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----------

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. 

Reasons for  Fuel Price Hike
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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