Industries warn of steep jump in prices

Hyderabad: The industrial sector has warned of a marginal to steep rise in the cost of various goods in coming months. This will be on account of factors like the continuing sluggish growth, shortage of power and higher tariffs, a credit squeeze by banks, political uncertainty hitting business and the increased two per cent taxation in the form of CST (Central Sales Tax). The cost of overheads is also expected to increase further.

The mounting problems over the last two years have already resulted in around 70 per cent of small and medium industries becoming non-performing assets (NPAs), and now even bigger companies are on the brink.

The overall industrial scenario has been bad since the last two years and will only worsen in the next two to three months, warn experts. While trading in all goods and services has gone down by roughly 20 per cent in the last three months, it is expected to plummet by another 10 per cent in future until the political situation settles down.

A major chunk of industries will be affected by the compulsory CST (Central Sales Tax) that will come into play once the state is bifurcated. Companies that currently have business in both regions are likely to be affected.

“There will be a two or three per cent increase in the cost of goods sold between the two states on account of CST. This will have to be passed on to consumers. Due to this there will be a marginal increase in costs,” said senior vice president of FAPCCI (Federation of AP Chambers of Commerce and Industry), Mr Shiv Kumar Rungta.

Also, as per the taxation regime, many companies will be required to get new official addresses (for new Tax-Payer Identification Numbers) which are compulsory to continue business in both the new states. The already struggling companies that operate in both the Andhra and Telangana regions will therefore be compelled to maintain offices in both states. This means the setting up of new offices in at least one of the regions, which will escalate the cost of operations further.

“The number of NPAs is growing at an alarming rate and since the industrial sector already has a one-day power holiday in place until the end of April, the situation is not expected to be any better due to the power requirements of the rabi crop. If the situation continues in May, it will have a direct bearing on overheads. The manufacturing sector is already in decline and taking together all other factors, there will be a substantial increase in the cost of goods as losses will have to be passed on to products,” said J. Nageshwara Rao, president, Federation of AP Small Industries Association.