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Published on February 9, 2008

They said the plan went against the market trend, with rising costs of production as a result of rising oil prices.

Commerce Minister Mingkwan Sangsuwan promised on Thursday to look at the issue on his first day in office. Then yesterday, the ministry said some 30 items would be subject to price cuts, angering some producers.

Department of Internal Trade chief Yanyong Phuangrach said the 30 selected items would be finalised next week.

"It's impossible," said Thai President Foods director and president Pipat Paniangvait. The company produces Mama instant noodles and recently increased its price by Bt1 per pack.

"Can the Commerce Ministry compensate us for one baht a pack? If the ministry can, it's possible. Or why don't they buy out the company? It's ridiculous to force us to cut prices by legal means," he said.

The ministry says it will review the price of about 30 consumer goods in accordance with its policy to decrease the burden on consumers. The Internal Trade Department plans to propose 30 potential items for price cuts.

Products targeted include rice packs, dairy products, instant noodles, wheat flour, ready to eat food, pork, detergents, shampoo, soap, toothpaste, sanitary napkins, electric batteries, pulp, craft paper, corrugated paper, car batteries, passenger vehicles, small trucks, motorcycles, cooking gas, cement, electricity wires, steel rods, structure steel, steel bars, fertiliser, pesticide, animal feed, rental fees, mobile fees, and hospital fees.

Faced by cost pressures, Thai President Foods increased the retail price of Mama instant noodles to Bt6 per pack - up by Bt1, or 20 per cent, at the start of this month.

Pipat said the company had been hit by skyrocketing prices for raw materials, particularly crude palm oil and wheat flour.

"Our sales last year grew by about 10 per cent over 2006 to more than Bt6 billion. However, we posted a decline in profit due to the increase in raw-material costs," said Pipat. He said profit margin had dropped last year to only 8 per cent of revenue, the lowest level in five years.

Pongtip Thesaphu, corporate relations director of Unilever Thai Trading, said the company had never increased the price of its products, which have been under the control of the Commerce Ministry.

"We have raised the prices of some products since last year, which are not on the control list. They include some of Wall's ice cream, Pond's facial foam, and Best Foods jam. It will be quite difficult for the company to reduce those prices to previous levels," Pongtip said.

However, she said the price increases wouldn't affect consumers across the board. The company was willing to follow the government's pricing policy and it had no plans to adjust prices of any other products.

Prices of goods have different margins. According to the department's report, the margin on powered milk is 11 per cent, while condensed milk is 8 per cent, wheat flour 8 per cent, pasteurised milk 22 per cent, UHT milk 10 per cent, vegetable oil 3 per cent, canned fish 10 per cent, detergent 15 per cent, toothpaste 35 per cent, soap at 7.5 per cent, and shampoo at 30 per cent.

Chitsanupong Rungrojngamcharoen, president of LPG Traders Association, said he agreed with the ministry's plan to trim the price of some products in a bid to help consumers.

However, the margins and marketing costs of LPG were very low. The marketing cost associated with LPG procedures, including refiners, packers, wholesale and retail traders, and brand owners, was only Bt3.2 a kilogram or 10 per cent of total costs.

The government may consider cutting costs in other ways such as decreasing Oil Fund subsidies, cutting VAT or local tariffs for enterprises. However, measures may be difficult to implement, as they would destroy the system and not reflect real costs to consumers in the long run, he said.

Somroek Tangpiroonthum, president of Thai Rice Packers Association, said the moves should benefit consumers, but he had concerns for rice pack producers if they were forced to cut retail prices as they were facing higher production costs.

He called for the government to help rice packers cut costs, such as higher entrance fees and mail costs.

About 90 per cent of rice pack costs are from raw materials, while production costs were up 30 per cent due to higher rice prices and operational costs. Rice packers now had a margin of only 23 per cent.

Somroek also warned the government it could face domestic rice shortages - if they forced down domestic retail prices, while the price of rice for export was very high.

Sethasan Sethakarun, president of Soyoil and Ricebrans Processors Association, said vegetable oil producers would find it hard to adjust prices down as they faced higher raw materials costs every day. He said the sector had more than 30 traders and the market mechanism has already forced firms to set fair prices for consumers.

Kwanchai Rungfapaisarn,

Petchanet Pratruangkrai

The Nation