'No threat' from price, cost hikes

'No threat' from price, cost hikes
The Nation (16 October 2007)

Target will be met: Kosit, Commerce.The authorities believe the inflation target will not be breached despite hikes in the prices of consumer products and rising costs, including a 3-5-per-cent rise in the lorry freight rate that takes effect on November 1. Transportation Federation of Thailand secretary-general Thongyoo Kongkun said the freight increase was unavoidable, because of the higher price of diesel. While the current freight rate is based on a diesel price of Bt22 a litre, the price is now Bt27.34. The Commerce Ministry will meet manufacturers of 200 key products tomorrow and try to convince them of the need to delay price increases. However, Ajinomoto (Thailand), manufacturer of Yum Yum, the Kingdom's third-best-selling instant-noodle brand, has officially asked for permission from the Internal Trade Department to raise its price Bt1 per pack, or 20 per cent. Thai President Foods, manufacturer of best-selling Mama instant noodles - often regarded as an indicator of consumer pricing pressures - has not yet submitted an official request for a price hike, although it has announced it intends to do so. "We remain confident inflation will be within the target of 2.5 per cent this year," Internal Trade Department director-general Yangyong Phuangrach said yesterday. Inflation will not be under pressure from yesterday's increase in public bus fares, he said. A department study indicates rising public-transport costs will lift the inflation rate only 0.23 per cent. Deputy Prime Minister and Industry Minister Kosit Panpiemras also said the increases in product prices and bus fares would not put much pressure on inflation. "Personally, I believe inflation will stay in the 2-3-per-cent range, but data are insufficient to point out if the increases will lead to any risks for the economy," he said. Earlier, the Commerce Ministry said manufacturers might have to raise product prices in response to higher manufacturing costs. The price of cooking gas is likely to be floated in mid-December. Asked whether higher prices will lead to lower consumption, Kosit said it was difficult to forecast consumption. Although product prices have remained low in recent months, consumption has remained sluggish. He said he was confident consumers would resume spending after a long delay, particularly if economic growth could be maintained at 4-4.5 per cent, as expected. In its proposal to the Commerce Ministry, Ajinomoto said rising costs of raw materials and oil prices were forcing it to increase the price of Yum Yum instant noodles. Yangyong said the proposal had not yet been approved. "The government will consider the production costs carefully, in order to ensure minimum effects on consumers while creating fair practices for all enterprises," he said. Together, the country's top three instant-noodle brands - Mama, Wai Wai and Yum Yum - hold more than 90 per cent of a market segment valued at Bt10 billion a year. Yangyong said his department would soon meet Mama's manufacturer to discuss price rises, because it was the largest player in the segment. So far, manufacturers of 517 items in 13 product categories, including instant noodles, canned fish, medicine, vegetable oil and detergents, have asked for the Internal Trade Department's permission to increase their prices. The department has already approved a price hike for instant-coffee products, because of rising prices for roasted coffee, a major raw material. To cushion consumers from the burden of rising living costs, the department will hold low-cost consumer fairs, selling consumer goods at 20-40 per cent below market price. The fairs will be held at Sanam Luang from October 30 to November 2 and at Udon Thani's city hall from November 2 to December 2.