SMEs believe fuel price hike will increase input costs

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Saurabh Gupta | 25 Jun, 2011
While conceding that the fuel price hike was inevitable, small and medium enterprises (SMEs) in the national capital region Saturday said the increase in the rates of diesel, kerosene and cooking gas will have inflationary pressure in the economy and will result in high input costs.

"Diesel price hike will have an impact on our industry. Due to power shortage in the state we have to produce our own electricity to run our manufacturing unit. Hike in diesel prices will lead to increase in our production cost. Along with this there will be more inflationary pressure. Logistic and transport costs will increase because of the price hike," said Rajeev kumar, a manufacturer of auto components in Ghaziabad.

The increase in logistic and transport costs will put small manufactures in a more disadvantageous position, he added.

Petroleum Minister S. Jaipal Reddy Friday announced that the price of diesel will be increased by Rs.3 per litre, kerosene by Rs.2 per litre and domestic liquid petroelum gas (LPG) by Rs.50 per cylinder, excluding state levies such as VAT from Friday midnight.

The hike came a day after the government announced that food inflation had soared to nearly a 10-week high of 9.13 percent for the week ended June 11.

People voiced their woes after the hike, finding it an additional burden on the house budgets.

Another owner of a SME in Okhla Industrial Area in New Delhi, Amit Malhotra said that the Reserve Bank of India (RBI) is consistently increasing the key rates to tame inflation, but the price hike of petro-products will have a wide-spread effect on inflation.

He said, "This extra burden on our workers will affect their livelihood. We are already facing immense shortage of skilled workers and with this move of our government, our workers will demand for extra wages, which leads to high input costs."

"The government could have given tax relief to the loss-making oil companies instead of increasing the prices of diesel, kerosene and cooking gas," Malhotra added.

While countering central government's move, the Bharatiya Janata Party (BJP) Saturday staged a demonstration in the national capital against the hike in the prices of diesel, kerosene and cooking gas, with party leaders demanding a rollback.

"Instead of listening to the complaints of the common man, the government is showing a no-mercy attitude by raising the prices of essential commodities," said the BJP's V.K. Malhotra, Leader of Opposition in the Delhi state assembly.

"The hike in prices of fuel and cooking gas is unjustified," he added.

Shouting slogans against the government and asking the people to join in, the party organised the protest at Jantar Mantar at 11 a.m.

"We demand an immediate rollback of this hike," Malhotra said.