Now, get ready to pay more for colas, bottled water, mobiles

Carbonated soft drinks, bottled water and mobile handsets could become costlier soon, in the aftermath of Finance Minister Arun Jaitley's second full-term budget on Monday.

Beverages
A three percentage point increase in the excise duty on "waters, including mineral waters and aerated waters, containing added sugar or other sweetening" from 18 per cent to 21 per cent will lead to price hikes across the product line. The industry, struggling to cope up with slowdown in demand, will not be able to absorb the increase, sources say.

Coca-Cola India is planning to increase the price of its 200 ml glass bottles by Re 1, taking the market price to Rs 13. For larger PET bottles, the hike will be between Rs 2 and Rs 9, depending on the pack size. The industry had to cut production last year during peak summer and further price hikes may affect sales in 2016.

"The growth of the industry suffered significantly in 2015 and this hike will have a serious impact. The industry provides direct and indirect employment to millions of people and also supports sustainable profitability of small retail stores," says the Indian Beverage Association.

 

Bottled water is expected to become costlier by 5-10 per cent. The price of 1 litre packaged drinking water may go up to Rs 22 from Rs 20. According to the IBA, the industry has been witnessing a slowdown in growth despite investment across the supply chain of over Rs 2,700 crore.

Urging the government to roll back any duty hike, the IBA says, "The viability of the industry could be in grave danger because of such consistent an adversarial tax approach."

Mobile handsets
The withdrawal of duty waiver on a number of mobile phone components and imposition of additional duties on others will lead to 10 per cent and three per cent price increases of feature phones and smartphones, respectively.

Removal of the 12.5 per cent duty sop (special additional duty, countervailing duty and basic excise duty together) is intended to encourage local manufacturing of components.

According to Pradeep Jain, managing director, Karbonn Mobiles, the industry is not ready to manufacture these components.

Speakers, headphones, batteries, adapters and chargers, on which the duty sops have been withdrawn, constitute 20 per cent of the cost of a feature phone and less than 10 per cent of the cost of a smartphone.

As much as half the production cost of a mobile phone is on populated circuit boards and the imposition of a two per cent special additional duty will bring the differential between mobile phones and their parts lower. India is not ready for the complexity involved in populating a mobile phone's circuit board," says Hari Om Rai, chairman and managing director, Lava International.