Increase in crude oil prices may cause a 4-7 percent increase in the prices of consumer goods like packaged snacks and cooking oils. This inflation will affect demand and even bring the benefits of GST to reverse.
“There could be 4-5 per cent increase in prices across the sector in the next two quarters if crude prices remain at existing levels,” said Saugata Gupta, MD of Marico, the maker of Saffola cooking oil. “Even though rural demand is expected to be better on account of good monsoon forecasts and companies would like to drive growth by absorbing crude-induced costs, the increase in crude prices over last year is significant.”
The report says that consumer goods are directly affected when crude oil prices go up as the packaging materials of these goods are made using petroleum derivatives. “We expect a 5-7% hike in prices over the next month. The increase in crude prices comes on the back of an increase in customs duty on palmolein and crude oil in March this year and some of the impact will definitely have to be passed on to consumers,” Krishna Rao, category head of biscuits maker Parle Products added.
The report further says that to support farmers and domestic manufacturers, the government had increased the import duty on crude and refined palm oil in March. The rise was to 44 percent from 30 percent on crude oil and 54 percent from 40 percent on palm oil.
“Rising oil prices impact us directly and definitely puts pressure on profit margins,” Dabur chief financial officer Lalit Malik told the media. “We are being cautious about pricing and closely monitoring the trend.”