The Hindu Business Line : Of Budget boost and breakfast cereals

Chennai, Feb. 29 So, what’s in it for you and me? If consumers were looking to the Budget to lower prices across a range of items of daily consumption or on that refrigerator you were hankering for, that is going to be unlikely. The biggest Budget boost comes from the fact that there’s going to be more money in the hands of consumers so one can still go out and buy that fridge.

However, the comforting factor is that while prices will not go down, they could well stay put. Says Mr Adi Godrej, Chairman, Godrej Industries, “The budget is anti-inflationary in nature, which will ensure that prices are not going to go up for the fast moving consumer goods (FMCG) category. While prices are expected to come down, it will overall be governed by the demand and supply in this industry.” A point endorsed too by Mr C. K. Ranganathan, Chairman of CavinKare Pvt Ltd, who says that there are too many cost pressures on FMCG companies which will see them retaining prices at current levels. Adds Mr Vinod Kamath, Chief (Finance &IT), Marico Ltd, “There will be a marginal relief for FMCG companies as the industry was not really expecting any positive surprises. Input and raw material prices were already under pressure and the overall reduction in excise duties will lead to less than one per cent drop in the MRP of the products. There are already inflationary pressures which will not lead to any significant reduction in prices.”

However, the FM has tinkered with the excise duties on a few products, such as breakfast cereals, which could see their prices coming down. As Anupam Dutta, Managing Director of Kellogg’s, says, “By reducing the excise on breakfast cereals, it has finally been recognised as a mass consumer product rather than a premium one. In spite of commodity prices going up we have not taken a price hike since 2005 and were really getting hit by it. Now with the reduction in excise duties we will be able to hold over our impending price increase which had been planned for the Kellogg’s brand.” A fact that could gladden the hearts of health food buffs.

The Budget has also dropped the excise on water purifiers but manufacturers warn that one should not exult. As Mr J. N. Ichhaporia, Senior Vice-President (Finance & Legal), Eureka Forbes, pointed out, “In spite of the excise drop from 16 per cent to 8 per cent, there will be no change in prices for the water purifiers at Eureka Forbes as our manufacturing units are already situated in the tax-free areas such as Baddi and Uttaranchal.”

Makers of durables too don’t promise much. As Mr George Menezes, COO, Godrej Appliances, says, “There has already been a steep increase in steel prices, the basic raw materials for most appliances. Only in categories such as microwave ovens and washing machines where there are relatively few steel-based components, there might be a probability of bringing down prices.”

However, where consumers can expect to see a 5 to 7 per cent across-the-board price cut is on medicines, say pharma industry representatives, following a reduction in excise duty from 16 to 8 per cent.

The difference will be significant on high-priced locally produced drugs, says Mr D. G. Shah of the Indian Pharmaceutical Alliance. Drugs made locally in the cancer, cardio-vascular, anti-diabetic, anti-ulcer and some newer antibiotics can see some downward price revision, he indicated.

Well, if you’re still vexed about most prices staying put, you could still reach out for some packaged coconut water which will be cheaper or even quaff some sherbet on which excise has been halved from 16 per cent! And top it all up with some paan masala, which will have a “concessional rate of 14 per cent excise duty (Cenvat 8 per cent plus health cess 6 per cent). But, mind you, this is only if it “contains not more than 15 per cent betel nut!”

(Reports from Purvita Chatterjee, Jyothi Datta and Vinay Kamath)

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