Though it was expected earlier that the paint companies would raise the prices of decorative paints only after this year’s budget, now it appears that price hike may come much earlier than anticipated. According to some experts, it may come soon after the general elections.
Firming up raw material prices may force the paint companies to advance their decision to hike the prices of their products before the end of busy season. According to them, waiting till the presentation of budget means no price hike almost till the beginning of next festive season which will start after Monsoon as the Budget this year is likely to be presented only in July.
For paint companies, most of the raw materials are derivatives of crude oil and any surge in the prices of crude oil will have direct impact on the prices of raw materials too. From the low of Rs 3,200 per barrel/US$45 at the end of December last year, crude oil prices have gradually increased to Rs 4,500/US$65 currently. Titanium dioxide (TiO2), another key raw material for manufacturing paints, recorded 13% year on year average price increase in the fourth quarter of last financial year. And there are no indications that these prices will role back to previous year’s level in the near future. Also, paint companies, especially the market leader, Asian Paints, follow the practice of passing on the cost escalation immediately and this year they are holding back due to general elections.
It may be recalled here that in 2018 paint companies had hiked prices twice aggregating to 4%. During January-March this year, prices remained almost normal with major paint makers continuing with no increase in the price during the quarter. The only exception was Akzo Nobel which hiked the prices of its products marginally by 1-1.5% in the month of February. For paint companies more than six months of price inaction is something unheard of. So, expect a price hike of 1-2% post elections.