The much-appreciated and admired production linked incentive (PLI) scheme for the white goods segment alone is speculated to create an incremental revenue of ₹65,000-75,000 crore and is also aimed at boosting domestic manufacturing of electronic appliances, states India Ratings.
The scheme is highly expected to provide an incentive of 4 to 6 percent on ACs based on the incremental sales of domestically manufactured goods in the coming five years. Here is the catch; the minimum investment varies because it based on the type of venture as well as the type of component. The scheme will magnetize investment for several international and in-house companies.
The Appliance and Consumer Electronics sector in the country is massively dependent on import for imperative components such as blower motors, compressors, and condensers. CEAMA also stated that 75 percent of components (by value) are imported. Compressors, condensers, blower-motors and PCB circuits, which account for 55-60 percent of the total cost of an AC, are imported. For LEDs and ACs, the total expense allocated is ₹6,238 crore, but a proper division is not available for both segments.
There is speculation that 60 percent of this expense will be for the ACs. After examining and calculating the benefits derived from PLI, the report urged that the overall price of domestic manufacturing should come down by 8 to 12 percent, based on the type of components being used.
Now, over the past several years, various manufacturers have brought component making under control in India for several key items like heat exchangers, compressors, indoor and outdoor units, motors and many more. All these have manufacturing units in the nation now. Highly Electrical Appliances (a JV of the Hitachi Group) and Midea Group are beginning compressor units in India. Due to the insufficient price of imported components and reduced size of the industry, component and AC makers do not find it economically viable to invest in domestic units.
But, because of large incentives promised under the PLI scheme and augmented backward integration, investments are increasing by international companies. The big contract manufacturers, which are responsible for 40 percent of ACs manufactured in India, could also invest in the area because they have the chance of getting profits and other benefits faster than others.