TV makers jump on PLI bandwagon as more AC companies evince interest

With the government busy finetuning the small print of the prospective production-linked incentive (PLI) scheme for air conditioners (ACS) and lightemitting diodes (LEDS), manufacturers have begun to express interest in availing of the new manufacturing scheme for white goods, effective from April 1. The potential benefits of the scheme have led several television (TV) makers to lobby for a PLI for the industry. According to sources, close to half a dozen AC makers have expressed interest in availing of PLI for the sector that is expected to provide significant boost to manufacturers in India.

Leading consumer durables makers like Blue Star, Daikin, Panasonic, Samsung, and Havells (Lloyd) are planning to apply as soon as the detailed scheme is announced. The enthusiasm over PLI is not unfounded, said industry executives. Apart from offering inducement to any incremental production over the next five years, the scheme has the potential to transform the manufacturing landscape in the country, they said.

According to B Thiagarajan, managing director, Blue Star, the contours of the proposed scheme are “very attractive” and Blue Star has decided to avail of PLI for ACS. “The expected threshold of investment and the proposed incentives offer great opportunity. Apart from growing capacity for finished AC units, its focus on component manufacturing will also help,” he clarified. Blue Star is currently awaiting the final scheme document before finalising its proposal. “It will definitely help scale up the component ecosystem and generate employment. The scheme will optimise industry focus in three ways — unlock manufacturing demand, open up exports to further scale up demand, and fuse supply chains into backward integration,” said Manish Sharma, president and chief executive officer, Panasonic India. According to him, the firm is already exporting ACS. Further, Panasonic is now “collaborating with component manufacturers, especially for motors, compressors, and aluminium coils, to scale up and add more value”.

According to Kamal Nandi, president of industry body Consumer Electronics and Appliances Manufacturers Association and vice-president, Godrej & Boyce, the disparity between costing for Indian and large Chinese manufacturers is the biggest hurdle the industry is facing that the PLI will be able to reduce considerably.

“Currently, the disability factor between manufacturers in India and some of the larger Chinese entities is 25 per cent.

While a part of it will be covered by the incentives offered through PLI, some of it will be covered through making components locally, when the component ecosystem is in place. Moreover, as our manufacturing base grows, manufacturers in India will also enjoy the economies of scale, which will further bring down costs. Combining these three, we will be able to bridge most of the disability gap between local and global manufacturers,” said Nandi.

While the 6.5-million-a-year local AC market is minuscule, compared to China that makes over 50 million units a year, poor penetration among Indian households offers headroom for growth, even in the local market. The AC is the least-penetrated large appliance (at 6 per cent), compared to washing machines (11 per cent), refrigerators (35 per cent), and TVS (85 per cent).

Under PLI, the government has planned to offer ~3,000crore incentive on finished AC units, while ~2,000 crore has been earmarked for components like compressors. Sharma expects the making of compressors — that account for over half the cost — on a scale that could be much grander and a reality by 2024. For the LED sector, ~1,000 crore is being planned as incentives.

“It will provide tremendous opportunities for home-grown companies like ours to increase manufacturing capabilities for LED lighting products within the country and boost production capacity, as well as generate employment opportunities,” said Kishan Jain, director, Goldmedal Electricals, adding, “Additionally, the government’s initiative will endorse emerging digital technologies and productivity, advance machine adoption, strengthen infrastructure, upskill employees in the LED lighting market, and given the economy an upward thrust.” The attractiveness of the forthcoming scheme has led TV makers push for a PLI for the sector. While the local industry is nearly self-sufficient in terms of assembly of TV sets, compared to market demand, it lags behind in component production.

“Currently, only a handful of Chinese and Taiwanese firms control the flat-panel market and that allows them to raise prices that hurt our costing,” said senior executive from a TV maker. Further, the growing demand from the domestic market is making it inevitable for firms to expand capacity.

According to Avneet Singh Marwah, chief executive officer of Super Plastronics, “The government should seriously consider bringing TV manufacturing under the PLI scheme. This will make the TV industry more competitive on the global stage.”

“CURRENTLY, THE DISABILITY FACTOR BETWEEN MANUFACTURERS IN INDIA AND SOME OF THE LARGER CHINESE ENTITIES IS 25%”

KAMAL NANDI, V-P, Godrej & Boyce

“THE EXPECTED THRESHOLD OF INVESTMENT AND THE PROPOSED INCENTIVES OFFER GREAT OPPORTUNITY”

B THIAGARAJAN, MD, Blue Star