Rising fuel cost pushes India Inc to hike prices – Times of India
According to auto corporations and transporters, truck leases have gone up 10-12% within the final two months and most corporations are presently negotiating freight charges. Some like MG Motor stated they plan to take a value hike too.
“Typically, freight comprises 2-2.5% of the cost of a car. But, due to the jump in sea freight and the 10-12% increase in truck rentals, we will have to go in for another round of price hikes of around 2-3%,” stated MG Motor India president and MD Rajeev Chaba. He is presently negotiating these charges with the transporters.
For trucking, virtually 45% of the cost is due to fuel. And with fuel prices having gone up 65 occasions because the onset of Covid, the entire improve has been upwards of 30%. Logistics startup Rivigo’s founder and CEO Deepak Garg stated freight prices are unsustainable right now and except there’s a direct correction of 15-20%, the trucking business might face difficulties.
T A Krishnan, founder and CEO of Ecom Express, which works with e-tailers like Amazon India and Flipkart, stated conversations are already below approach with e-commerce corporations to mirror the elevated cost of deliveries in contracts.
Online meals supply agency Swiggy is finalising a brand new fee construction for its supply companions in gentle of the elevated fuel prices, an individual conscious of the matter stated. Zomato on Thursday stated it should hike funds to its supply companions to allow them to take up the elevated cost of fuel. Whether these prices would ultimately be handed on to the customers stays to be seen.
Godrej Appliances enterprise head and government VP Kamal Nandi stated most transporters predominantly use diesel of their autos. Since July 2020, there was a gradual improve in diesel prices, amounting to an 11.3% surge, and this has been impacting freight fees. “This is expected to impact prices and consumer demand,” stated Nandi.
Most corporations are looking at a mixture of greater bills akin to these for key uncooked supplies which, together with rising fuel prices, add to the general cost burden. Parle Products class head Mayank Shah stated, with uncooked materials and packaging bills going up, there may be an total influence on prices.
“Packaging materials are derivatives of petroleum products and that is also up, which is causing significant pressure on the bottom line. Currently, we are watching the situation. But if the prices do not go back, we will have to pass on the cost to consumers,” stated Shah.
A value improve might be within the vary 5-7%. “No one would want to take a price hike right now as all are more interested in the revival of demand. But if input costs do not soften anytime soon, companies would be forced to take a price hike in two months,” stated Shah.
WayCool Foods, a farm-to-fork provide chain enterprise, stated with the fuel value improve, its whole logistics cost has gone up by almost a rupee per kg of fruits/greens.
“Our inbound logistics cost — to move produce from farm to urban centres — are seeing an increase of roughly 55 paise per kg. In case of movements from warehouses to retail locations, we are seeing a price rise of around 25 paise per kg,” WayCool co-founder and CEO Karthik Jayaraman stated.
In the final six months, fuel prices have elevated by roughly 23%. “Initially, our logistics partners were able to absorb the costs. But once the increase crossed 10-15%, we had to revisit our arrangements with them,” he added.
“A typical lower middle-class family, whose grocery baskets are vegetables-heavy, may see roughly a 1-2% hike in bills. At this point, the pinch may not be too high. But if this continues, the impact may show up in consumers’ budgets,” he stated.
Air journey too has turn into dearer. A kilolitre (KL) of aviation turbine fuel (ATF) — which accounts for 40% of an Indian provider’s whole working cost — for home flights cost Rs 26,860 at Delhi’s T3 and Rs 26,456 at Mumbai airport on June 1, 2020.
By January 1 this 12 months, jet fuel prices had shot up to Rs 40,783 at Delhi’s T3 and Rs 39,267 at Mumbai, and there have been a number of value hikes thereafter as effectively. Airfare vary for flying between Delhi and Mumbai, as an example, now could be Rs 3,900-13,000, as an alternative of Rs 3,500-10,000 earlier. These are financial system one-approach fares that don’t embody person payment of airports, passenger safety charges (Rs 150 for home) and GST.
(Contributions by Nandini Goswami, Rajesh Chandramouli, Avik Das, Saurabh Sinha, Digbijay Mishra, Surojit Gupta & Namrata Singh)
