Reasons to Invest

Upgrading Production Ecosystem: Manufactering push provided through schemes such as PLI Scheme in White Goods, SPECS (Scheme for Promotion of Manufactering of Electronics Components and Semiconductors), EMC 2.0 (Electronic Manufactering Cluster Scheme 2.0), etc.
Surging Demand: White Goods and Consumer Electronics market is expected to exhibit a strong growth of between 10-15% CAGR over the next 5 years.
Attractive State Incentives: Multiple states have announced special incentives for consumer durable manufacterers, with incentives offered on capital expenditure, interest payments, land purchase etc. Special customized incentives also available for large and mega-investors across different states.

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FDI Norms

100% FDI is allowed under the Automatic Route for manufacturing
100%

FDI Allowed

Budget 2021-2022 Announcements
100% FDI is allowed under the Automatic Route for manufacturing

Government Support

Central Government Schemes
  • Production Linked Incentive scheme
  • Duty Drawback Scheme
  • Export Promotion Capital Goods scheme
State Incentives

Incentives by the state usually include:

  • Capital subsidy
  • Stamp duty exemption
  • Interest subsidy
  • Tax reimbursement
  • Electrical duty exemption  
Empowered Group of Secretaries (EGos) and Project Development Cells (PDCs)

The PDCs would be responsible for coming up with projects with all approvals and identifying issues to attract investment that would be brought to the attention of the EGoS.

Productive Linked Incentive Scheme for White Goods

The PLI Scheme for White Goods is aimed to boost domestic manufacturing of components and sub-assemblies of ACs and LED Lights and make India globally competitive by removing sectoral disabilities, creating economies of scale and ensuring efficiencies. The Scheme was approved by the Government of India in Apr 2021 and has an outlay of $855 Mn. Tenure for the scheme is FY 2021-22 to FY 2028-29.

Application for 2nd Round closed on 25th Apr 2022.

Achievements:

  • 64 applicants with committed investments of INR 6,766 Cr have been selected as beneficiaries under the scheme.
  • The selected applicants include 34 for the manufacturing of Air-conditioner’ components with a committed investment of INR 5,275 Cr and 30 for the manufacturing of components of LED Lights with a committed investment of INR 1,491 Cr.

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UJALA Scheme

Under the UJALA (Unnat Jyoti by Affordable LEDs and Appliance for All) Scheme, the Government distributed more than 366 Mn LEDs to households from year 2015 to 2022 at 40% of the market price. The Scheme aimed to promote energy-efficient lighting. As of January 2022, 48 Bn kWh per annum energy has been saved and 3.86 Bn Tonnes of reduction in CO2 emission has been achieved.

SLNP Scheme

The Street Lighting National Programme (SLNP) aims to install/retrofit around 30 Mn LED streetlights by 2024 out of which 11 Mn LED streetlights have been installed as of January 2022, resulting in annual energy saving of around 7.6 Bn KWh and annual estimated greenhouse gas emission reduction of around 5.29 Mn Tonnes of carbon dioxide.

Trade Scenario

India's Consumer Durables Imports (HS codes 8415,8418,8422,8450,8516,8539) decreased by 1% CAGR from $3.1 Bn to $2.9 Bn from in FY 2018 to 2022.
India's Consumer Durables Exports increased by 5% CAGR from $760 Mn to $915 Mn from FY 2018 to FY2022.
AC imports (HS code 8415) declined by about 10% CAGR from $1.2 Bn to $792 Mn in period 2018 to 2022. AC Exports increased from $165 Mn to $233 Mn, rising by 9% CAGR in the same period.
Major markets for import include China, Thailand, Singapore Vietnam, Turkey, amongst others. Major export markets include UAE, Bangladesh, Nepal, Nigeria etc.
Indian exports are expected to rise further, as local manufactering ramps up and the Production-linked Incentive Scheme incentivises production of key components domestically for ACs and LEDs

Value Chain Assessment

Product Profiles

Indian residential AC market is estimated to be around 7 to 7.5 Mn units per annum by volume. The organized sector dominates the industry in terms of sales value and volume, employment generation and investments.
In 2020, urban households constituted 70% share of the demand for ACs from the residential sector. Adoption of latest technologies has led to the introduction of new innovative models in the market such as ACs fitted with copper condenser and blue fin, ubiquitous sensor and Wi-Fi enabled smart features.
Constantly rising temperatures in northern regions of India has made Air Conditioners an increasingly important fixture in homes boosting their sales. Currently, ACs have a penetration of just 4% compared to global average of 30% signifying the huge potential for growth

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FAQ

FAQs

Which ‘Heads’ of eligible investment are capped and to what extent?
  • Investment in Research & Development shall not exceed 15% of the total committed investment.
  • Investment in Transfer of Technology shall not exceed 5% of the total committed investment.

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Is investment in used plant and machinery an eligible investment?

No. Investment in second hand/ used/ refurbished plant, machinery, equipment, utilities shall not be considered as eligible investment.

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What will be the threshold net incremental sales if an applicant makes higher investment than the threshold investment?

In case an applicant makes higher investment than the threshold investment, the threshold incremental sale to be achieved by the applicant for achieving eligibility for incentive shall remain same for respective target segment as specified in Appendix-I or Appendix-IA of the scheme guideline, as the case may be.

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Does Captive Consumption of eligible products form part of Net Sales Turnover?

Yes. Captive Consumption of eligible products shall form part of Net Sales Turnover.

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Do the Value-Added Resellers qualify under the scheme?

No. Value-Added Resellers do not qualify under the scheme. 

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