Come June, and consumers are going to be hit by a volley of price hikes. Steep hike in fuel prices does not burn a hole in the pockets of only those who buy fuel. Every consumer is impacted by a hike in fuel price because fuel is what the economy runs on. Steep fuel prices and many other factors such as the closure of Sterlite Copper plant in Tuticorin will disappoint consumers from next month as prices of many consumer goods are going to rise.
Price of air-conditioners, refrigerators, washing machines and microwave ovens are set to get dearer by 2-5% from next month due to increase in crude oil prices, depreciation of the rupee and rates of key raw material steel and copper hardening up, according to industry executives.
The net increase will be in the range of Rs 400 to over Rs 1,500 for premium models which will reflect when new products hit the market, according to an ET report. The companies told ET while demand has been rather subdued, they are left with no other option since the input cost pressure and rupee depreciation have been pinching them since March, leaving little scope for any absorption.
Godrej will raise prices by 2-3%, while India’s largest air-conditioner maker Voltas has just increased prices by around 3%. Whirlpool India too will be increasing prices once the industry does but has yet to decide the extent. Industry executives told ET that even the Korean duo — LG and Samsung — has indicated to traders that prices might go up by up to 5%.
Prices of daily-use consumer products such as packaged snacks, detergents and cooking oils may increase by 4-7% due to rise in fuel prices, according to another ET report. The increase could reverse, to some extent, the benefits brought about after the GST Council slashed tax on 178 items to 18% in November last year from 28% earlier. That led companies to cut prices by 10-20% on detergents, deodorants, shampoos, snacks and edible oils.
Consumer staples are directly affected by crude oil prices because petroleum derivatives are used in packaging material including bottles and tubes. Crude oil-linked costs account for 15-20% of raw material used in packaging. The rise in crude oil prices compounds the effect of higher duties on palm oil, which is used in some food products. The government increased import duty on crude and refined palm oil in March to support local farmers and domestic manufacturing.
According to analysts, the effect on margins would depend on the ability of companies to pass on higher costs to consumers.
Prices of several electrical products, pump sets and electric cables will go up because import of copper, a raw material used in making them, has risen ever since the closure of Sterlite’s Tuticorin copper smelter on March 27 when the plant shut down for a 15-day scheduled maintenance turnaround.
The state government issued a permanent closure order on May 28. With the plant that has the capacity to produce 4 lakh tonnes of copper per year, and meets a third of the sales in the country, being shut, user industries such as makers of electrical cables, which have seen a sharp spike in imports, are planning to increase prices following the rise in input costs.