Iran crisis lifts India bottled water prices, erasing Modi tax cut gains

The Iran war has made bottled water in India 11% more expensive after prices of plastic bottles and caps surged, a change that has also erased the benefit of a lower water tax rate Prime Minister Narendra Modi announced a few months ago.

Clean water is a privilege in the country of 1.4 billion people where researchers say 70% of the ‌groundwater ⁠is contaminated. Bisleri, Coca-Cola KO.N, Pepsi PEP.O, billionaire Mukesh Ambani's Reliance RELI.NS and Tata all compete for a share of the $5 billion market.

The market is being squeezed as rising oil pricesincrease the cost of polymer, a key material for the industry's plastic bottles.

India's biggest player, Bisleri, which commands a third of the bottled water market, has increased prices by 11%. A box of 12 bottles of 1-litre each will now cost 240 rupees ($2.57), compared to 216 rupees ($2.32) earlier.

"The price of packaged drinking water has risen to 20 rupees per litre, due to a significant increase in packaging material costs, which have surged by over 70% in the last fortnight," Angelo George, CEO of Bisleri, told Reuters in a text message.

"What is happening is beyond anyone’s control," he added.

TAX BENEFITS GONE

Due to rising oil prices triggered by the Iran war, the cost of material used in making plastic bottles has risen by 50% to 170 rupees per kilogram, ​while the price of the caps has more than doubled to 0.45 rupees apiece. Even corrugated boxes, labels and adhesive tape ​are costing more, Reuters has previously reported.

The price increase reverses the benefits from Modi's September tax reforms when his government reduced taxes on bottled water from 18% to 5%, prompting many companies to reduce prices.

India's Parle Agro has also increased the price of its Bailley bottled water brand by around 11%, according to pricing sheets provided by a water industry source. The company declined to comment.

Its website still runs a message thanking Modi for reducing taxes, which led to lower prices of its products, including bottled water.

Nayan Shah, CEO of Clear Premium Water, said he had increased the retail prices of his bottled water by 8% to 11% due to geopolitical developments.

"A price revision has become unavoidable," he said.

-Aditya Kalra/Reuters