Hike in fuel price elicits mixed reactions

First it was inflation, and now the fuel hike is taking a toll on channel
partners. 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.

It is said that the price hike, effective midnight of June 4, will likely
push inflation up by about 0.5 percent. Economists feel there will also be a
cascading effect on inflation 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
turnover of the customers have decreased.” 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 in buying the 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.

Not others like Keshav Madhav of Delhi-based Vidur and Co felt otherwise.
According to Madhav, this hike will have an impact for only two-three days,
after which everything is going to come back to normal.

Vendors like HP, Lenovo and Dell have already increased the price of their
products in anticipation as the inflation has increased. Jitender Singh of JP
Sales, Dehradun felt that the operating cost is going to swell and will affect
them indirectly, but not much will change due to petrol price hike. Citing an
example he said, “Suppose the price of laptop is Rs 39,000 and due to petrol
price hike and inflation is has increased to Rs 41,000, do you think because of
this hike, people are not going to buy PCs? They will. It might pinch a bit but
then no one is going to stop buying.”

Partners down South, we found that partners were a bit anxious about the
hike. A worried V Sukumaran of Chennai-based National Infomac said, “Dollar rate
has increased and now petrol price. It is going to take a toll on us but not in
a big way. Transportation cost is going to increase and hence price of
everything is going to increase.”

Yaspal S Jain of Devraj Computers, Chennai seemed to be vexed by the hike.

“What is Congress doing? Till the time we have Chidambran as our Finance
Minister, nothing concrete is going to take place. Nothing is going to improve.
It is the government's duty to see that we get water and electricity, but
instead they are imposing taxes on basic necessities now. I can see the impact
the fuel price hike will have on my business. There will be no customer at my
shop. Whatever I used to sell at Rs 50, I will sell at Rs 70 now. There is going
to be 100 percent negative impact. Prices of everything are going to rise,” said
an annoyed Jain.

Partners in West, where the price of petrol increased to Rs 55.80 per litre,
which is the maximum increase as compared to any other region, they were the
most relaxed lot. Vinod Mulchandani, of Aar Vee Computers and Ashwin Kukreja of
Real Time, both Mumbai-based companies, seemed to be least bothered by the
impact. “It has happened in the past and it will happen in future too. Life goes
on, “ Kukreja concluded.