Price of appliances in India could rise due to disruption in supply of crucial spare parts from China, where the outbreak of coronavirus has forced many businesses to suspend operations.
Appliance makers in India expect a 5-10 percent increase in product prices as demand rises ahead of the summer season.
Customers will feel the pinch immediately, as companies are grappling with delay in getting spare parts from China.
These spare parts include open-cell panel, a key component of the TV screen. Due to the epidemic, component exports from China has been halted indefinitely.
The World Health Organisation (WHO), on January 31, declared the outbreak of novel coronavirus (2019-nCoV) as a Public Health Emergency of International Concern, as the disease is rapidly spreading beyond China and to countries with weaker health systems.
“In India, products like refrigerators and air conditioners cannot be manufactured without the key component of compressor. Production has been stalled due to the emergency situation prevailing in China,” said the head of retail appliances at a large consumer durables firm.
The disruption in the supply chain comes just ahead of the onset of the summer season, when consumers in India start buying appliances such as refrigerators and air conditioners.
The earlier an appliance is bought, the cheaper it is. With the absence of key component to produce the goods, there would be delays in production and a mismatch in demand and supply.
With customers rushing to buy cooling products ahead of the harsh heat, appliance makers are struggling to meet the demand. To offset this, a price hike is expected to be initiated over the next few weeks.
“If the cost to import an entire product unit would not have been so prohibitive, that would have been an option to offer appliances at the same rates. However, we cannot bear the high duty structure and passing it on to the customers will steeply increase prices,” said the chief executive of a mid-size consumer durables firm.
Importing a finished product is expensive since the government has imposed a 20 percent import duty on completely built units that are brought in from other countries. With import being ruled out as a temporary option to mitigate the dearth of products in the market, a price rise is the only option.
The duty for importing a completely built unit of an electronic appliance is set at 20 percent. This was doubled from 10 percent in the budget presented in July 2019.