India Inc shudders as oil prices rise

The Indian industry wants the government adopt a multi-pronged approach to de-risk the country's oil needs by conserving energy, promoting alternative sources and building strategic reserves, a Federation of Indian Chamber of Commerce and Industry survey on emerging oil price scenario said.

As much as 77 per cent of the 147 companies, ranging from a turnover of Rs 1 crore (Rs 10 million) to Rs 60,000 crore (Rs 600 billion), surveyed said their cost of production has risen by up to 20 per cent due to rising oil prices.

While 64 per cent of those responded said that oil accounts for less than 20 per cent of their total energy bill, 19 per cent of companies, which included firms from steel, aviation and pharma sectors, said it accounts for 20-40 per cent of total energy bill.

Despite increase in cost of production, 60 per cent of the companies said they were fully absorbing this incremental cost internally and had not passed on the burden to consumers.

Of the remaining, 38 per cent of the respondents said they were absorbing a part internally while passing on the rest to the their customers.

However, this situation may not be sustainable in medium to long term and companies have expressed apprehension that if the present situation of high oil prices continues, they would have to increase their sale prices, the survey said.