India Inc feels oil price burden

India Inc is feeling the pinch of rising oil prices with the cost of production going up by 5-20 per cent.

According to a Federation of Indian Chambers of Commerce and Industry (Ficci) survey among 147 companies, nearly 77 per cent firms reported that their cost of production went up.

Only 23 per cent said that there had been no impact on their cost of production.

Nearly 60 per cent companies said that they absorbed the hike internally, while 38 per cent said that they were doing just the same for a part and passing the rest on to consumers.

Industry feels that the government should promote alternate sources of energy and diversify the sources of imports to help meet the country's oil needs.

Seventy nine per cent of the companies said that internal absorption may not continue for long and prices would be hiked in the next three to six months, 21 per cent said that the present conditions would remain for the next one year. Most respondents said that economic parameters like inflation and trade balances would be affected the most.

According to 70 per cent of the respondents, the impact of rising prices on inflation would be 'high' while 90 per cent said that impact on trade balances would be between "medium and high".

The survey covered sectors like cement, heavy equipment and machinery and transportation and construction, which uses oil and oil products.

Nearly 64 per cent of the Indian companies said that oil accounted for less than 20 per cent of their total energy bill while 19 per cent said that oil accounted for 20-40 per cent of their bill.

The respondents have suggested internal and external measures to curb the prices. Among internal measures they said that top priority should be given to energy conservation and promotion of efficient use of petroleum products.

Other measures like a floating tariff regime would also help in controlling the prices, the survey said.On the external front, respondents said that India should form a buyers consortium with other Asian nations to bargain with oil exporting countries.