Air-conditioner prices to go up

Prices of air-conditioners are likely to go up by 6-8 per cent soon as the air-conditioning industry may pass on the hike in the input metal costs to customers.

T G Babu, president, Refrigeration and Air-conditioning Manufacturers' Association (RAMA), said the cost of input metals like copper, aluminium and steel had escalated considerably during the last one year and the refrigeration and air-conditioning industry might not have any option but to increase the prices of ACs.

He added that increase in cost of input metals had affected the entire spectrum of air-conditioning equipment, including central air-conditioning equipment, packaged air-conditioning and room air-conditioners.

Despite an increase in the cost of steel, copper and other raw material costs, the manufacturers were holding on the price due to intense competition.

"The prices of air-conditioners have been steadily coming down over the last couple of years. However, for the first time, this summer, there was no price reduction and the industry has maintained the same price levels because of inflation," he said.

In the past one year, the prices of copper increased by over 120 per cent, aluminium by 60 per cent, steel by 20 per cent and zinc by 72 per cent. The price of copper has increased from $3435 per tonne in April 2005 to $8029 per tonne in May 2006. At present, it stands at $7850 per tonne.

The manufacturers of compressors and fan motors have also proposed to increase the prices between 6 per cent and 12 per cent. Since margins have gone down very badly in the last few months, the industry is compelled to raise the prices by 6-8 per cent, he said.

While the central air-conditioning sector grew by 30 per cent during 2005-06, the room air-conditioning segment grew by little under 25 per cent. The industry expects the trend to continue this year as well, driven by the boom in the IT and ITES sector.

The size of the room air-conditioners (window and split) was 1.5 million units (about Rs 2800 crore) during 2005-06. This is expected to grow to 1.8 million during 2006-07 (about Rs 3400 crore).

The central air-conditioning segment is expected to grow from a size of Rs 2900 crore in 2005-06 to Rs 4000 crore during 2006-07.

The copper, which is used in air-conditioning products, is fully imported as India's production is very small. "All air-conditioning products, without a single exception, use copper, but the copper production is not keeping pace with the demand," he said.

Babu said that the prices of air-conditioners were expected to go up in other markets also. Though, the price are likely to go up by 20 per cent in China, it will at least settle with 10 per cent hike," he added.