High excise duty mars growth of A-C industry

Stringent labour laws and high excise duty, coupled with the fact that a lot of capital needs to be invested, has prevented Indian air conditioner manufacturing firms from venturing into the mass production of air conditioners.

"The labour laws in India still are not in favour of investors and the excise duty, although rationalised, continues to be high. In addition, this is a very capital intensive industry and thus Indian companies are not being able to get into mass production," said Pankaj Dharkar, executive director of Ahmedabad based Dikshit Consultants and Engineers Pvt. Ltd and a member of the Indian Society of Heating, Refrigerating and Air Conditioning Engineers (ISHRAE), a body of air conditioning manufacturers of the country.

He added that, despite these drawbacks, the industry is growing at 25-30 per cent every year.

The market for air conditioners market in the country is pegged at around Rs 4000 in the organised sector and another Rs 1500 crore in the unorganised sector.

Dharkar said that, barring ten or 12 large companies, the others units in the industry are into manufacturing of components in air conditioning systems.

"In the past fiscal, 13-odd lakh air conditioners were sold in the country, but only six lakh compressors were manufactured within India. This means that half of the compressors, the main component of ACs still were imported," he said.

Other ISHRAE officials said that another reason why the air conditioning market is suppressed is the cost of energy.

"While a on-tonne window air conditioner is available for around Rs 20,000, people end up paying an equal amount in one year just on electricity, assuming that the air conditioner is run for about eight hours a day. In China, for instance, the cost of energy is one fourth," said an office bearer of ISHRAE.

The excise duty on air conditioner varies from 16 per cent on control plant (huge plants that require integrated air conditioning systems) components to 30 per cent on window and split air conditioners.