Soaring LPG Costs May Force Restaurant To Hike Prices

'If 5% of the total revenue was spent on LPG (pre-war), it is now expected to double. The overall food cost in restaurants is expected to rise by 4-6%.'

From roadside dhabas in Delhi to family-run restaurants in Bhubaneswar and busy kitchens in Chennai, the Indian food and hospitality sector continues to grapple with soaring commercial liquefied petroleum gas prices that are forcing eateries to rethink everything from menu prices to cooking methods.

The latest and sharpest increase in the day -- a Rs 993 jump in the price of a commercial cylinder on May 1 -- has only deepened concerns across the hospitality sector.

It follows earlier hikes of Rs 114.50 on March 1 and Rs 195.50 on April 1, pushing commercial cylinder prices beyond Rs 3,000 across the country.

For many restaurateurs, the timing could hardly be worse: Demand remains uneven, input costs are rising and food delivery platforms continue to eat into margins through commissions and aggressive discounting.

"The added burden of fuel cost will have a negative impact on the profitability," said Sagar Daryani, president, National Restaurant Association of India (NRAI).

Daryani, also the chief executive and cofounder of Wow! Momo, said LPG already accounted for around 10 per cent of food costs for many businesses, a figure now expected to climb to 12 to 15 per cent.

Prices usually don't come down; instead, they set a new base, he said.

Delhi

In Delhi's Karol Bagh, where rows of eateries compete for customers, restaurant owners say the latest increase has left them with little room to manoeuvre.

"Price rise is a matter of survival for us now. We understand it impacts the regular customers but we don't have a choice, expect a 10 per cent hike in all dishes," said Gulshan Sharma, who runs a dhaba in Karol Bagh.

"This is a collective decision from all of us," he added, referring to nearby eateries.

Larger restaurant chains, too, are feeling the impact. Zorawar Kalra, vice-president of the NRAI and founder of Massive Restaurants, which operates brands, including Farzi Cafe and Pa Pa Ya, said the industry's margins had already been stretched thin.

"I don't support price hikes, but now, when we are doing our math there is a significant increase in our input costs. If 5 per cent of the total revenue was spent on LPG (pre-war), it is now expected to double," he said. "The overall food cost in restaurants is expected to rise by 4-6 per cent."

But some legacy brands are trying to hold the line for now.

"We have a brand name and cannot increase prices immediately. We have decided to bear this expense for now. But if this continues, we will eventually have to follow the drill," said Vinod Chadha, owner and managing director of Moti Mahal

The pressure is also accelerating a shift away from LPG. Rahul Singh, owner of The Beer Cafe, said many of the chain's kitchens had shifted to electric or piped natural gas systems, helping it avoid menu price increases for now.

Sanjay Pathak, a commercial cylinder supplier to several eateries in Delhi, said, "Earlier I used to deliver 80 cylinders per day. It is down to 30."

Chennai

In Chennai, restaurant owners warn that food prices could rise sharply if fuel costs remain elevated.

A dosa priced at Rs 150 could rise to Rs 210, while pongal prices may increase from Rs 80 to Rs 115.

The Tamil Nadu government has introduced a Rs 2 per unit electricity subsidy for restaurants, tea shops and cloud kitchens switching from commercial LPG to electric or induction stoves.

According to the Chennai Hotel Association, around 15 per cent of restaurants in the city have already shifted to electric cooking, while nearly half are in the process of switching.

Others, however, are turning to older alternatives. "Some have gone back to firewood," said R Rajkumar of the Chennai Hotel Association, adding "We expect a 40 per cent price hike across food items (because of the LPG price hike)."

Yet major hotel chains in the south have so far resisted passing on costs to diners.

"So far, none of the star hotels and their restaurants in South India have opted for a price rise," said Sundar Singaram, director of operations at the South India Hotels and Restaurants Association.

Increased LPG allocations by the central government, Singaram added, had provided some relief.

Bhubaneswar

In Odisha, restaurant owners say the gas price increase has compounded pressure from rising electricity bills, transport costs and higher raw material prices.

"Despite the ongoing crisis, we did not increase the food cost, but we will have to revise menu prices by 20 to 30 per cent in the coming days," said Jajati Das, managing director, Hotel Meridian.

Biswanath Jena, who operates a restaurant in Bhubaneswar, said many businesses had already been absorbing losses for months.

"We were managing by cutting margins and increasing food prices by only 10 per cent, but now food prices will have to be revised once more," he said.

The Hotel and Restaurant Association of Odisha said it would hold an emergency meeting after receiving distress calls from members across the state.

"Preliminary feedback suggests prices may have to go up by 20 per cent," said J K Mohanty, the association's chairman.

For now, many restaurants in Bhubaneswar, Cuttack, Puri, Berhampur, Rourkela and Balasore are still hesitating before raising prices, wary of losing customers already squeezed by inflation.

But across kitchens large and small, there is a growing sense that the industry may soon have little choice left.

Feature Presentation: Aslam Hunani/Rediff