Price Cut– Good news for common people. The leading FMCG company Hindustan Unilever (HUL) has reduced the prices of many of its popular products. These include Dove shampoo, Horlicks, Kisan jam and Lifebuoy soap. The new prices will be effective from September 22.
Which products’ prices decreased
According to HUL’s advertisement, Dove shampoo (340 ml) will now be available for Rs 435 instead of Rs 490. The price of Horlicks (200 gm) has come down from Rs 130 to Rs 110. Kisan Jam (200 gm) will now be available for Rs 80 instead of Rs 90. Whereas, Lifebuoy soap (75 gm × 4 pack) has come down from Rs 68 to Rs 60.
HUL says that the packs with new prices are gradually reaching the market. This decision has been taken after the government’s rule, which requires companies to give information about the change in prices in newspapers.
Will the prices of small packs not decrease?
Consumer goods manufacturing companies have made it clear to the Central Board of Indirect Taxes and Customs (CBIC) that they will not be able to reduce the price of small-priced products after the GST cut . They say that this will make it confusing for consumers to buy. Instead, companies have suggested increasing the size of the pack.
Why the price of the small pack will not change?
Everyday items like biscuits, soap and toothpaste are often sold at Rs 5, 10 and 20. Companies say that going below these price points will be difficult in the Indian market. For example, a Rs 20 biscuit pack till now came with 18% GST. After September 22, GST on this will be reduced to 5% and the price of the pack will come down to Rs 17.80 or Rs 18.
A senior executive of an FMCG company said, “Indian consumers are used to buying products at the price of 5, 10 and 20 rupees. We do not want to disturb this structure.” He said that now companies will pass on the benefit to consumers only by increasing the size of the pack. That is, the weight of the 20 rupee pack will increase.
Impulse packs and corporate strategies
Rishabh Jain, CFO of Bikaji Foods International, said that after the new rates, the company will increase the weight of the ‘impulse pack’. Impulse pack is that which the consumer buys suddenly without thinking.
Finance Ministry officials say that the government may soon bring guidelines so that companies do not indulge in ‘unintentional profiteering’. At the same time, Dabur India CEO Mohit Malhotra expressed confidence that companies will definitely pass on the benefits of GST reduction to customers, which will increase consumption.
Why is there a need to change prices?
In the 56th GST Council meeting held last week, major changes were made to simplify the tax system. Now the standard rate will be 18% and the merit rate will be 5%. A 40% de-merit rate will also be imposed on some selected goods and services. Most everyday items have now come under the 5% tax slab. The government has instructed that companies should pass on the benefits of tax rate cuts to customers.
Now what will the government do next?
At present, there is no fixed system to monitor the profiteering of companies, but the government can bring in a new mechanism if needed. BCG MD Namit Purit believes that there will not be a major change in prices. Companies will mostly pass on the benefits to consumers by increasing the pack size. According to him, ‘Customers will get more quantity at the price point of Rs 5 and Rs 10.’