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Durables firms fear slowdown in rural regions as COVID-19 cases rise

Over the last six-nine months, it is the small towns and rural areas in India that have been key to reviving consumer demand, even as the Covid-19 pandemic disrupted life in the big cities.

That trend appears to be reversing now as small towns see stringent restrictions and curfews amid a fresh surge in Covid-19 cases. While big cities remain vulnerable, states such as Maharashtra, Punjab, and Kerala are imposing stricter measures in small towns to curb the rising tide.

“Yes, the second wave of Covid-19 seems to be widespread. This will impact demand from the smaller towns. However, the soaring temperature this year during summer should help categories such as air conditioners, refrigerators, air coolers, fans and deep freezers,” says Kamal Nandi, business head and executive vice-president, Godrej Appliances.

Nandi is also the president of the Consumer Electronics and Appliances Manufacturers Association (CEAMA), the apex body of durable companies in the country. It has been monitoring the situation closely, since the summer season constitutes a third of industry sales.

During unlock, most consumer goods makers, including durables majors, turned their attention to small towns and rural areas, as the twin trends of reverse migration and relatively lower caseload aided consumption.

Most durables companies used online channels in urban areas and offline channels in small town and rural areas to shore up sales. Now, chief executive officers (CEOs) admit that restrictions in tier-II markets are creating supply-chain issues.

For instance, Beed district in Maharashtra on Wednesday joined places such as Akola, Amravati, Pune, Nagpur, Nanded, Parbhani and Buldhana in imposing curbs for a week. In Punjab, places such as Ludhiana, Patiala, Mohali, Jalandhar, and Kapurthala have night curfews and other restrictions. In Kerala, Kasaragod, Kannur, Palakkad, Malappuram, and Kozhikode districts have been the worst affected, prompting swift action by the state government.

Shekhar Bajaj, chairman and managing director (MD), Bajaj Electricals, says the company has been facing problems in moving goods because of the curbs in places like Pune and Nagpur. “This affects supplies in the marketplace. Because many people are still working from home, they require small appliances for the kitchen and the home,” he says.

Kanwal Jeet Jawa, MD and CEO, Daikin Airconditioning India, says his company is assessing the impact on demand because of the curbs. “The current situation is a cause for concern. The industry has been grappling with commodity inflation, prompting most durables makers to hike prices. We are assessing the impact on demand,” he says.

Most durables makers have announced two rounds of price increases, totaling 10-12 per cent, experts said. Some have opted to split it into two rounds of 5-6 per cent each. Others opted for a sharper increase in January (5-8 per cent), leaving a smaller price hike for now or April (3-4 per cent).

Some like Haier India have split price hikes even further to 3 per cent over three rounds so far.

Chances are that one more round may be in the offing next month.

“This is the first time that almost every appliance category — from TVs to refrigerators, washing machines, air conditioners, and microwave ovens — has seen price hikes because of commodity inflation. The only saving grace is that most companies are expecting a severe summer this year, which will aid sale of cooling products. But the emerging Covid-19 situation is something to watch out for,” says Eric Braganza, president of Haier India. Business Standard

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