Hike in fuel price elicits mixed reactions

Gurgaon

June 9, 2008

First it was inflation, and now the fuel hike is taking a toll on the
channel. The Union Government has raised the retail fuel prices to reduce
oil-marketing companies' burgeoning losses because of the spurt in global
crude oil prices. Petrol will now cost an additional Rs 5 per liter and diesel
an additional Rs 3.

Economists feel that it will have a cascading effect on inflation, rising it
by 0.5 percent, due to rise in price of diesel, since it is used as a fuel in
transportation of commodities. The cascading effect of the rise in prices of
diesel will be felt in the next two months.

The DQ Week asked partners across India whether they were worried about the
hike in price and what impact it is expected to have. But partners did not seem
to be too perturbed about the announcement.

New Delhi-based Pankaj Bandlish of Compro Computers, agreed that hike would
increase the price of products but the effect would not be severe. “We have
observed that the sales of products have decreased in the last two days as
customer turnover has decreased,” he noted. Elaborating further on the effect,
Bandlish said, “In home segment, there are two kinds of products, basic
products like PCs and laptops and luxury items like printers and speakers.
People will delay the purchase of luxury products. They will now prioritize what
to buy. Customers will go for products only if it is a must.”

He further added that the price hike was going to have a psychologically
impact on consumers. “For example, if fuel price is hiked by 10 percent, it
will affect the pricing of everything and the cost of all products may increase
by two percent, but people will assume the price hike to be 10 percent of every
product, and hence delay the purchase of luxury items,” said Bandlish.

Read full report in The DQ Week edition of June 9-15, 2008