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Prices of durables to increase
MUMBAI, FEB 17 (AGENCIES)
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Published on 17 Feb. 2010 11:24 PM IST
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An uptick in commodity costs has already led to a hike in consumer durables like refrigerators, air-conditioners and television sets. However, a second round of price increases could just be round the corner if the forthcoming Budget unveils a rollback of the stimulus package, stated Times news. In fact, Godrej Appliances, part of Godrej & Boyce Manufacturing, will immediately pass on a 2-3% hike in its product prices to consumers, said its chief operating officer, George Menezes. “In one quarter, commodity prices have hardened by close to 15-18%, which is why we are passing on a part of the cost increase to consumers. If the government decides to partly roll back the stimulus package in the Budget, we will be forced to go in for a second round of price increases. The impact of a rollback would be crippling,’’ said Menezes. Last week, Videocon initiated a 5% price hike on home appliances across categories. In some cases, the hike has been in the order of 6-6.5%. The company is considering another price hike before the Budget. “The entire industry has taken a cautious approach and everyone is waiting to see who makes the first announcement. In the Budget too, there are expectations that the tax rate will go up. In all likelihood, it will be higher. We are setting in price hikes to get over these hurdles,’’ C M Singh, vice president, Videocon, told TOI. Prices of steel, copper, aluminium, polymers and chemicals have been on the rise, which is putting pressure on the margins of consumer durable companies. The prices of all these commodities put together add up to 65-70% of total cost. For Godrej Appliances, for instance, steel constitutes 25-30%, polymers forms 25%, copper and aluminium, 15-20% and chemicals comprises another 15-20% of the total cost. While commodity costs are a major factor for companies to go in for price increases, tax is another factor. Consumer durable companies have been impacted in certain states like Andhra Pradesh and Rajasthan, where value-added tax rate was hiked by 2% last month. ‘‘We have been hit on both counts and have brought about a price increase. In colour television sets, the hike is more due to taxes,’’ said Videocon’s Singh.

 
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