Packed food prices may rise despite government sops

Consumer prices of packaged foods will continue to increase despite recent government measures to check food inflation because of sustained increase in costs of packaging and not enough cost benefits on oil and industry fuel, executives said.

The government has in recent days banned wheat exports, restricted sugar exports, allowed duty-free imports of crude soyabean and sunflower oil up to 2 million tonnes each per year for two years, and cut excise duty on petrol and diesel.

"Owing to continuous increase in packaging costs and not enough benefits on oil, we are forced to continue taking up price increases directly or indirectly," said B Krishna Rao, senior category head at Parle Products, one of the country's largest makers of biscuits and snacks. "There is no respite on costs of packaging laminates and cartons because these are internationally linked, as a result of which are being forced to continue price increases."

A spokesperson of its rival Britannia Industries said, "We will assess the impact of the export curb on the domestic market and decide course of action (on product prices) accordingly."

While sugar and wheat constitute 18-20% of costs depending on the product category, cost of packaging material like laminates and corrugated boxes can comprise up to 40% of costs of these products, industry executives said.

Packaging costs of industrial fuel, diesel, laminates, cartons and corrugated boxes have shot up in the past six months. "The industry has not been given any major advantages on large components of costs such as oil and packaging; we have to continue to either increase prices or reduce grammage," said Vikram Agarwal, managing director of salty snacks maker Cornitos.

RS Sodhi,MD of Gujarat Cooperative Milk Marketing Federation (GCMMF), which makes Amul dairy products, said, "The export restrictions on sugar will not have an impact on consumer prices. Unless there is reduction in costs of packaging and energy, inflationary pressures on prices will stay."