West Asia crisis eases, but peace could elude consumers for now

Kolkata: Indian consumers are unlikely to see lower prices for everyday goods and home appliances anytime soon despite crude oil prices slipping to below $80 a barrel, with manufacturers saying they have substantial inventories of raw materials purchased at higher prices.

Chief executives of companies selling daily essentials, fast-moving consumer goods (FMCG) and consumer durables such as refrigerators and washing machines said any benefit from lower crude prices is likely to reach consumers only by September-October, ahead of the festive season. That too, if input costs remain stable. "There is no possibility of immediate price correction. We need to see raw material prices stabilise for a few months," said Mohan Goenka, vice-chairman of Emami.

"We are carrying 2-3 months of raw material inventory that was booked in advance in larger quantities because of shipping disruptions. We will review prices after three months," he said.


The maker of Zandu Balm, Navratna cooling oil and BoroPlus had raised prices by 3-4% on average over the past few months.

Berger Paints chief executive Abhijit Roy said the company would monitor raw material prices for at least 60 days, while also keeping an eye on the rupee-dollar exchange rate. "We need to be sure where prices finally settle. There is still significant inventory in the system at old prices," he said. The paints industry has been among the worst hit by higher crude-linked input costs, with prices rising by about 10% on average over past three months. Crude oil extended its decline on Wednesday with Brent slipping under $79 a barrel, the lowest level in three months since early days of West Asia war. Brent crude had surged past $120 a barrel at peak of the conflict amid fears of supply disruptions.

Crude derivatives are key inputs for FMCG and consumer goods companies, finding their way into plastics, packaging materials, liquid paraffin, petroleum jelly, detergents, shampoos and soaps. Elevated crude prices had also pushed up freight and commodity costs, leading to price increases across categories over the past three months.

"Crude is correcting very quickly, but Malaysian palm oil prices have not changed much. Even plastic prices remain high," said Tarun Arora, chief executive of Zydus Wellness that markets Complan and Glucon-D. "It takes time to respond, just as it took time when crude prices went up. It may take a few weeks for input costs to reflect the change and a couple of months for consumers to see the benefit," he said.

Kamal Nandi, head of the appliances business at Godrej Enterprises Group, said prices of key inputs such as copper and plastics remain elevated, though the industry expects commodity prices to soften in the July-September quarter.

"Demand is not very encouraging," he said. "The price hikes taken by the industry so far are still not enough to offset high copper and plastic costs. If input prices continue to soften, there could be some price correction around the festive season."