Import dependency for AC compressors may fall to 15% by 2027-28

Domestic manufacturing from month-end under PLI scheme to lower dependence from 85%

Top consumer-appliance companies — LG, Daikin, and Midea — are set to start manufacturing AC compressors by the end of this month, a move that will bring down import dependence to 15-16 per cent of home consumption by 2027-28, according to the government’s internal estimates.
 
The three companies have been selected as beneficiaries under the government’s production-linked incentive (PLI) scheme for white goods (AC and LEDs).
 
The compressor is one of the key components in an AC and accounts for close to 30 per cent of its manufacturing cost. India has been a net importer, with two key companies manufacturing AC compressors in the country being the subsidiaries of a Chinese firm and a US-based entity, people aware of the matter said.
 
In 2022, sales of ACs in India are expected to have been about 8.5 million units. By 2028, the demand is anticipated to go up to 15 million, thereby increasing the requirement of compressors. The committed capacity of these three companies during FY28 is expected to touch 12.4 million. In that case, India’s import dependence will reduce from 84-85 per cent to 16 per cent, according to the analysis.
 
The cumulative production capacity of Daikin, LG, and Midea during FY24-FY28 will be 19 million, 9.5 million and 9.9 million, respectively.
 
Of the import requirement, the lion’s share -- over 66 per cent -- can be attributed to China, followed by Thailand and South Korea, with 15 per cent and 8 per cent, respectively.
 
“With the production capacity supplemented by manufacturers under the PLI scheme, the demand for AC compressors is expected to be domestically catered completely in a few years,” a person cited above told Business Standard.
 
To tackle India’s dependence on imports and become self-reliant, the Department for Promotion of Industry and Internal Trade (DPIIT) had notified the PLI scheme for white goods in 2021. Apart from the focus on self-reliance, the government wants to create a complete component ecosystem in India and make India an integral part of the global supply chains.
 
The white goods PLI scheme is set to bring investments worth ~6,632 crore and ~6,172 crore for AC components alone. In the case of ACs, companies will manufacture copper tubing, compressors, and heat-exchangers, among other things.
 
The scheme will extend an incentive of 4-6 per cent on incremental sales for five years subsequent to the base year and one year of the gestation period. Domestic value addition is expected to grow from 15-20 per cent now to 75-80 per cent.