Recent government measures to bring down food prices will have limited impact on the makers of packaged consumer goods, and consumers are unlikely to benefit from any reduction in prices of daily goods, company executives said. In a series of steps to cool food inflation, the government earlier this week capped sugar export and allowed duty-free import of soyabean and sunflower oil. However, companies said they continue to face high input costs across different areas such as packaging material and edible oil imports.
“The way things are moving, I would say it (the relief measures) is going to give a respite from any further inflation at least in certain input materials. It will ensure that there is some stability. Basically, such curbs are going to help towards containment of the prices,” said Krishnarao Buddha, senior category head at Parle Products.
Buddha said prices of several commodities such as palmolein oil, which contributes 30-40% of input costs for salty snacks, are still very high. “There, the government has very little control. So, those continue to rise and that leads us to continue our price increases, but the rate of price increase may not be as much because of the government’s intervention,” he added.
Firms have been facing high inflation for several quarters, pressuring company margins and triggering rapid price increases.
Others said the decision to allow duty-free imports of two million tonnes each year of crude soyabean oil and crude sunflower oil, for two consecutive fiscal years will provide relief to fast-moving consumer goods (FMCG) players.
Manish Aggarwal, director at packaged foods firm Bikanervala Foods Pvt. Ltd said inflation has affected pricing of almost all packaged consumer goods. High primary costs of manufacturing has resulted in major price hikes and the recent reduction in grammage across packaged consumer goods, he said. “We believe the government is taking the necessary measures in bringing the inflationary pressures down, and will continue to announce more measures,” he said.
Aggarwal said the cut in excise duty on auto fuels has brought down prices and will give some relief. Last week, the government announced a reduction in excise duty on petrol by ₹8 per litre and on diesel by ₹6 per litre, which could help packaged consumer goods firms lower transportation and freight costs.
“The move by the government to reduce excise duty on petrol and diesel is timely and will greatly help in reducing the overall inflation in the economy and its impact on consumers. Over the past year, we are experiencing unprecedented input cost inflation for commodities, including crude oil derivatives, palm oil, packaging, and freight. In such a challenging environment, our priority is to provide value to consumers, invest in our brands, and protect our financial business model,” said a Hindustan Unilever spokesperson.
The maker of Dove soaps and Knorr soups said it is mitigating cost inflation by driving its savings agenda harder, looking at all cost lines with a laser-sharp focus and removing any non-value adding cost. “We are taking calibrated pricing actions whilst protecting and growing our consumer franchise through our principles of net revenue management,” the spokesperson said.
Ankush Jain, chief financial officer, Dabur India Ltd, said it is too early to see a significant impact on input costs. “Fuel price reduction would, however, go a long way in reducing logistics and freight costs for companies,” Jain said.
