LCOs and MSOs got a jolt when Finance Minister P Chidambaram proposed a hike in import duty of set top boxes from 5 per cent to 10 per cent in the Union Budget 2013-14.
Talking to exchange4media, Ashok Mansukhani, President, MSO Alliance said, “The timing of the duty increase, with just a month to go for Phase II, is unfortunate. The expectation that indigenous STBs will match up to the demand of another 8 million to 10 million STBs required to be installed in four weeks is fallacious. Indigenous industry had an opportunity in the last two years to get ready for Phase II, but could not meet the price and delivery schedules of the Chinese companies. We live in a globalised economy, and with compulsory subsidisation of the STBs, the increase is ill-timed. Phase II DAS implementation is already faltering, notwithstanding DTH supply, and with the new BIS norms due on April 1, implementation deadline is doubtful, though national MSOs are trying hard by opening LCs and pushing for early delivery.”
The Government decision has also upset the DTH players, who say at that such announcements will slow down the digitisation process.
According to Harit Nagpal, CEO, Tata Sky, “At a when everybody needs more and more boxes, and when the DTH industry is paying 32 per cent of its top line, this is the step could have been avoided and should be rolled back.”
Commenting on the impact, he said, “In a rough calculation, the DTH industry alone will suffer losses close to $20 million in a year because of this hike.”
Nagpal felt that going forward, the assembly lines of the Indian manufacturers and their testing capabilities will have to be augmented at a faster pace for MSOs and DTH players to go ahead and place orders on the India companies (both existing and new players). “However, in my opinion more should be done if the Government is really serious to push for localisation,” he added.
On the other hand, Sisir Pillai, Chief Strategy Officer, Digicable called the hike in duties as a “very good initiative” by the government and added that it should have been introduced before the commencement of Phase I of DAS as this would have saved the country millions of dollars in foreign exchange. “Close to 12 million-14 million STBs have already been imported for seeding in Phase I and Phase II and an additional 5 million to 6 million more would be imported shortly – almost entirely from China, which is not in the interest of India. But better late than never,” he remarked.
He further said that Indian manufacturers will have to augment their capabilities (assembly line and testing facilities) immediately to benefit both the manufacturers, the distribution companies (MSOs and DTH players) and the Indian consumers. Pillai informed, “As of now, the increase in duty will add close to Rs 65 to Rs 70 per consumer to the subsidy of the distribution companies (on zapper boxes of the MSOs and more for the DTH players) in Phase II and a little more in Phase III, as almost all the STBs that will be offered in Phase III are likely to be offered to consumers at much higher discounted rates.”
Amit Kharbanda, Executive Director, My Box, too called the Government’s announcement a “welcome initiative” and added that it shows that the Government is very keen on promoting the local manufacturing ecosystem. He further said, “Prior to this, there was the disability factor in domestic versus imports, which has been taken care of to a large extent by this increase. Moreover, the Government is saying that only local designed products will be sold, but that this will also create an environment conducive for international companies to set up operations and have a manufacturing base in India.”
Meanwhile, SN Sharma, CEO, DEN Networks said, “This hike will make the set top box costlier by around Rs 75 to Rs 100 and we have no option but to pass on the price hike to the consumer. But I don’t see this impacting that much since we already have adequate stock in hand.”
There are several cable operators who think that the deadline for Phase II will be postponed, which will give them some time to purchase the STBs from local manufacturers. With the sudden demand for large number of boxes, it will be a tough challenge to maintain BIS quality standards. Moreover, with more than 16 million STBs needed in Phase II and a further 32 million in Phase III, it remains to be seen how geared the local manufactures are to handle this huge demand.