1.main report

CONTENT

Page No.
List of Tables
List of Annexure
Executive Summary i-v
Chapter 1 Introduction
1.1 Background 1
1.2 Objectives of the Study 3
1.3 Terms of Reference 3
1.4 Methodology 4
1.5 Limitations 6
Chapter 2 Light Electrical Industry: Large Home Appliances Segment
2.1 Light Electrical Industry in India 7
2.2 Growth of Durable Product Market in India 8

2.3 Large Home Appliances Segment 10

2.3.1 Preferential Government Policies 10

2.3.2 India to enforce energy efficiency in climate fight 12
2.3.3 Air Conditioners 13
2.3.3.1 Types of Air Conditioners 14
2.3.3.2 Penetration in India and Competing Countries 14
2.3.3.3 Players and Market Share 14
2.3.4 Refrigerators 16
2.3.5 Washing Machines 19
2.3.5.1 Penetration of Washing Machines in India and Global 21

2.3.5.3 Future Scenario 22
2.3.6 Vacuum Cleaners 23
2.3.7 Microwave Ovens 23
2.8 Financial Analysis of Domestic Electrical Appliances 25
2.9 Financial Analysis of Refrigerators and Air Conditioners 26
Chapter 3 Impact of WTO, FTAs and Global Economic Recession
3.1 Introduction 27

3.2 WTO and Implications for Indian Economy 28
3.3 Impediments to the growth of India’s International Trade 29

3.4 From the Uruguay Round to Doha Round 29

3.5 The Doha Development Round 30

3.6 Free Trade Agreements (FTAs) 31

3.6.1 India- Thailand Free Trade Agreement 32
3.7 Product Categories under Early Harvest Scheme 34

3.8 India signs FTA with ASEAN 35
3.9 Global Economic Recession 36

Chapter 4 Productivity Growth of Large Home Appliances
4.1 Introduction 38
4.2 Air Conditioner 38
4.2.1 Key Features of the Registered Factory Sector 38
4.2.2 Data and Variables 39
4.2.3 Growth Air Conditioner Sector 40
4.2.4 Partial and Total Factor Productivity Growth for Air Conditioner 40
Industry
4.3 Refrigerator 43
4.3.3 Growth Refrigerator Sector 44
4.3.4 Partial and Total Factor Productivity Growth for Refrigerator 45
Industry

4.4 Washing Machine 48
4.4.3 Growth of Washing Machine 49

4.4.4 Partial and Total Factor Productivity Growth for Washing Machine 50
Chapter 5 Competitiveness of Large Home Appliances in India

5.1 Introduction 53
5.2 Export Trends 53
5.3 Import Trends 54
5.4 Export Competitiveness of Large Home Appliances 55
5.5 Air Conditioners 57
5.6 Refrigerator 60
5.8 Vacuum Cleaners 71
5.9 Microwave Ovens 74
5.10 Conclusion 76
Chapter 6 Field Survey Findings of Large Home Appliances
6.1 Profile of Light Electrical Manufacturing Units 77
6.2 Product Category wise distribution of the manufacturing units 78
6.3 Refrigerator 78
6.3.1 General Profile of Respondents 78
6.3.2 Employment Trend 79
6.3.3 Domestic Market Trend 79
6.3.4 Productivity and Competitiveness 83
6.4 Air Conditioners 84

6.5 Washing Machines 90
6.6 Vacuum Cleaners 96
6.7 Microwave Oven 101
6.8 Conclusions 107
Chapter 7 Summary of Diagnostic Case Studies 109
7.1 Introduction 109
7.2 Air Conditioner Manufacturing Unit 1: Mumbai, Maharashtra 109
7.3 Air Conditioner Manufacturing Unit 2: Mumbai, Maharashtra 111
7.4 Refrigerator Manufacturing Unit 3: NOIDA, Uttar Pradesh 113
7.5 Refrigerator Manufacturing Unit 4: Aurangabad, Maharashtra 114
7.6 Washing Machine Manufacturing Unit 5: Gurgaon, Haryana 116
7.7 Washing Machine Manufacturing Unit 6: NOIDA, Uttar Pradesh 116
7.8 Microwave Ovens Manufacturing Unit 7: NOIDA, Uttar Pradesh 117
7.9 Microwave Ovens Manufacturing Unit 8: Mumbai, Maharashtra 118
7.10 Vacuum Cleaners Manufacturing Unit 9: Mumbai, Maharashtra 119
7.11 Vacuum Cleaners Manufacturing Unit 10: NOIDA, Uttar Pradesh 119

