A day after Finance Minister P Chidambaram scaled down the peak rate of the Customs duty and reduced the excise duty on products like tyres and synthetic fibre, companies responded by rolling back their prices.
With the peak Customs rate reduced from 20 per cent to 15 per cent, the automobile sector was the first to drop prices. Honda Siel Cars announced a cut of 0.33 to 0.54 per cent on its Honda City and Honda Accord sedans.
Toyota Kirloskar Motor cut the price of its newly-launched Innova by Rs 14,000 and its premium Corolla by Rs 32,000.
Others are expected to follow suit. Hyundai will slash prices of the Elantra and Sonata by Rs 10,000-12,000. Next could be Skoda Auto India.
"The fine print in the Budget still has to be analysed and the benefits would be passed on to the consumer directly or indirectly," said Imran Hassen, managing director, Skoda Auto India.
With the excise duty on tyres cut from 24 per cent to 16 per cent, Ceat announced a 5 per cent reduction in the prices of its products in the replacement market.
Market leader Apollo Tyres is expected to follow suit in another week's time. Sources in the tyre industry said the price protection offered to dealers would, however, vary between manufacturers.
In order to avail of turnover discounts, dealers who have picked up additional stock of tyres would be allowed to sell the old stock at new prices, and the price difference would be compensated by manufacturers.
Sources said price protection varies between a week's sales to a month's sales depending on the speed at which each brand moves in the market.
Indo Rama Synthetics brought down the price of polyester filament yarn by about 8 per cent from today following the reduction of excise duty on it from 24 per cent to 16 per cent. Prices of polyester/nylon chips, yarn, fibre and intermediaries of manmade fibres are also likely to come down as the Customs duties have been reduced from 20 to 15 per cent.
"We fix prices based on the import value. Though ultimately the price of garments made from manmade fabrics will depend on the garment manufacturers, the reduction in yarn prices is a positive step in that direction,'' said OP Lohia, managing director, Indo Rama Synthetics.