Home appliances likely to become cheaper as govt focuses on PLI scheme
Domestically manufactured components and reduced imports will bring down the cost of white goods.
The production-linked incentive (PLI) scheme for white goods— including televisions, refrigerators and air-conditioners among other home appliances — is likely to provide Indian consumers with a much greater variety of goods at a much cheaper price in the years to come.
The PLI scheme for white goods is outlined to build an end-to-end component ecosystem for ACs and LED lights, in order to make India a hub of the global supply chain. The scheme will extend benefits of 4-6% on incremental sales for five years subsequent to the base year and one year of the gestation period, according to a Mint report.
How PLI will affect AC market
According to market experts, providing incentives for the manufacturing of components is the right move by the government given the huge response from the Indian firms to manufacture the three main air-conditioning components – compressors, copper-tubing and aluminum fins.
The Mint report quoted an official as saying, “At present only one firm makes compressors. Now we have got four firms seeking to make compressors in India and the capacity indicated is about 12 million. Hindalco is coming to build aluminum fins to cater to 10 million ACs annually. In copper tubing, among the best companies, Mettube alone may cater to 15 million ACs.”
At present, India has a market of roughly 7.5 million AC units, of which 6 million are assembled with domestic value addition making up for just one-fourth of the units. According to the official, the production of ACs could go up to 23-24 million annually and the domestic value addition may rise to about 75%.
The PLI scheme has the potential of not only boosting domestic production but also of lowering the dependence on imports, according to Madan Sabanavis, chief economist, Care Ratings, the report added.
Domestic markets to get a boost
According to Sabanavis imports of electronic goods, which is a major group in imports bill for India, can come down as the government takes initiative for PLI scheme. The total incentive for electronic-based goods will be Rs 60-70 thousand crore over the next 4-6 years. Intuitively if this helps reduce the import bill by even 10% over this period, the incentive provided would have worked well, added Savanavis as quoted by the Mint.
The Chinese companies haven’t applied for the PLI scheme, since India has come up with stringent rules to verify proposals from neighbouring countries after the border skirmish in Ladakh in June 2020. The companies operating from China are now expected to tie up with Indian companies that qualify for the PLI scheme for the technology transfer, the report added quoting an official.
After the June 2020 clashes, which left 20 Indian soldiers dead, India introduced trade and non-trade barriers against Chinese companies. It put all FDI from neighbouring countries through the approval route and barred such firms from participating in government procurements.
According to the report, so far 52 firms have committed to invest Rs 5,866 crore under the PLI scheme for white goods. Of these, 31 firms have committed nearly Rs 5000 crore for the manufacturing of AC components while 21 firms have pledged to Rs 871 crore for LED components. Some of these companies are Daikin, Panasonic, Hitachi, Mettube, Nidec, Voltas, Bluestar, Havells, Amber, EPack, TVS-Lucas, Dixon, R K Lighting, Uniglobus, Radhika Opto and Syska.