Chapter 8 SWOT Analysis of Large Home Appliances in India
8.1 Air Conditioner 121
8.2 Refrigerator 122
8.4 Vacuum Cleaner 123
8.5 Microwave Oven 124
Chapter 9 Factors Constraining the Growth of the Sector
9.1 Electrical Energy Generation Review 125
Chapter 10 Summary of Findings: Study of Major Asian Trade Partners
10.1 Introduction 131
10.2 China 131
10.2.1 Lessons from Chinese Industry 133
10.3 Thailand 133
10.4 Malaysia 134
10.5 Korea 135
10.6 Energy Efficiency Standards and Labeling: International Scenario 135
10.6.1 China 136
10.6.2 India 137
10.6.3 Thailand 138
10.6.4 Malaysia 139
10.6.5 Korea 139
Chapter 11 Conclusions and Recommendations
11.1 Policy Guidelines for Skill Development and Training of Manpower 141
11.2 Infrastructure Development 142
11.3 Raw Material, Components & Machinery 142
11.4 Building a Global Supply Chain Network 144
11.5 R&D and Technology Upgradation 144
11.6 Implementation of Quality Standards and Energy Efficiency 146
Standards labeling programme
11.7 FDI in Light Electrical Sector 146
11.8 Policy of Disposal of e-waste 147
11.9 Fiscal Incentives 147
11.10 Changing character of Refrigeration Manufacturing in India 148
11.11 Market Segmentation 149
11.12 Quality and Price Discrimination 149

11.13 Customer Relationship Management 150
11.14 Labour Relations 150

11.15 Productivity Enhancement for Raising Profit Margins 150

11.16 Contract manufacturing 150

References 151
Annexure 153-177
Study Team 178

LIST OF TABLES
Page No

2.1 Growth drivers of Consumer durables 10
2.2 Foreign Trade and Domestic consumption of Air Conditioners- 16
India
2.3 Major Players / Manufacturers in India based on Market Share - Air 16
Conditioner
2.4 Foreign Trade and Domestic consumption of Refrigerators- India 19
2.5 Major Players / Manufacturers in India based on Market Share - 19
Refrigerator
2.6 Foreign Trade and Domestic consumption of Washing Machines- 22
India
Washing Machines
2.8 Foreign Trade and Domestic consumption of Vacuum Cleaners- 23
India
Vacuum Cleaners
2.10 Domestic Electrical Appliances (All Categories)- Financial 25
Aggregates
2.11 Refrigerators and Air Conditioners – Financial Aggregates 26
3.1 India’s Revised offer list for ASEAN under AI-FTA dated 7th Feb 35
2008
3.2 Year on Year Growth in Secondary Sector 37
4.1 Characteristics of Registered Air Conditioning Industry in India 39
4.2 Growth of Organized Air Conditioner Sector 40
4.3 Productivity Estimates for Labour and Capital Inputs 41
4.4 Labour, Capital and Total Factor Productivity Growth 42
4.5 Index of Labour , Capital and Total Factor Productivity Growth 42
Rates
4.6 Characteristics of Refrigerator Sector in India 44
4.7 Growth of Organized Refrigerator Sector 45
Rates
4.11 Characteristics of Washing Machine Sector in India 48
4.12 Growth of Organized Refrigerator Industry 49

Rates
5.1 Segment wise Export of Home Appliances – India Total 54
5.2 Segment wise Import of Home Appliances – India Total 55
5.3 Product Segment wise Export-Import Ratio of Home Appliances 56
5.4 Export of Other Window/Wall Types Self-contained Air 57
Conditioning Machines
5.5 Import of Other Window/Wall Types Self-contained Air 58
5.6 Trade Ratio of Other Window/Wall Types Self-contained Air 58
5.7 Country wise Export of Split System Air Conditioning Machines 59
5.8 Country wise Import of Split System Air Conditioning Machines 59
5.9 Trade Ratio of Split System Air Conditioning Machines 60
5.10 Country wise Export of Refrigerator (Household Compressor type 61
refrigerator)
5.11 Country wise Import of Refrigerator (Household Compressor type 61
refrigerator)
5.12 Trade Ratio of Refrigerator (Household Compressor type 62
refrigerator)
5.13 Country wise Export of Refrigerator (Other Household type 63
refrigerator)
5.14 Country wise Import of Refrigerator (Other Household type 64
refrigerator)
5.15 Trade Ratio of Refrigerator (Other Household type refrigerator) 64
5.16 Country wise Export of Other Machines, dry linen capacity <= 10kg 65
5.17 Country wise Import of Other Machines, dry linen capacity <= 10kg 66
5.18 Trade Ratio of Other Machines, dry linen capacity <= 10kg 66
5.19 Country wise Export of Other Machines, with Built-in centrifugal 67
drier of a dry linen capacity not exceeding 10kg
5.20 Country wise Import of Other Machines, with Built-in centrifugal 68
drier of a dry linen capacity not exceeding 10kg
5.21 Trade Ratio of Other Machines, with Built-in centrifugal drier of a 69
dry linen capacity not exceeding 10kg
5.22 Country wise Export of fully automatic machines of dry linen 69
capacity <=10 kg
5.23 Country wise Import of fully automatic machines of dry linen 70
capacity <=10 kg
5.24 Trade Ratio of fully automatic machines of dry linen capacity <=10 71
kg
5.25 Country wise Export of Vacuum Cleaners 72
5.26 Country wise Import of Vacuum Cleaners 73

