs reduced from 60% to 45% due
to reduction in excise/CVD on full PC from 16% to 8% in Jan 2004. During this period the local SI strength was reduced from 60,000 to 55,000. This
marketshare is further likely to go down to 30% if the full exemption of CVD/Excise on finished systems is implemented.
The latest proposal makes imported PCs cheaper than a PCs assembled in the country, because components attract 0%, 5%, 10% and 20% basic duty + 16.32%
CVD + 2% cess. At the same time, a finished PC attracts only 10% basic duty + 2%
cess.

The new duty regime would essentially mean that importing finished computer systems would be 5% to 15% cheaper than local assembled PCs. This will
result in MNCs dumping the market with fully imported PCs rendering majority of local assemblers jobless across the country. 

According to NACIT, the new regime will also see majority of PC assembling shifting outside India, which will directly
effecting employment. The customers in terms of getting customized PCs due to ready imported boxes
will feel the impact of this development. 

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