The government reduced import duties on edible oils effective September 24 to help food companies manage rising costs. While this move could ease pressure on namkeen prices and pack sizes, firms like Bikaji Foods said they will use the savings to rebuild margins instead of increasing product weights right now.
A ₹10 packet of namkeen has two prices: the one printed on the wrapper and the one measured in grams. India's edible oil duty cut could help leading food companies protect both this festive season, after rising input costs pushed parts of the industry toward price hikes and smaller packs.
Effective September 24, the government reduced import duties on crude palm and soybean oils and eliminated the duty on crude sunflower oil. Including levies, effective duties fell to 11 per cent for palm and soybean oils and 5.5 per cent for sunflower oil.
India Ratings estimates landed costs could decline by 4-5 per cent for palm and soybean oils and 8-9 per cent for sunflower oil. However, the pass-through will depend on global prices and the pace at which companies exhaust higher-cost inventories.
Bikaji Foods has offered the clearest signal. After two price hikes in four months, it had planned to hold retail prices through Diwali. The company expects oil costs to decline 3-4 per cent in the coming weeks but has indicated the benefit will initially be used to rebuild margins rather than increase pack sizes.
For Haldiram's, where palm oil is a key raw material, lower costs could ease production expenses, though the company has made no commitment on pricing or pack weights.
Prataap Snacks, which previously used lower grammage to offset edible oil inflation, may face less pressure to shrink packs further. No change in strategy has been announced.
Britannia, which had highlighted a more than 20 per cent rise in palm oil prices and relied on grammage cuts in ₹5 and ₹10 packs, could see some relief. However, it has not revised its guidance publicly.
ITC, which cited edible oil inflation as a margin headwind in its foods business, could benefit across Bingo, Sunfeast and YiPPee, but has not announced any changes to pricing or pack sizes.
The stakes are highest in small packs. Systematix Research estimates ₹5 and ₹10 packs account for 70-80 per cent of organised savoury snack sales. Based on industry assumptions, a 3-4 per cent reduction in edible oil costs could translate into an illustrative annual gross benefit of ₹235-330 crore for the organised snacks sector.
Beyond the five companies, Nestle India's Maggi highlights earlier shrinkflation, with some packs reportedly losing 7-9 per cent weight while prices remained unchanged. HUL's benefit is likely limited, as the duty cut does not cover the palm-derived ingredient used in its soaps. Neither company has indicated plans to restore pack weights.
For consumers, cheaper oil may reduce the pressure for another round of shrinkflation. Whether that means fuller ₹10 packs by Diwali is a decision manufacturers have yet to make.