'AC import ban to protect domestic firms from free imports via FTA route'

Last Updated 16 October 2020, 14:50 IST

The government's move to ban imports of finished air-conditioners will hit small fly-by-night operators and Chinese firms which launch their products during peak summer season and disrupt market, according to industry players.

Though the move would help push the "Aatmanirbhar" movement, leading players like Blue Star, Daikin, Voltas, Panasonic and LG electronics feel that it will have little impact on them as they are already manufacturing most of their air conditioners in the country.

According to Blue Star Managing Director B Thiagarajan, the ban would have a minimal impact of the domestic companies. The intent of the government was to put a curb on duty-free import of airconditioner units from FTA countries such as Thailand, Malaysia and Vietnam.

"Earlier, if you are importing a fully built AC through countries such as Thailand, Malaysia and Vietnam, then the duty is zero and if you import without refrigerant, then you have to pay full duty," he said.

Several Chinese companies which were setting up factories in countries such as Thailand, Malaysia and Vietnam in order to bring products to India directly under FTAs, will be affected by the government's move, he added.

"Under the FTAs, finished products like ACs attract zero duty but the components have to pass through an inverted duty structure. Now after notifying that gas-filled units are banned what that means is you can now import it as a component only. Therefore the zero per cent duty route is now no longer available," he added.

Expressing similar views, Daikin Airconditioning India MD & CEO Kanwal Jeet Jawa said that the ban would not have much impact on major players as most of the manufacturing is done in India now, whether it is a local player or a multinational.

All have now big plants and manufacturing in India. However, it might hit some small companies which were importing either the IDU (Indoor Unit) or ODU (Outdoor Unit) from countries such as China and through Thailand by using FTA route with zero per cent duty, he added. "Some small payers, which used to bring some ACs in the season and disrupt the market will be affected to that extent, it's a welcome step," Jawa said.

Commenting on the development, Consumer Electronics and Appliances Manufacturers Association (CEAMA) said that the notification would prohibit the import of AC, boost domestic manufacturing in India and create more jobs.

"This move is consistent with the government's twin objective of making India fully self-reliant in manufacturing air conditioners and capturing a greater share of the global AC market through export," said CEAMA President Kamal Nandi.

Currently, approximately 30 per cent of ACs are imported into India as CBUs.

Tata group firm Voltas, a leading manufacturer in the room-air conditioner segment said the decision to ban the import of 'Air Conditioners with refrigerants’ will play a crucial role in promoting domestic manufacturing in line with the ''Aatmanirbhar'' movement.

"As India's leading AC company, we welcome this decision by the government,” Voltas Managing Director & CEO Pradeep Bakshi said.

Panasonic India President & CEO Manish Sharma termed the ban as a step in the right direction.

"We believe the amendment to the import policy with reference to air conditioners is a step in the right direction and in line with the Aatmanirbhar strategy announced by our Honourable Prime Minister. We currently export air conditioners from India to SAARC, Middle East and Africa," he said.

LG Electronics India also welcomed the step and said it would boost the domestic manufacturing capabilities.

"We welcome this move; it will boost Make in India initiative. The entire line up of LG Air conditioners is made in India. I am confident this announcement will support PM’s vision of Aatmanirbhar Bharat,” said LG Electronics India VP-Home Appliances Vijay Babu.

Havells India CMD Anil Rai Gupta said, "We believe the companies who have invested in their own manufacturing facility will be well placed to benefit from it." The government on Thursday banned imports of air conditioners up to 2 tons with refrigerants to promote domestic manufacturing and cut imports of non-essential items. According to Jawa, India has sold around 7 million units of room air-conditioner last fiscal and there is a huge possibility to grow as the penetration level is less than 5 per cent. Therefore the companies in India have invested heavily and have bullish plans.

In a residential AC, compressor and motor, which account for around 30 per cent of the price are imported, while sheet metal, coils and other are sourced locally.

Several global manufactures, including GMCC which is investing around Rs 800 crore to set up a plant here to manufacture compressor, have taken up local manufacturing of their products. Besides, Hitachi Highly has also made investment for manufacturing of compressors.

"The way the Prime Minister has focused on Aatmanirbhar Bharat, other companies are also now looking at it and many components manufacturers now want to come," he said. Bakshi, however, said that India is still at a nascent stage in terms of product technology and hence the requirement to import certain components will remain for some time.

(Published 16 October 2020, 14:50 IST)

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