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India: Petroleum, coal price hikes to hit many sectors

The first major economic decision by the government is expected to hit many industry segments, leading to an across-the-board rise in prices of various goods. The steep hike in petroleum and coal prices on Tuesday will negatively hit companies — especially the automobiles, steel and cement sectors.

While petrol and diesel prices were hiked by Rs 2 and Re 1, respectively, Coal India had announced an average 16.7 pc hike in prices from June 16.

According to the automobile industry players, many customers will think twice before buying a vehicle with petrol costing as much as Rs 40.96 a litre in Mumbai.

Ravi Kant, executive director (commercial vehicles) Tata Motors, said the rise in petrol price could dampen car sales, as people may defer purchasing new ones. ‘‘We have seen it does have an impact, as cost of operation goes up. People do tend to think about that and may delay their purchases,’’ he said.

‘‘A petrol price hike does impact, at least temporarily. We have seen it does have an impact as cost of operation goes up,’’ he added. Commercial vehicle sales are also likely to be hit.

In fact, cement companies are gearing up for a round of price increase following the hike in domestic coal prices. While companies are still working out the price increase for various grades of coke, industry observers said a price hike was imminent following the oil price rise coupled with an increase in freight rates.

ACC will see input prices going up by Rs 5 per bag. ‘‘We are in the process of working out the price increase. The cost increase is significant and we will try to pass it on, if not in one but in two tranches,’’ ACC Executive Director A.K. Jain said.

According to Gujarat Ambuja estimates, domestic coal prices are expected to go up by 15-17 per cent.

The upward revision of coal prices by Coal India Limited (CIL) has come in for sharp criticism from Indian Steel Alliance (ISA).

ISA president Moosa Raza has said, ‘‘ An increase of coal prices by 16.7 pc will have an adverse impact on the steel industry as a whole.’’

Requesting the Government for a roll back on the increase, he said the prices of raw material which goes into making of steel— especially coking coal and iron ore have been continuously increasing adversely affecting the available margins for the steel industry.

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