The government has approved production-linked incentive (PLI) scheme for solar panels, room air conditioners (ACs) and LED lights. The total outlay is over Rs 10,700 crore.

Speaking to CNBC-TV18, B Thiagarajan, MD of Blue Star said that the scheme will benefit air conditioning companies at the backend as the incentive is for components and not finished goods.

“The original objective of the government was to ensure that India becomes a major player in the global arena. Our market size is just around 7 million compared with something like 110 million manufactured in China. So, if we want to be competitive some kind of support is required for the finished goods as well as the components. The government’s announcement addresses the components. As an industry we would have been very happy if this would have been extended to finished goods as well,” he said.

He believes that the air conditioning industry will go slow on finished good manufacturing. “I think the industry will go slow on finished good manufacturing. They will measure what is the capacity expansion that is required because with the PLI on finished goods, the market would have exploded. However, now what will happen is that exponential growth of room air conditioners is not going to take place. It will grow at CAGR of 10-12 percent,” he said.

However, for the company, he said that Blue Star needs capacity and they will avail the 15 percent corporate tax for the new manufacturing units.

Sunil Sikka, Advisor of Electric Lamp and Component Manufacturers Association of India (ELCOMA) said that even though LED penetration in India is at 90-95 percent, the scheme will make a huge difference.

“In India, we have reached 90-95 percent penetration. Though the conventional lighting still continues, LED has taken it over completely. The lighting industry is around Rs 20,000 crore, it is not a very big industry, but Rs 19,000 crore comes from LEDs and just Rs 1,000 crore is left to the conventional lighting. So, the PLI scheme is going to make a huge difference,” he said.

Sikka said that the scheme will incentivize Indian and multinationals companies to setup shops in India.

“The component ecosystem is pretty bad in LEDs. We were in a hurry in the last few years to make LEDs in India, but 50 percent of the components are still being imported from China, especially the lighting electronics is completely run by China. So, we had lost out on the components and we had not worked on the components and this is incentivizing the Indian companies, it is incentivizing the multinationals to come and set up shops here,” he said.

However, he too believes that the PLI scheme should be given to both components as well as to finished goods.

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(Edited by : Abhishek Jha)