PLI for ACs component manufacturing to help build ecosystem, reduce dependency on imports: Industry

The production-linked incentives scheme for air conditioners will help build an ecosystem for component manufacturing in the country, reduce dependency on import and create employment opportunities, according to leading manufacturers.

The government on Thursday said as many as 31 companies, including Voltas, Daikin, Panasonic, Hitachi, Blue Star and Havells, have applied for availing production-linked incentives (PLIs) for manufacturing of components, proposing an investment of around Rs 4,995 crore.

The selection of applicants will be done within 60 days from the date of closure of the application window or by November 15, said Additional Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Anil Agarwal.

According to the Consumer Electronics and Appliances Manufacturers Association (CEAMA), this will boost manufacturing in the category.

"We have got encouraging responses from most of the brands for the PLI scheme. This will definitely help to build the eco-system for components which we were looking for," CEAMA President Kamal Nandi told PTI.

The country's leading AC maker Voltas said that after this PLI scheme, there would be a thrust on Make-in-India and it would help the country to be self-reliant in components rather than importing it from outside.

Voltas MD & CEO Pradeep Bakshi said, "It would help in product development and would increase the number of employment generation."

Though the Tata Group firm did not disclose the investment for which it has applied under the PLI scheme but said it will also get help from the domestic industry as several components were not getting manufactured in India.

Panasonic India & South Asia President and CEO Manish Sharma said that currently, the average domestic value addition for AC for the industry is around 20-25 per cent and may go up to 75 per cent in the next five years, as production of local components will start.

Under PLI, Panasonic will invest around Rs 300 crore to set up domestic component manufacturing for components of ACs.

"Panasonic is also looking to invest 300 crore to set up component manufacturing for compressor, heat exchanger, among other parts," said Sharma.

He added that the backward integration is one of the key pillars to drive up manufacturing and exports.

As component manufacturing is a key beneficiary of the new policy, indigenous AC manufacturing will get a fillip.

"This will also enable design-led manufacturing, fuel innovation and drive component exports along with finished ACs from India. In the foreseeable future, I see a lot of exciting developments in component design capability and growth of the MSMEs and SMEs," he said.

Homegrown firm Blue Star Ltd has applied for manufacturing of heat exchanger and sheet metal components under the PLI scheme, which would be manufacture at its Sri City, Andhra Pradesh, where it is setting a new plant.

"The investment we have committed is Rs 156 crore," said Blue Star Managing Director B Thiagarajan.

The company has almost reached its full capacity at its Himachal Pradesh-based plant, and the company has "aggressive growth plans". So, it is investing in its capacities, he said.

"Sri City plant would have a total capacity close to 1.2 million in a five-year period and the first phase will have a three lakh units," Thiagarajan said. According to him, PLI will enable the Indian AC industry to compete with China, which has an capacity of 85 million units per day, as against around 7.5 million units of India.

Panasonic's Sharma said that last year, the Indian AC market was pegged at around 7.5 million. "Of this, 2.5 million were imports which have come down significantly due to ban on import of gas-filled ACs."

"I expect the market to touch nine million this year; and of this, 8-8.5 million will be manufactured locally," Sharma added.

Under the PLI scheme for white goods (air conditioners and LED lights), the government has approved a budgetary outlay of Rs 6,238 crore. This will be implemented over FY 2021-22 to FY 2028-29.

In air conditioners, support would be provided for AC components as copper tubes, aluminium foil and compressors. It will also provide incentives for low-value intermediates such as PCB assembly for controllers, BLDC motors, service valves and cross-flow fans for AC and other components.

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