Michael Dell Lobbies India to Cut PC Tax

The Associated Press
Tuesday, March 20, 2007; 10:38 AM

NEW DELHI -- Dell Inc.'s sales in India have soared in the past year, but the high taxes the country levies on computers are preventing the U.S. company from expanding investment and operations here, Chairman and Chief Executive Michael Dell said Tuesday.

The Round Rock, Texas-based company has done well in selling servers and computers to large Indian companies in recent years, but it has failed to penetrate the mass market for desktop computers and laptops.

Its India sales totaled $500 million last year, up 70 percent from a year ago and Dell said "we believe it's rapidly heading toward $1 billion."

Still, Dell's share of the Indian computer market is just about 5 percent, widely trailing that of rivals Hewlett-Packard Co. and Lenovo, which have been here much longer than Dell and offer lower prices.

Dell blamed India's tax structure for the company's poor presence in the Indian market.

Most countries around the world have very low taxes, or no taxes at all, on computers, but India levies both import tariffs and sales taxes that make up 20 percent to 25 percent of the cost of a computer, he told reporters during a visit to New Delhi.

Dell computers are more expensive, partly because the company ships fully assembled systems into the country, paying more in duties than its rivals who manufacture locally.

The company is building a computer assembly plant in southern India _ a move that would help boost local sales, but may not be enough to match rivals.

Michael Dell, who met with Indian Prime Minister Manmohan Singh and other top officials, said he was waiting to see how the Indian government moves to lower taxes on computers.

"That will determine the nature and scale of our investment," he said.

The plant in southern India, which is being set up with an investment of $30 million, will assemble 400,000 units annually, Dell said. The first computer from that plant in Sriperumbudur town is expected to roll out in July, he said.

Sales growth in markets such as India and China are key to Dell's efforts to regain its No. 1 position in the personal computer industry. The company now trails HP in global sales.

Dell said, however, that staying profitable is a bigger priority for the company than selling the largest number of computers.

"I have a different perspective on this," said the 42-year-old entrepreneur, whose return as the CEO earlier this year has set off a major restructuring program within the company.

"We want customers who are loyal; we want to be profitable. When we do all those things, eventually we become No. 1," he said.

© 2007 The Associated Press