Consumer durable companies plan to increase prices between Rs 300 and Rs 15,000, depending on the product, in a couple of weeks.
They have been increasing prices since January to keep up with the rise in metals’ prices. The increase in excise duty announced in the Union Budget this year (from 8 per cent to 10 per cent) is also being passed on to the consumer.
So, prices could see a rise from anywhere between Rs 280 for a low-end refrigerator and Rs 15,000 for a top-end television set, although microwaves would be spared, as the duty has been reduced from 10 per cent to 5 per cent on the key component, Magnetron.
Godrej & Boyce, for instance, is increasing prices for the second time by two per cent across categories. The first time it raised prices was in January, by 1.5 per cent, due to escalating commodity prices. "If commodity prices keep increasing, we could look at a third round of price increase in April," said Kamal Nandi, vice-president of marketing, Godrej & Boyce. LG Electronics India Managing Director Moon B Shin told Business Standard, "With the two per cent increase in excise duty, a price hike is imminent."
Amitabh Tiwari, head of sales at LG, concurred: "We will revise prices by 1.5 per cent for microwaves and 3.5 per cent for refrigerators from around March 15." LG raised prices by around two per cent in January and again by one per cent in February, when some states increased VAT (value added tax). This is the third time LG is increasing prices in 2010.
"While escalating metals’ prices continue to be a concern, any further fluctuations in raw materials prices would not impact us immediately, because purchases have been fixed and prices are hedged," Tiwari added.
Samsung, too, is increasing prices this month on all products manufactured in India. Samsung India Deputy Managing Director R Zutshi said, "The increase in excise duty by two per cent, coupled with the increase in commodity and petrol prices, will lead to cost increases which will be passed on to consumers. We are yet to decide on how much increase we are looking at. This is the first time this year that we are increasing prices."
Haier India President Eric Bragenza also said a price increase by two to three per cent was inevitable with the increase in excise. "There has been an increase in input costs already and so, it is difficult to absorb," he said.
Most companies also say they may further increase prices in April-May 2010 on the back of rising metal prices, as well as an increase in value-added tax — from around 12.5 per cent to 14 per cent — by some states.
The sector, grappling with a hike in raw material prices, was hoping for a rollback in excise. It had benefited from the economic stimulus twice — once in last year’s interim budget, with a two per cent excise duty reduction to eight per cent, and before that in December 2008, when it dropped to 10 per cent from 14 per cent.
Copper prices have gone up by 125 per cent over the past year, while resin and steel have shot up by 22 per cent and 7 per cent, respectively, over the past couple of months. Flat steel producers, whose products are used by the white goods industries, and are also facing input cost pressure, have passed on the excise duty hike.
However, there is a huge positive for the consumer durables sector as well, with the lowering of personal income tax slabs.
