In this news, we discuss the ‘AC import ban to protect domestic firms from free imports via FTA route’.
The government’s decision to ban imports of finished air conditioners will hit small night operators and Chinese companies that launch their products during the peak summer season and disrupt the market, according to industry players. While this move would help push the ‘Aatmanirbhar’ movement, top players like Blue Star, Daikin, Voltas, Panasonic and LG Electronics believe it will have little impact on them as they already manufacture most of their air conditioners in the country.
Blue Star chief executive B Thiagarajan said the ban would have minimal impact on domestic businesses. The government’s intention was to curb the duty-free importation of air conditioning units from FTA countries such as Thailand, Malaysia and Vietnam. “Previously, if you imported a fully built air conditioner through countries like Thailand, Malaysia and Vietnam, the duty is zero, and if you import without refrigerant, you have to pay the full duty,” he said. Several Chinese companies that were setting up factories in countries like Thailand, Malaysia and Vietnam to bring products to India directly under FTAs, will be affected by the government’s decision, he added.
“Under FTAs, finished products like CA are subject to zero duty, but components have to go through a reverse duty structure. Now after notifying that gas filled units are prohibited it means you can now import it as a component only. Therefore, the zero percent tariff route is no longer available, ”he added. Expressing similar views, Daikin Airconditioning India Managing Director and CEO Kanwal Jeet Jawa said the ban would not have much of an impact on major players as most of the manufacturing is currently done in India, whether it is a local player or a multinational.
All now have large factories and manufacturing in India. However, this might hit some small businesses that imported either the IDU (Indoor Unit) or ODU (Outdoor Unit) from countries such as China and via Thailand using the FTA route with zero percent duty, he added. “Some small payers, who used to bring in air conditioners during the season and disrupt the market will be affected to that extent, it’s a welcome step,” Jawa said.
Commenting on the development, the Consumer Electronics and Appliances Manufacturers Association (CEAMA) said the notification would ban the import of CAs, boost domestic manufacturing in India and create more jobs. “This decision is consistent with the government’s dual objective of making India fully self-sufficient in the manufacture of air conditioners and to gain a larger share of the world air conditioning market through export,” CEAMA President said. , Kamal Nandi.
Currently around 30 percent of ACs are imported into India as CBUs. Tata group company 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 accordance with the movement ” Aatmanirbhar ”. “As the leading air conditioning company in India, we welcome this government decision,” said Voltas Managing Director and CEO Pradeep Bakshi.
Panasonic India President and CEO Manish Sharma called the ban a step in the right direction. “We believe that the change in the import policy regarding air conditioners is a step in the right direction and in line with the Aatmanirbhar strategy announced by our honorable Prime Minister. We are currently exporting air conditioners from India to SAARC, Middle East and Africa, ”he said.
LG Electronics India also welcomed the move and said it will strengthen domestic manufacturing capabilities. “We welcome this decision; it will stimulate the Make in India initiative. The whole range of LG air conditioners are made in India. I am confident that this announcement will support the vision of the Prime Minister of Aatmanirbhar Bharat, ”said Vijay Babu, VP-Home Appliances of LG Electronics India.
Havells India CMD Anil Rai Gupta said, “We believe that companies that have invested in their own manufacturing facility will be well positioned to benefit.” The government on Thursday banned imports of air conditioners up to 2 tonnes with refrigerants to promote domestic manufacturing and reduce imports of non-essential items. According to Jawa, India sold around 7 million units of air conditioner in the last fiscal year and there is huge potential for growth as the penetration rate is less than 5 percent. Therefore, companies in India have invested heavily and have bullish plans.
In a residential air conditioner, the compressor and motor, which account for about 30 percent of the price, are imported, while sheet metal, coils and the like are sourced locally. Several global manufacturers, including GMCC which is investing around Rs 800 crore to set up a compressor manufacturing plant here, have resumed local manufacturing of their products. In addition, Hitachi Highly also invested in the manufacture of compressors.
“From the way the prime minister focused on Aatmanirbhar Bharat, other companies are also reviewing it and many component manufacturers now want to come,” he said. Bakshi, however, said India is still at an early stage in terms of product technology and therefore the obligation to import certain components will remain for some time.
- While this move would help push the ‘Aatmanirbhar’ movement, top players like Blue Star, Daikin, Voltas, Panasonic and LG Electronics believe it will have little impact on them as they already manufacture most of their air conditioners in the country. Blue Star chief executive B Thiagarajan said the ban would have minimal impact on domestic businesses.
- “ Import ban in AC sector to protect domestic companies from free imports through the FTA channel ”