India stays cool, thanks to China. Can that change?

Time of India

22-04-2025

The
India
n Meteorological Department (IMD) has said that India is set to face hotter-than-usual temperatures from April to June, with the Central, Eastern and Northwestern plains expected to experience more heatwave days. North More than 20 cities have already seen temperatures shoot past 42°C, with Delhi, parts of Uttar Pradesh, and Rajasthan facing intense heatwave-like conditions. The
India Meteorological Department
(IMD) says it's only going to get hotter in the coming days.
More and harsher heat waves can further aggravate a summer problem of India -- it depends on China to stay cool. India's room air-conditioner industry is still dependent on imports of crucial components such as compressors, PCBs, and fan motors, mainly from China, and is anxiously looking at the tariff standoff triggered by the Trump administration. Compressor availability from China had reduced sharply till January due to higher US supplies at the cost of countries like India, contract manufacturer Epack Durable's CEO Ajay DD Singhania had told ET.
Local production of AC compressors is just about 35 per cent of the demand. Grooved copper tubes are other AC components in short supply. The shortfall in local supply of AC components is largely filled by Chinese imports.
Echoing the demand of the industry, Panasonic India head Manish Sharma told PTI a separate production-linked incentive (PLI) scheme for the air conditioner segment, focusing on high-value components like compressors and motors, is the need of the hour.
Will air-conditioner prices soar?
Intermittent rainfall in south India and recent thunderstorms with moderate rain in some parts of north and eastern regions have slowed down the pace of sales of room air conditioners in April, but the industry is still expecting a double-digit growth with recent weather forecasts suggesting an intense summer.
Consumers looking to stay cool this season may find themselves facing higher costs as the industry grapples with two main challenges: increasing import costs due to a weak rupee and ongoing disruptions in the supply chain, particularly with key components such as compressors. Suppliers with large order books from India are acting in a "little miser way", said Jasbir Singh, chief executive of Amber Enterprises, the largest AC contract manufacturer in India, ET had reported in February. The company is looking at other markets for supplies, he had told analysts in an earnings call. Due to these reasons, several companies are considering price hikes.
Although price increases are unlikely to dampen AC sales due to the availability of EMIs, stocking (of AC units) is going to be a concern. "There are chances that consumers may not be able to get a brand or model of their choice," Nilesh Gupta, director at Vijay Sales, had told TOI in February.
Govt's exemption for Chinese AC components suppliers
A recent exemption made by the government might moderate price hikes. Last month, The government exempted certain critical AC and refrigerator components from mandatory Bureau of Indian Standards (BIS) certification to prevent an acute shortage. The Department for Promotion of Industry and Internal Trade (DPIIT) lifted the BIS certification of factory requirement for grooved copper tubes and AC compressors of 2 tonnes and above capacity, including those imported from China, meeting industry demand.
While DPIIT has not yet extended similar exemptions to
AC compressor
s of less than two tonnes and refrigerator compressors, three senior industry executives told ET last month the government was actively considering this and a notification was likely soon. "We expect a BIS waiver for refrigerator compressors and those used in ACs with below two-tonne capacity," an industry executive had told ET. "The AC compressor BIS waiver is immediately required since local capacities are still just 40-45 per cent of the demand, while the situation is better for refrigerator compressors as some companies like LG, Godrej and Samsung manufactures them locally."
AC and refrigerator manufacturers had flagged possibilities of acute shortage of products this summer due to non-BIS certification of their copper and compressor vendors in China and nearby countries. It is mandatory for brands to ensure BIS approval of the factories from where the components of ACs and refrigerators are sourced, be it in India or abroad, as per government rules. The country's largest AC contract manufacturer Amber Enterprises had said in its earnings call in February said production in April will be impacted due to component shortage.
India to manufacture more compressors
The government is considering a flexible approach on potential joint ventures between Indian and Chinese companies for air conditioner and refrigerator compressor manufacturing as it looks to enhance local capacities to meet surging demand and make the country self-sufficient on these critical white goods components, ET reported last month. With forecasts of an intense summer this year, adding to record temperatures in 2024, the government has asked AC and refrigerator makers to build more compressor manufacturing factories, three industry executives had told ET.
Government officials have told ET the Centre is examining suggestions to allow JVs with Chinese firms only for manufacturing critical components as long as the Indian partner is a majority stakeholder. "The government is taking a relook at the PLI (production-linked incentive) scheme for white goods as there is some budget available for them. There is a shortage of compressors and that is being looked into," an official said. An industry executive said the PLI for white goods needs to address high-value investments such as compressor manufacturing with greater incentives since setting up such a facility would require Rs 250-400 crore investment.
In 2023, Voltas had to scrap an AC compressor manufacturing plan since its JV proposal with China's Highly Group did not receive Press Note 3 approval from the government. Press Note 3 norms mandate government approval before any foreign direct investment from an entity in a country that shares its land border with India, such as China. The stricter rules followed worsening of India-China relations after a deadly border clash between the two armies in early 2020.