Corporate India is grappling with a sharp spike in commodity costs triggered by the war in West Asia that has forced firms to reassess pricing strategies, defer capital expenditure plans, and brace for earnings and margin pressures in the coming quarters.
Crude oil, the most immediate casualty of the conflict, has seen heightened volatility, with the benchmark Brent price surging nearly 33% since the start of the war. Key industrial raw materials and petroleum derivatives such as urea, naphtha, sulphur, titanium dioxide and PVC resins have seen price rise ranging from nearly 20% to as high as 70% in the past month and half.
User industries such as FMCG, consumer durables and paint companies are initiating price hikes to protect margins.
In addition to rising costs, shortage of urea has forced fertiliser companies to cut production.
From FMCG to Paints
“We are entering a phase where input cost inflation may outpace pricing power,” Mohit Malhotra, global CEO, Dabur, said. “The war in West Asia has turned projections for FY27 on its head. For companies, it is more about managing costs at the moment than making aggressive investments. The latter can come when the environment eases,” he said.
Analysts estimate that every $10-per-barrel increase in crude prices widens India’s current account deficit by nearly 0.4% of the GDP and exerts inflationary pressure across industries. For oil marketing companies, this translates into tighter marketing margins in a sensitive pricing environment. Airlines have begun hiking fares to deal with a surge in aviation turbine fuel, which constitutes 35-40% of their operating costs; and logistics firms are witnessing a steady climb in fuel expenses, sector experts said.
Abhijit Roy, managing director and CEO, Berger Paints, said that while paint firms do keep a buffer of about two months in terms of inventory, they still need to buy raw materials at current prices for future production. The April-June period is a critical period for paint firms where renovation work is undertaken by homeowners before the rains. Paint firms typically keep production going during this period to ensure there is adequate supply in the marketplace.
“We keep finished goods inventory of about 40-45 days. For raw materials, we keep stock of around 25-30 days. While we have two months of inventory, it can last up to April-end. We will still have to buy raw materials at current prices. To neutralise this impact, we have to increase product prices,” Roy said.
Fertiliser Subsidy Burden
For fertilisers that farmers get at subsidised rates, the subsidy outgo may see a substantial increase in FY27, if the West Asia conflict prolongs. India imports about 30% of its annual fertiliser requirements of around 64-65 million tonne (MT). Countries in West Asia account for 40% of these imports. Out of the estimated urea consumption of 40 million tonne in FY26, 25% is imported.
Experts say that the chemicals and fertiliser segments are among the hardest hit, given their dependence on liquefied natural gas and petrochemical derivatives. About 80% of urea production in India uses LNG, the rest uses domestic gas. Currently around 10-15% of LNG is purchased from the spot market while the rest is sourced under long-term contracts with Qatar and the UAE. LNG imports from Qatar and the UAE are shipped through the Strait of Hormuz, which has been blockaded because of the conflict.
Experts also point to currency movements which are adding another layer of complexity for businesses. The rupee has shown signs of weakness against the US dollar amid global risk aversion, making imports more expensive. A depreciating rupee amplifies the landed cost of commodities, compounding the burden on import-dependent sectors.