The union cabinet on Wednesday approved the PLI scheme for these two products with a budgetary outlay of Rs 6,238 crore as part of the government’s ‘Atmanirbhar Bharat’ initiative.
Panasonic India CEO Manish Sharma said one of the key pillars to drive up manufacturing and exports is backward integration.
“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,” said Sharma.
Daikin India MD KJ Jawa said the PLI scheme will enable the Indian AC industry to have comparative and competitive advantages.
“We expect multi-national 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 from current 25% to 75% level. Though few manufacturers willing to invest towards the finished goods production may delay the planned investments,” said Jawa.
Last year, the Indian AC market was pegged at around 7.5 million units of which around 2.5 million were imports which has off-late come down significantly due to ban on import of gas-filled ACs.
“I expect the market to touch 9 mn this year and of this 8-8.5 mn will be manufactured locally. Currently ACs come with 25% local value addition and with the current PLI scheme, this can go up to 75% in next 3 years,” said Sharma.
Kamal Nandi, business head at Godrej Appliances, said the PLI scheme will bring the entire value chain on-shore and enable India to play a more significant role globally, while creating employment opportunities locally.
The industry also feels reducing the GST on AC will improve sales and boost the sector.
Nandi said given the low penetration of this category, the domestic demand also needs to be boosted by making ACs more affordable, and that could be facilitated through reducing the GST from 28% to 18%.
“This will provide the highly desired scalability to the AC production, in turn, will enhance the sector’s competitiveness. It is also highly desired that the finished goods are also considered for incentivising, in addition to its components, under the PLI scheme,” he said.
The PLI scheme will offer an incentive of 4-6% on incremental sales of goods manufactured in India for a period of five years to companies engaged in manufacturing of AC and LED lights. A government release said different segments have been earmarked for different types of components separately to specifically target global investments into desired areas.
“Selection of companies for the scheme shall be done so as to incentivize manufacturing of components or sub-assemblies which are not manufactured in India presently with sufficient capacity. Mere assembly of finished goods shall not be incentivized…Incentives shall be open to companies making brown field or green field investments,” the note said.
The government estimates that over the period of five years, the PLI scheme will lead to incremental investment of Rs 7,920 crore, incremental production worth Rs 1,68,000 crore, exports worth Rs 64,400 crore, earn direct and indirect revenues of Rs 49,300 crore and create additional four lakh direct and indirect employment opportunities.