LG to raise durable prices

Korean chaebol LG Electronics will increase the prices of colour televisions, refrigerators and washing machines by 5-10 per cent on the back of an equivalent rise in input cost.

The company had previously revised prices of its products in November last year.

Kwang Ro Kim, managing director of LG Electronics India, said, "We are forced to pass on the increased costs to consumers as it would hit our bottomline."

Colour televisions are the biggest contributor to the company's turnover of Rs 6,500 crore (Rs 65 billion).

Kim was speaking to visiting journalists at the company's new plant in Ranjangaon in Maharashtra. LG executives attributed the rising input costs to the increase in oil prices that had impacted prices of resin and plastics by 25 per cent. Steel prices, the main raw material for white goods and copper/ aluminum increased by over 20 per cent.

The prices of colour TVs will increase by five per cent and refrigerators and washing machines by 10 per cent, which would be mainly due to the rise in steel prices.

The last two months have not been quite good for the consumer durable industry as there was not much off take of products in the market on the impression that prices of products would fall post the value added tax period.

In fact, Consumer Electronics & TV Manufacturers Association had issued a statement saying that because of the implementation of VAT, there will be an increase of tax incidence by 1 per cent and this increase will not be passed to consumers but absorbed by manufacturers.

"There is no possibility of any downward revision of prices in televisions, audios, washing machines, refrigerators, microwave ovens and air-conditioners, after the implementation of VAT," the statement added.

In another development, the South Korean consumer electronics company had decided to relocate its manufacturing base of microwaves from England to India.

"High production costs was the main reason to close down our microwave facility in UK, Kim explained. The Ranjangaon facility will manufacture 200,000 microwaves by next year.

Currently, exports contribute around Rs 700 crore (Rs 7 billion) to its turnover, which Kim expects to increase substantially in the future.

India has already been identified as an export hub with in the parent company. The Indian arm is aiming to become a $10 billion company by 2010. LG is planning to invest $250 million towards expand its production capacity and research & development.

The company has already started assembly of GSM handsets at its Ranjangaon facility and by 2010 intends to produce two million phones.

The plant would also manufacture code division multiple access handsets in the next one year, while manufacturing of emerging technologies like evolution value data optimised and high-speed downlink packet access handsets are also in the offing.

"However, this would depend on the policies of the Union government," he added.