The Commerce and Industry Ministry is set to officially launch the production-linked incentive (PLI) scheme for white goods, such as LED lights, air conditioners, worth Rs 6,238 crores on April 1. While the budgetary level allocations have been approved by the Cabinet, details on guidelines and schemes are still awaited. “How do we take AC industry from a current level of Rs 16,000 crore to Rs 1 lakh crore in the next nine years? Out of this 35 percent should be coming out of exports, and the remaining from domestic consumption,” says Manish Sharma, President & CEO, Panasonic India, and Chairperson, FICCI Electronics & White Goods Manufacturing Committee.
Guruprasad Mohapatra, DPIIT Secretary, said the PLI scheme will be a game-changer in the country, where the focus is not only on manufacturing locally, but also for the world. Potential investors will have at least six months after the scheme’s launch to apply for it and submit plans.
Under the scheme, eligible investors are now proposed to get incentives of 4-6% on incremental sales (to be calculated over the base year of 2019-20) of goods manufactured in India for a period of five years. Of course, the benefits will be subject to certain conditions, including the threshold of cumulative incremental investments.
The conversation around the PLI scheme for air conditioners started in the month of May last year and a couple of weeks later, the government and industry came together to initially chart out a strategy to enable three important objectives in the air conditioner industry.
“The first objective is to manufacture in India. And I say, not assemble, but manufacture. Currently, a lot of product components still come from elsewhere. The first idea is to go beyond assembling products. For example, before the ban on refrigerants fitted air conditioners was imposed, 1.5 million units of ACs were coming from elsewhere, which was almost 30 per cent of the total ACs sold in the country, whereas 70 per cent was getting produced in the country,” says Sharma.
Further analysis revealed that value addition in air conditioners is very low, at just about 25 percent. While many manufacturers draw copper wires and aluminum foils, manufacture heat exchangers, do sheet metals and molding in the factory and then produce air conditioners, the material components such as aluminum, copper, PCB, compressor, motors among other materials are sourced from elsewhere. “That is why the second objective is to take the current value addition of 25 percent to 75 percent in the next 5 years and backward integrate,” adds Sharma.
The third and most important objective is to make India competitive on the global scale in terms of cost, quality standards, and delivery benchmarks set by some of the competing nations.
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“The issue today is that the market size in India for air conditioners is just about 7.5 million units. China is 120 million units, and out of this they export 50 million units. Even with a similar population (of course, the differential is the per capita income) we have to go a long way. I think it’s the responsibility of multinational companies to ensure that they establish the global supply chain footprint in the country. And that is our objective too – to make India the export destination,” says Sharma.
Panasonic India has been manufacturing air conditioners at its manufacturing plant in Jhajjar, Haryana. While the company has been exporting ACs from the facility, it intends to scale exports going forward.
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