Manufacturers hike prices across sectors, boosting inflation even further

New Delhi: Be it cars, tyres, CNG or consumer durables like refrigerators, washing machines or microwave ovens, manufacturers across different sectors have raised prices in the last 10 days, citing increase in raw material costs, reports PTI.

The hike in prices of these items has come about over and above milk, onion, garlic, and other vegetables, which have become expensive in the past few weeks. Food inflation has crossed 14%.

Though the government is hopeful of inflation coming down to 6% by March, the latest price revision of the manufactured goods will exert more pressure on the overall inflation which was 7.48% for November, analysts say.

In the wake of rising prices of steel and other raw materials, several consumer durables manufacturers like LG and Whirlpool have increased prices up to 4%.

"Commodity prices are going up...this is a cause of concern on overall prices of the products," Whirlpool India vice president (corporate affairs and strategy) Shantanu Dasgupta had said.

For motorists driving CNG vehicles in the national capital, the New Year began with increase in their fuel bill.

Indraprastha Gas has increased the CNG prices from Rs27.75 to Rs29 per kg.

Cars too became costlier. While Tata Motors hiked prices up to Rs30,000, other auto firms like Mahindra & Mahindra, Hyundai and General Motors have announced their intentions to follow suit.

Some of the leading tyre-makers have also raised the price.

As regards food, onion prices after declining have returned to Rs45-60 per kg in different metro cities. Milk producers like Amul and Mother Dairy have raised the retail price by up to Rs2 per litre.

Given the increase in prices of both edible and non-edible products, containing overall inflation, measured by the wholesale price index (WPI) remains a big challenge for the government and the Reserve Bank of India.

"Any complacency on the inflation front is unjustified because the food inflation may remain sticky. With higher government spending in the last quarter, demand may further go up and prevent the prices to come down," said Ficci director general Rajiv Kumar.

The central government expenditure rose by 15% during the first three quarters to Rs6.90 lakh crore from Rs6.21 lakh crore in the year-ago period.

The government expenditure for fiscal 2010-11 has been budgeted at around Rs11 lakh crore. The expenditure in the last quarter of this fiscal may cross Rs4 lakh crore at a time when there is a cash crunch in the economy.

Increasing prices of raw materials like coal and iron used in steel making has forced several companies to raise the product prices. Companies like SAIL and JSW Steel have hiked their prices.

"We have increased prices across all product categories by 3% on high input costs," a senior company official of SAIL had said.

Cement prices in various metros too have inched up. According an industry expert, cement prices in Mumbai and Maharashtra have increased by an average of Rs10 per bag. The hike in cement and steel prices would also push the real estate prices.


India overtakes China as most attractive market for Japanese firms

Tokyo: India has overtaken China as the most attractive overseas investment destination for Japanese manufacturers over the next decade amid increased labour costs in China, reports PTI quoting a survey.

China, however, remained the most popular investment destination over the next three years in the survey conducted last summer, having retained top spot since fiscal 1992 when the state-backed financial institution began conducting the survey by the Japan Bank for International Cooperation.

The result suggests that an increasing number of Japanese companies are aiming to diversify foreign investment amid caution about rising labour costs and anti-Japanese demonstrations in China.

An additional survey conducted in November in the wake of bilateral tension over the Senkaku Islands in the East China Sea provided further evidence of the trend.

China no longer dominates Japanese foreign investment and Japanese companies "are increasingly turning their attention to such (emerging) markets as India and Vietnam," said Toshiharu Mimura, a senior economist at JBIC.

In the survey conducted in the summer of 2010, in which multiple responses were allowed, 74.9% of the 605 Japanese manufacturers selected India as their investment destination over the next 10 years, compared with 71.7% that chose China. In the previous year, China was first and India second.

As a destination over a shorter period, China came top at 77.3%, followed by India at 60.5% per cent, Vietnam at 32.2%, Thailand at 26.2%, and Brazil at 24.6%.

The companies that chose China and India said they viewed the two markets as having high growth potential.

Many companies, however, expressed concern over rising personnel costs in China amid the country's rapid economic growth, as well as labour issues, apparently reflecting a recent rise in disputes between Japanese firms and Chinese workers seeking wage hikes.

In the follow-up study to gauge the investment stance of Japanese companies after maritime collisions between a Chinese trawler and Japanese patrol boats near the disputed Senkaku Islands in September, 24.8% responded that China was not as attractive as before, while 46.9% said it was important to reduce their dependence on China and diversify investment risks.


Oil ministry not in favour of raising diesel, LPG prices: Deora

New Delhi: Oil minister Murli Deora today said his ministry is not in favour of raising diesel and domestic LPG prices as a response to the spurt in global crude oil prices, as the move will add to already high inflation rate, reports PTI.

"We are trying to see that we do not have to increase prices," he told reporters here.

Last week a meeting of the Empowered Group of Ministers (EGoM) headed by finance minister Pranab Mukherjee was indefinitely postponed on Mr Deora's insistence of not raising fuel prices just now.

"I don't think the EGoM should meet just now to decide on raising prices," Mr Deora said today.

Others in the government have favoured raising fuel prices as a response to hardening of international crude oil rates to over $90 per barrel while Mr Deora has preferred government subsidies to lessen burden on the common man.

Diesel has a weightage of 4.67% in inflation, while LPG contributes 0.91%. A hike now would further accelerate inflation, which is currently at 7.48%.

Mr Deora wants the government to make up for at least half of the Rs72,812 crore revenue loss state-owned oil firms are likely to incur this fiscal on selling diesel, LPG and kerosene below cost.

The EGoM was originally scheduled to meet on 22nd December but was deferred to 30th December. The meeting was at the last moment deferred without a new date being given.

The panel was to meet to consider at least a Rs2 per litre hike in diesel price and Rs30-Rs40 per cylinder raise in LPG rates.

Mr Deora said the government would do everything possible to protect balance sheets of state-owned oil firms and insulate the common man from vagaries of international market.

"In 2008, when crude oil shot up to $147 per barrel, we insulated the common man and provided for Rs1,03,000 crore from the budget to subsidise fuel," he said.

The under-recovery (or the revenue oil companies lose) on diesel today stands at Rs6.99 per litre, sources said.

Besides diesel, the oil firms lose Rs19.60 per litre on PDS kerosene sales and Rs366.28 per 14.2-kg LPG cylinder.

The oil firms had last month raised petrol price by Rs2.94-2.96 a litre but the hike was short of Rs3.5 a litre desired increase to make retail prices at import parity.

The government had in June 2010 freed petrol prices, but the state firms, which control 98% of the retail market, continue to informally consult the oil ministry before revising prices.


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