Going up, up, up: Food prices, airfares, mobile tariffs

Every day brings new information on prices that are going to be raised after the recent budget. Here is Friday's crop: food, airfares, telecom, consumer goods.

According to The Economic Times, the Empowered Group of Ministers on Food has asked the food ministry to consider revising the prices of rice and wheat sold through the public distribution system - a.k.a. ration shops. Prices here have not been raised since 2002.

The food ministry is not enthused, since it believes that all these price increases will become redundant when the new Food Security Bill is legislated. Under the Bill, priority households will get rice, wheat and coarse grains at Rs 3, Rs 2 and Re 1 per kg, while the rest will get it at half the procurement price paid to farmers.

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Firstpost believes that even if the ration price increase does not happen, food prices will trend upwards since rural minimum wages have been increased (NREGA wages are up everywhere), and once the Food Security Bill kicks in, government will have to raise minimum support prices to increase procurement for the widened PDS.

The Times of India says that domestic and international air fares will go up due to the impact of service tax. Even though the service tax on international fares has been reduced from 10.3 percent to 4.9 percent, earlier there was a cap of Rs 773 on economy class international fares. But now the cap is gone - and the full impact of 4.9 percent depends on the actual fare paid.

As different passengers pay different fares in a dynamic pricing model, each one will be paying a different (and usually higher) economy class fare.

Firstpost believes that even without the service tax issue, air tickets are going to cost more because Kingfisher is in crisis, and the industry is busy raising fares to become viable. Fares are unlikely to return to their old levels anytime soon.

The Hindustan Times reports on the future shock in store for mobile phone users. The newspaper says that following the Supreme Court's cancellation of 122 licences - which will stand cancelled by 2 June, the four-month deadline - the remaining players will cartelise and increase tariffs. The forecast price increase is around 30 percent.

Firstpost believes that even if the licences do not get cancelled (and the court gives them an extension since the government says spectrum auctions will take 400 days to conduct), tariffs will still go up this year since the idea is to auction spectrum - and higher spectrum costs will anyway mean higher tariffs.

Next up are the prices of petrol and diesel, over which the government is still dithering. One report said the government is planning to cut taxes to allow oil companies to avoid losses even at current petrol prices, but then the fiscal deficit cannot be cut. Especially if the logic is extended to diesel as well. So don't bet on petrol and diesel prices not rising. The question is when.

Another report talks of fast-moving consumer goods (FMCG) companies - which means everyone from Hindustan Unilever to Britannia, Nestle, ITC, Godrej Consumer, Dabur, GSK Consumer, etc - are planning a second bout of price increases after doing so once immediately after the budget. The Economic Times says that prices of "packaged milk, biscuits, yoghurt, edible oil, hair oil, soaps, balm and detergent are set to rise 5-10 percent over the next couple of months."

Whoever said inflation was softening ought to have his eyes examined. Newspaper headlines are confirming this every day.