Consumer goods firms to up prices on rising input costs

Market leader LG Electronics will revise television prices by 3 per cent, while the refrigerators and washing machines will get dearer by 3-5 per cent, V Ramachandran, director (sales and marketing), LG India, said. The company may raise the prices of airconditioners by 7 per cent later.

Mirc Electronics and Godrej Appliances may also hike prices in June. Gullu Mirchandani, chairman Mirc Electronics, said, "A hike of 5-7 per cent is inevitable as raw material costs have gone up while imports have become expensive."

The rise in prices is expected to partly offset increase in raw material costs, which consumer durable makers were forced to absorb in the past few months. Raw material costs for appliance makers have risen by 10-12 per cent since February.

The cost of steel alone, which comprises almost 30 per cent of products like refrigerators and washing machines, has grown by 40 per cent in past four months.

Other key commodities like copper and aluminium have soared by close to 20 per cent. George Menezes, COO Godrej Appliances, observed, "The companies are still absorbing almost half of the pressures by passing only 3-5 per cent of the cost."

The refrigeration and other non-electrical machinery group has a weight of 0.98909 in the wholesale price index (WPI), which is used to measure headline inflation in India. Within the group, colour televisions have a weight of 0.33056, while airconditioners have a weight of 0.0879.

LG on the other hand differs. "While we have tried to maintain our prices but with the dual impact of rising input cost and depreciating rupee we can no longer defer the intended price hike," Ramachandran explains.

With the dollar becoming stronger against the rupee, manufacturers will have to pay more for completely built units (CBUs) and other components imported into the country.

The weakening currency becomes a cause of concern for the companies as premium products in vogues like double door high-end refrigerators, LCDs and front load washing machines are largely imported for sale.

Earlier this year, lack of incentives in the Union budget and building input cost pressure had prompted companies, such as Godrej Appliances and Samsung Electronics, to hike prices by 2-3 per cent on certain product categories. However, Samsung has decided against revising prices for the second time this year.