Economy

Sops brighten the prospects of AC, LED lights makers

Meenakshi Verma Ambwani New Delhi | Updated on April 07, 2021

The PLI scheme is expected to increase local value addition to 75% from the current 25% level   -  Businessline

But industry says scheme should also cover finished products

The PLI scheme for the AC industry, which got the Cabinet nod on Wednesday, is expected to strengthen the component ecosystem and boost local value-addition. Industry players, however, said that incentives under the scheme should also have been extended to finished AC products.

Kamal Nandi, President, CEAMA and Business Head & Executive Vice-President – Godrej Appliances said, “This scheme will bring the entire value chain on-shore and enable India to play a more significant role globally, while creating employment opportunities locally. However, towards a holistic growth of the sector, finished goods can also be considered for incentivising, in addition to components, under the PLI scheme.”

Focus on manufacturing

In the AC segment, which is pegged at around 7.5 million units annually, companies are dependent on the import of crucial components such as compressors and motors. Last year’s ban on import of ACs with refrigerants by the government has reduced the import of finished ACs, with most now either being locally manufactured or assembled. The PLI scheme has the potential to encourage the industry to step up focus on manufacturing and not just assembling; hence, inclusion of finished AC products in the scheme has been the industry’s key demand.

The government has said that different segments have been earmarked for different types of components separately to target global investments into desired areas. Selection of companies for the scheme shall be done so as to incentivise manufacturing of components or sub-assemblies which are not made in India, with sufficient capacity.

Kanwaljeet Jawa, MD & CEO of Daikin India, said the scheme has the ability to play an anchor-led model to boost component manufacturing in the country. “We expect multi-nationals to bring in meaningful investments in terms of FDIs to the country for component manufacturing which will help increase the local value-addition in AC manufacturing to 75 per cent from 25 per cent level. Though, few manufacturers are willing to invest towards finished goods, production may delay the planned investments. We will study the details and accordingly, decide on the next step,” he added.

Reducing dependence

Meanwhile, the LED lights industry also said that it expects the scheme to reduce the country’s dependence on imported components. Puneet Dhawan, Executive Vice-President, Orient Electric said, “The LED lights industry has lagged behind in electronics components manufacturing. The scheme will promote capex investment and help domestic LED light manufacturers to become more competitive at the global level.”

Published on April 07, 2021

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