Power equipment maker Bharat Heavy Electricals Ltd has a brand new strategy in place -- it will set up onsite fabrication units rather than transport equipment over long distances.
Chairman and Managing Director Ravi Kumar hopes this will help the company protect its bottom line after Petroleum Minister Murli Deora raised fuel prices last week.
The new mantra
Adversity often brings out the best in companies, even state-owned ones. Faced with a bloated fuel bill, companies are busy devising new ways to control costs. These range from cut in travel to shift to cheaper fuels and even reduced recruitment.
Many companies told Business Standard that they expect international crude oil prices to rise further (Goldman Sachs has predicted it will hit $200 per barrel by the end of 2009) and, therefore, they need to work out a long-term strategy to deal with the problem.
"The crude oil price rise is a major concern for Tata firms like Tata Motors, Tata Chemicals, Tata Power and Tata Steel. These firms are taking various cost-cutting measures, introducing newer technologies and slowing down recruitment and investments," said a Tata group insider, asking not to be quoted.
Top consumer electronics firms like LG and Samsung too are seized of the matter and are likely to decide shortly whether or not to pass the additional fuel burden to their customers. Transportation fuel accounts for 2-3 per cent of their costs.
Privately, a leading FMCG company too said it was grappling with the issue.
Automobile companies have decided to speed up the launch of variants that run on either electricity, LNG or CNG. Hero Electric has decided to launch four electric two-wheeler brands by the end of this year and Ultra Motors plans to launch an electric three-wheeler shortly.
The writing on the wall is clear in the passenger car segment too -- Maruti Suzuki and Hyundai have launched hybrid (petrol and LNG/CNG) versions of their compact cars and Mahindra Renault plans to come up with a CNG Logan later this year.
Higher fuel prices threaten to burn a serious hole in the pocket of information technology companies too. The sector employs people in large numbers who need to be transported to their work stations daily.
Many software firms have asked their employees to use video-conference facilities and avoid travelling. Some may withdraw transport-related perks to their employees.
"We offer transport at a subsidised rate to our employees. What we will do now is withdraw the subsidy," said the head of an IT company. Pune-based KPIT Infosystems has asked its employees to form car pools.
The Maharashtra Call Centre Drivers' and Owners' Association, which had called a strike last month demanding immediate clearance of dues worth Rs 1 crore (Rs 10 million) from various Pune BPO units, has now pressed for Rs 10 a km from these companies, up from Rs 6.
Inflation, the silent killer