Govt mulling scheme to lure users to replace old AC with new 5-star models

Consumers may be able to turn in their old units and receive a certificate that can be redeemed while purchasing a new five-star AC, that can save up to ₹6,300 a year in electricity bills

In an effort to reduce rising power consumption and promote energy-efficient technologies, the Union government is preparing a financial incentive scheme that encourages consumers to replace their old, inefficient air conditioners (ACs) with new five-star-rated models.  The Ministry of Power and the Bureau of Energy Efficiency (BEE) are currently reviewing this plan, which is expected to significantly impact urban electricity demand and household expenses.  Need for the shift  As temperatures and incomes rise, the country’s annual AC sales have jumped from 8.4 million units in 2021-22 to nearly 11 million units in 2023-24. But this rapid growth comes with a cost. Buildings consumed close to 500 terawatt-hours (TWh) of electricity last year, with cooling accounting for about one-fourth of the demand, according to government estimates.  Most of the older AC units in Indian homes are rated below 3 stars, meaning they consume far more power than newer, energy-efficient models. The Bureau of Energy Efficiency (BEE) estimates that replacing an old AC with a new five-star unit could save up to ₹6,300 a year in electricity bills, while reducing the burden on the national grid particularly during peak summer months.    How the incentive scheme will work  While the final details of the scheme are yet to be announced, the government is considering a multifaceted approach to make the switch financially viable for consumers:  1.Buyback via recyclers: Consumers may be able to turn in their old units to certified recyclers and receive a certificate that can be redeemed while purchasing a new five-star AC.  2. Manufacturer discounts: AC manufacturers might offer instant discounts on the purchase of new models in exchange of the old ones.  3. Electricity bill rebates: In collaboration with power distribution companies (discoms), the Centre may explore the possibility of providing bill credits for households upgrading to more efficient appliances.    Aligning with broader climate goals  The proposed scheme also ties into India’s long-term strategy under the India Cooling Action Plan (ICAP), which aims to reduce cooling energy demand by up to 40 per cent by 2038. With space cooling expected to account for nearly 30 per cent of total electricity consumption by mid-century, a transition to energy-efficient appliances is crucial not just for energy security, but also for climate action.    Industry response and next steps  The government has begun consultations with major manufacturers, including Voltas, Blue Star, LG, Samsung, and Lloyd, to ensure industry support and smooth implementation. These discussions will likely shape the final framework of the incentive scheme, including pricing strategies, logistics for old unit collection, and recycling norms.    Similar existing scheme  BSES is already running a similar scheme in the national capital under which users can avail up to 60 per cent discount on new energy-efficient air conditioners. The scheme is to replace less stars/non-star rated AC’s with BEE 5 star labelled /inverter AC’s. The AC for replacement should be old up to 3 stars, installed at consumer premises in working condition. Any BSES consumers can replace up to three ACs per CA number as per their requirement.