RISING CRUDE OIL PRICES IN INDIA WILL POSE A CHALLENGE TO COMPANY MANAGEMENT

In India, prices were rising by about 6 per cent each and now a drought-like situation is fast emerging. Company management will have to cut costs in many areas

By attacking Ukraine, the Shiites have stirred up not only world politics but also world economy. It will have an adverse effect on India’s economy and company management. Due to rising crude oil prices, there will be hardly any company or business sector in India whose business will continue as before. Of course, the central government of India has imposed unbearable taxes on petrol and diesel and if this tax is drastically reduced, the Government of India and its citizens will not have to pay higher prices for petrol and diesel and hence many items will be spared. The biggest hit of the potential price hike will be on companies like University, Dabur, Patanjali, Godrej, ITC as they sell their wares at the corners of the country and they have to spend huge amounts on the transportation of their products to run the nationwide expansion. Their profit margins and sales are likely to decline. The margins of the paint industry, which uses oil extensively as a raw material, will also be lower.

What to talk about the plight of the citizens? Higher crude oil prices have led to higher prices of vegetables, cooking oil, electricity, cooking gas, spices, etc. and also increased the cost of driving scooters, bikes, cars, trucks, rickshaws etc. Even so, prices in India were rising by about 3 per cent and now a drought-like situation is fast emerging. Company management will have to cut costs in many areas. The huge cost behind advertising will have to be reduced and the manufacturing cost will also have to be reduced. The same days are coming as a headache for the company management as the margin of the company paying them should not be reduced. The government will be in trouble as it will have to take a number of unfavorable steps to curb inflation.

Adverse Impact on Indian Companies: High inflation on the margins of Indian companies during and after the quarter of FY 2021-202, which ends on March 31, will have a very negative impact. The Nifty 20 companies that were supposed to show an estimated growth rate of 30 per cent during this period will not be able to achieve it. There is no denying the possibility of a sharp drop in sales of fuel oil manufacturing and marketing companies from India’s public enterprise.

 

Profitable Indian companies engaged in the dyeing business, which consume large quantities of oil for raw materials, will be in a difficult position as they will have to raise the prices of their products or drastically reduce their margins. In India, companies like Unilever, Dabur, Walmart, Emami, Colgate, ITC which we know as FMCG (Fast Moving Consumer Goods) will have to raise the prices of their products. Because they sell their goods all over India and hence their cost of distribution is high.

 

Now that their high distribution costs have skyrocketed, they may have to bear the brunt of these costs. FMCG companies now sell so many of our daily necessities that the price hike would disrupt the budgets of ordinary Indians. Now if the Reserve Bank raises its repo rate, the declining demand for liquidity in the market will further reduce it. F.V. 2015 and F.W. Even as global crude oil prices crossed the ૧ 100 mark in the two-year period of 2016, demand fell and companies’ margins fell. F.V. In 2016, crude oil prices hit a record high of ૫ 115 a barrel for the first time in the history of oil marketing.

After that F.W. In 2014, it plummeted to just ૮ 4.5 a barrel, marking a significant increase in the margins of Indian companies.

Fear of Unbearable Inflation: Crude oil prices have risen sharply since February 8, 2008, but have risen sharply in the last three months. The global price of a barrel of Brent crude oil in March 2021 was only 3. Then at the end of November 2021 it rose slightly to ડો 50 and now almost three months later it has reached ૫ 108.

 

Will the government and potentially distressed citizens face the next challenge? If Kovid’s epidemic barely escapes, will we be able to free ourselves from the devastation of the epidemic created by this war?

COUTESEY: GUJARAT SAMACHAR DHAVAL MEHTA 13032022

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