Reasons for
Fuel Price Hike
05. jun.2008. We want to
inform you kindly that Government should not increase the prices
of petrol, diesel and LPG for following points:
1. Every year Govt. Oil
companies are making huge profits out of which, they are paying high percentage
of dividends to the shareholders and also are paying very handsome incentives
to their employees.
2. Oil companies can curtail
their cost of production by reducing their excess man power.
3. Oil companies are paying
abundant facilities to their employees including very high tax free conveyance
allowance. They should adopt austerity matters to reduce cost of production.
4. ONGC , OIL and PSU companies
are still selling the domestic crude oil at 130 dollar per barrel. This
crude oil is sold again to our own PSU Oil refinery companies. Is it not
ridiculous? And Govt. is passing the burden of so-called loss to the common
people of the country. ----------Aam Janta---------- aamjanta@yahoo.com
The fuel price hike has painted
a grim picture for India Inc. While the increase in freight costs is unlikely
to increase cost of production by more than 3% to 5%, it will put further
pressure on profitability of companies which are already being impacted
by rising raw material costs and slowdown in offtake. Increasing consumer
prices is an option but there are aprehensions that this could translate
into falling sales.
For auto companies, price
hike comes as a frontal attack. Demand for fuel guzzling luxury sedans
is expected to slump though sales of small fuel efficient may pick up.
The industry is already reeling under high inputs costs of steel, nickel
and plastics. Maruti Suzuki’s executive officer (sales and marketing) Mayank
Pareek said: “Historically, we have seen there is a shock effect as fuel
prices go up, but in the long-term it is inflation which strains demand
and affect topline growth.”
As of now, it’s only the
cement makers who are certain about increasing prices. Steel makers are
holding on to their prices despite their costs going up by 2-3%. Grasim
Industries’ CFO and director D D Rathi said that the cost will go up, but
didn’t quantify the increase. The 10% hike in the price of diesel is likely
to increase the cost of cement by Rs 1.30 per 50 kg bag. Freight cost contributes
21% to a cement company’s total cost and road accounts for almost 60% of
the total freight while rail accounts for the rest. Steel companies have
said that increased cost would not be passed on to the customers as they
have promised the government to hold the prices at the current level for
at least three months.
Consumer goods companies are
still undecided as the sector is sensitive with many regional brands at
play. Companies are therefore treading cautiously as any increase in prices
will prompt consumers to switch loyalities immediately. Godrej Consumer
Products executive director and president Hoshidar Press said the oil price
hike will have a multiplier effect on prices. “By itself, the hike is nominal
but it will add to the inflationary burden, with costs of packaging materials
and raw materials going up simultaneously,” he said.
The pharma industry also
finds itself pushed to a corner. “The price hike will now have a direct
impact in the freight and distribution cost, which accounts for 8% of the
total manufacturing cost,” said Cipla MD Amra Lulla. Industry body Indian
Drug Manufacturer’s Association (IDMA) secretary general Daara Patel said
the pharma industry would be among the worst hit. “Drug manufactures use
only roads to transport for medicines for transport.”
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