Although the import duty cuts in the latest round of sops are being viewed as a positive development for many sectors depending on imported raw materials, the fast-moving consumer goods (FMCG) sector may not see any immediate price reduction. Industry players feel that there are many other factors collectively determining the end result on MRPs.
Godrej group chairman Adi Godrej, who said that the cut in import duties is a favourable move for the FMCG sector in general, however, added that for the soap business, it’s not the only factor that can lower prices. The issue of palm oil imports is very complex and the benefit of duty cuts can get offset if the commodity prices go up sharply. He said that a cut in excise duties for this segment would have directly led to a fall in MRPs.
Analysts, as an afterthought, feel that reduction in customs duties of non-farm imports would soften prices of FMCG products, but not necessarily toilet soaps. However, the price hike in soaps may soften due to this development. Analysts added that MRPs of many FMCG products depend heavily on prices of imported raw materials, and companies are likely to pass on the benefits to the consumer, but with a lag of one month, even as this depends on the competitive scenario of each segment.
Some analysts comment that the degree of benefit of duty cuts will vary from segment to segment. Those segments of the FMCG sector facing heavy competition will use this opportunity to lower prices. Those who plan to use the savings on marketing/promotional activities will not do so. Shaving segment players like Gillette may slash its prices by 3-4 per cent. Prices of paints are also most likely to come down.