Get ready to pay more for consumer products

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NEW DELHI | KOLKATA: Several consumer products from soaps to shoes to smartphones and appliances will cost more soon as several companies plan to pass on the custom duty hikes announced in the Union budget to consumers.

Apple on Monday increased prices of some iPhone models such as iPhone 11 Pro, 11 Pro Max and iPhone 8 by Rs 600 to Rs 1,300 to offset the proposed increase in duties while sportswear brand Puma India will increase prices by 10% from April.

“Till then, we will continue to have the same price because for the products that have already been imported we have not paid additional duties,” said Abhishek Ganguly, managing director of Puma India that imports almost 70% of its products, mostly shoes. Prices of air conditioners, washing machines and refrigerators will go up by 3-6% from this month due to 2.5% increase in basic custom duty on their compressors and motors of ACs, as well as due to increase in component and logistics costs in the wake of Covid-19 crisis in China, manufacturers said.


Finance minister Nirmala Sitharaman had in her budget speech last month announced doubling of custom duty on shoes to 20% along with higher import duty on various other products including butter, cheese, fans, food grinders, irons, room heaters, tea and coffee makers, kitchenware and hair dryers. Godrej Consumer Products has hiked soap prices by 5%, while soft drinks-maker PepsiCo has selectively increased the prices of some items.

For example, the 750-ml soft drinks that carried maximum retail price of Rs 38 in Uttar Pradesh now cost Rs 40, and the price of 1.25-litre packs in Karnataka has gone up from Rs 60 to Rs 65. “We continue to observe market dynamics and consumer preferences from time to time,” a PepsiCo India spokesperson said. “Depending on the insights we receive, we take decisions on our pricing strategy that may vary from one region to another.”

Others FMCG companies such as Parle Products and Nestle said they are keeping a close watch on raw materials with inflationary pressures. “The trend of higher commodity prices witnessed in recent quarters is likely to continue in the near future,” Nestle chairman Suresh Narayanan said in a post-earnings call last month. Over the past three months, commodities including wheat, edible oils and sugar have become costlier by anywhere between 10% and 20%. Parle Products marketing head Mayank Shah said, “If the inflationary trend continues, we will need to consider price hikes.”

Some footwear companies such as Woodland, Adidas and Asics plan to put off the price increase by a few months because they have either already imported products in the old custom duties or have committed price to distributors or franchisees keeping in mind the previous 10% duty.

“This season there will be no change in the pricing since we have already sourced the products to our distributors and we cannot change the price,” said Harkirat Singh, managing director of Woodland. “But next season — that starts in September — it will get affected. The products we import now will come with the new duties and we will quote the distributors our new prices.” Adidas said it would increase prices by 5-6% from June on a small range of products. Asics, too, could hike prices by 5-10% from June as it imports about half of its shoes, a person close to the Japanese footwear and sports equipment company said. Asics said its spokesperson is not available for comments.

A telecom industry executive said the net import duty impact for smartphones has gone up by 2% since the budget fine print withdrew the exemption on social welfare surcharge, which was earlier available on basic custom duty on mobile phones. The surcharge is 10% of the basic custom duty, which is 20% for smartphones. This has forced Apple to hike prices of some models. The iPhone 8 64 GB now costs Rs 40,500 against Rs 39,900 earlier, while the price of iPhone 11Pro 64 GB has gone up to Rs 1,01,200 from Rs 99,900 and that of iPhone 11Pro Max 64 GB to Rs 1,11,200 from Rs 1,09,900. Prices have gone up for these models across memory variants.

Apple has, however, decided to absorb the duty hike in the case of iPhone 11 since it does not want to impact its demand. Locally-made models iPhone XR and iPhone 7, too, have escaped the price hike. Around 75% of iPhones sold in India are imported by the company.