Compliance with energy efficiency norms has proven to be a great challenge for the appliances industry, due to the short two-year window for norms revision, , said Kamal Nandi, President of Consumer Electronics and Appliances Manufacturers Association (CEAMA).
“India has the highest energy-efficiency norms in the world. With a window of two years; there is too much pressure on the entire supply chain. There is also a huge impact on the average ticket value of the product, making these products very expensive for the end-consumer.
“There is a strong case to revise the period of upgrade from the current two years to maybe 5 years,” Nandi told.
At an industry level, there has been a drop in the sale of five-star air conditioners from 22 percent to around 14 percent (of total sales volume), largely due to the average price of a unit (around ₹50,000-55,000)said Nandi.
Typically, a one-star jump in energy efficiency norm translates into 5-6 percent increase in product prices said Rahul Prithiani, Director at CRISIL Research.
When asked how this dents sales growth, Nandi said that due to continuous changes in the energy efficiency norms, manufacturers are forced to investment more, which in turn pushes up the production cost. The price rise owing to this would ultimately affect demand and dampen the industry growth, he said.
Go for five-year window
B Thiagarajan, Joint MD, Blue Star Ltd, suggested that the five-star ACs should have zero GST in order to address this issue. Setting the revision window (for change in norms) at five years will be a welcome move, he added.
Manish Sharma, President and CEO, Panasonic India, too recommended lowering the GST on energy-efficient products.
“New energy efficiency norms call for changes in the product engineering design and will impact the entire supply chain,” said Anuj Poddar, Executive Director at Bajaj Electricals. He added that though Bajaj Electricals is “gearing up to comply with the new norms”, this is putting undue stress on its resources given the stringent time lines.
Prithiani said that companies can take steps such as value engineering and cost optimization to increase efficiency and lower the high-cost barrier.
“Using R-32 refrigerant in place of R410a in ACs and a smaller envelope size for the outdoor unit of ACs are few of the options,” he said.
Prithiani also said that since a large part of the premium segment is either imported or assembled here after importing the components, a shift towards local manufacturing can bring down the cost. Better marketing of monetary savings through energy-efficient appliances over their life cycle is another way to reduce the impact of increase in prices on sales, he added.― The Hindu Business Line