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Reduction in duty fails to bridge handset price gap

Ishita Ayan Dutt & Sambit Saha

The purpose of reducing duties on cellular handsets seems to have been defeated as the gap between prices offered by handset operators and the grey market continue to be a significant 25-30 per cent even after the tariff reductions in the Union Budget and the West Bengal state Budget.

Industry sources said grey market prices were expected to drop further in the coming weeks thereby widening the gap.

"The main idea behind reducing the duties was to curb blackmarketing of handsets but, in price sensitive cities such as Kolkata, subscribers would still opt for cheaper handsets," they said.

The Nokia 3310, one of the largest selling models, is available for Rs 7,200 with a tax-paid bill after the price revision, but is available at Rs 5,500 in the grey market. The official price for Nokia 3350 is Rs 9,250, while the grey market consideration is Rs 7,400.

Nokia 3330 is available in the official market at Rs 8,800 and in the grey market at Rs 6,600. The difference in high-end models such as Nokia 8210 and Nokia 8250 is as much as 23-27 per cent.

Sources said the new Samsung prices in the official market are yet to be effected. The official price for Motorola T-190 is Rs 6,995 while in the grey market it is Rs 6,000.

The industry expected subscribers opting for entry-level models and high-end models to opt for grey market handsets.

"Those opting for the entry-level models essentially opt for the grey market model because it comes cheaper and would like to save the maximum. The susbscribers going for high-end models also buy from grey market if they are inclined to change their handsets frequently to keep up with the times" sources said.

The Budget reduced the overall duties on cellular handsets from 25 to 14 per cent. However, while the 16 per cent countervailing duty was done away with the import duty was raised from 5 to 10 per cent.

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