Deadlock over liquidation of stocks, post duty cuts

HYDERABAD: Following the recent reduction of excise duty on hardware components, partners in Hyderabad are trying their best to liquidate their existing stocks at the earliest. Partners who had brought these products at a higher cost, are being forced to sell them at reduced prices, thereby making a huge loss.

Soon after the 'mini-budget' was announced, the Twin-Cities Computer Dealers' Association (TCCDA) called an emergency meeting to take stock of the situation and the result is the deadlock between dealers and distributors. Distributors have refused to absorb any loss from the stocks already sold unless their principals pitch in. "Our plight is much worse. Who is responsible for the stocks lying in our warehouses?" questions Venkata Subramanyam, branch manager, Redington.

Retailers, particularly those who hold stocks over Rs1 crore, are ready to liquidate stocks fast and at the best possible price. But apparently there are no takers. "Corporates have postponed their purchase to get the best prices after all companies start slashing their rates," says T Kishan of Kishan Trading Company.

Walk-in customers are also waiting for the reduced pricing to come into effect before making their purchases. Kishan emphasizes that the longer it takes to liquidate the stocks, the higher the losses will be. This has led to an immediate drop of 80% in sales. According to TCCDA's President KVR Menon, the collective stock of the Hyderabad market is nothing less than Rs 15 crore, if just the top five to eight big dealers are taken into consideration.

The representations of channel partners to distributors have evoked little response. "They are trying to wash their hands off from the stocks lying with dealers," says Menon, who has advised dealers facing unmanageable losses, to stop payments to the distributors for stock bought 20 days before the government announcements.

According to Menon, vendors and distributors feel that since the market is not grumbling about the duty slashes, there is no reason for channel partners to get worried. "However, they do not realize that buying has come to a standstill," adds he.

In this melee, the customer will have to wait to avail of the announced bonanza prices, till the deadlock between partners, distributors and vendors, gets sorted out. "Hopefully some understanding will be reached at within 10 days," says Venkateshwara Rao of SV Electronics.

CyberMedia News Service