Slash Edible Oil Prices To Bring Back Rural Consumers

Indian consumers, particularly those living those living in the rural regions, are making less purchases and use less edible oil since it reached an all-time high in April. The global price, since then, has slowed and duties have been reduced while the Indian government asked the makers of edible oil to cut their costs by a whopping two. 
 

The government of India yesterday asked oil producers to cut costs for packs by about Rs10-15 per Liter. The companies are looking at macro factors before making any changes. "A significant price reduction is already taking place. After the request from the ministry that we're evaluating it and will announce the announcement once we've completed the process, but it will not be a significant price cut. We're observing prices carefully prior to taking any decision since the main problems of supply chain, war and human resources are unaffected," Akshay Modi, director for Modi Naturals' informed.

Ghanshyam Khandelwal, chairman of the BL Agro-manufacturers Bail Kolhu-- the cold-pressed mustard oil brand-- is of the opinion that the reduction requested could be possible. "The price of oil has dropped in global markets, so it has a direct impact in the local market, too," Khandelwal added.

FMCG firms are now hopeful that a series of price cuts can boost rural demand which has been extremely sluggish in recent months. In fact, a majority of them have given up on the hope of even the holidays to boost demand. According to BL Agro, rural India can contribute about 40 percent to their overall consumption and a rise in demand for rural goods means higher profit margins.

"The consumer's demand is likely to increase especially in the rural sector and among the consumers who are out of home. It is a price-sensitive market and their demands are contingent on price fluctuations," said Khandelwal. Rural India has seen a decline in trading to loose oil following the price increase. They are cheaper than smaller packages, which can include a packaging cost of about 15%..

The oil that's moving quickly off the shelves today is palm oil. "Palm oil is among the most affordable of all oils and is therefore widely consumed by the poorer segment of the population. It's likely to get cheaper over the next few weeks," Khandelwal asserted.