5.27 Trade Ratio of Vacuum Cleaners 73
5.28 Country wise Export of Microwave Ovens 74
5.29 Country wise Import of Microwave Ovens 75
5.30 Trade ratio of Microwave Ovens 75
6.1 Distribution of Manufacturing units- NPC Field Survey 77
6.2 Distribution of Manufacturing units- Product category wise 78
Refrigerators
6.3 Refrigerator units surveyed: Statewise 79
6.4 Market share of Refrigerator 80
6.5 Domestic Sales to Total Sales 80
6.6 Local and Foreign Competition 81
6.7 Refrigerator Units: Import 81
6.8 Complete Knock Down (CKD) 81
6.9 Any Government Policies to help growth of Industry 82
6.10 Government Interface with business/private sector 82
6.11 Government friendly towards investor 82
6.12 Clearance to start manufacturing unit in India 82
6.13 Availability and quality of basic Infrastructure in India and 83
Competing Countries
6.14 Taxes and other controls in India and Competing countries 83
6.15 Cost of production in Competing countries 84
6.16 Any effect of Global Financial Crisis on company 84
Air Conditioners
6.17 Air Conditioners units surveyed: Statewise 85
6.18 Market share of Air Conditioners 86
6.21 Import: Responses of Air Conditioners Units 87
Competing Countries
Washing Machines
6.31 Washing Machines units surveyed: Statewise 90
6.32 Market share of Washing Machines 91

6.35 Import: Responses of Washing Machine Units 93
Competing Countries
Vacuum Cleaners
6.45 Vacuum Cleaners units surveyed: Statewise 96
6.46 Market share of Vacuum Cleaners 97
6.49 Import: Responses of Vacuum Cleaner 98
Competing Countries
Microwave Oven
6.59 Microwave Oven units surveyed: Statewise 101
6.60 Market share of Microwave Ovens 102
6.63 Import: Responses of Microwave Oven Units 104
Competing Countries

9.1 Electricity Generations- Target & Achievement (Jan 2009) 125
9.2 Electricity Generations- Target & Achievement (Cumulative period 125
April 2008 to Jan 2009)
9.3 Fuel-wise components of thermal generation 126
9.4 Hydro Energy Generation 127
9.5 Energy content in the Reservoirs – Region wise 128
9.6 Shortfall in Generation 130

ANNEXURE

Page No.

Annexure - 1: Survey Questionnaire 153
Annexure -2 : Format for developing Diagnostic Case 159
Studies
Annexure – 3: India-Thailand Consolidated List of 160
Items for Early Harvest Scheme (EHS)
Annexure -4: Methodology adopted for Partial and 163
Total Factor Productivity Estimations
Annexure -5: List Of Units Surveyed For The Field 166
Study
Annexure-6: Storage Position of Major Reservoirs 169
based Projects in the Country
Annexure-7 : Generation Performance of New Thermal 172
Units during Apr.’08 – Jan’09
Annexure-8 : Statement of shortfall in Generation 175
(April 08-Jan 09) existing Thermal Stations vis-à-vis
Target
Annexure-9: List of Thermal Stations Achieving Higher 177
generation than Target During April 08- Jan. 09

Final Report Productivity and Competitiveness of Light Electrical Industry in India

Executive Summary
It was not until 1992, when the Indian market first began to open up post liberalization, that
the MNCs started taking a closer look at the purchasing power of country’s middle class.
Inevitably, the first thing they saw was the massive volume of this potential market, rather
than its cultural idiosyncrasies. Studies have found that the penetration level of various
appliances in India is fairly low. Refrigerator use is about 18 per cent of the total population,
washing machine 6 per cent, air-conditioner less than 2 per cent and microwave ovens about
1 per cent, which translates into a great potential to tap new consumers. Light Electrical
Industry, particularly the large home appliances sector attracted a number of leading MNC’s
to either start joint ventures or start their fully owned subsidiaries in India.

The Indian consumer durables segment can broadly be segregated into consumer electronics
(TVs, VCD players and Audio systems etc.) and consumer appliances (also known as white
goods) like Refrigerators, Washing Machines, Air Conditioners, Microwave Ovens and
Vacuum Cleaners.

Present study examines the light electrical industry particularly large home appliances
sectors such as Refrigerators, Air Conditioners, Washing Machines, Microwave Ovens and
Vacuum Cleaners based on a detailed analysis of the data from both primary and secondary
sources. During the field interactions and surveys, suggestions have been also sought from
manufacturers, Industry associations, policy makers, experts/professionals, research and
developmental institutions, quality implementation agencies etc., on aspects relating to
productivity and competitiveness of the sector.

Domestic sales of Electrical Appliances at the aggregate All India Level during 2000-01 to
2007-08 reported an annual growth of 7.81 percent during the entire period, however, the
expenses have grown slightly at a lower rate of 6.99 percent per annum. One disturbing fact
been the total expenses are found to be higher than the sales realization.

Most of the segments in this sector are characterized by intense competition, emergence of
new companies (especially MNCs), joint ventures and introduction of state-of-the-art models,
price discounts and exchange schemes. MNCs continue to dominate the Indian consumer
durable segment.

World trade has definitely grown since the signing of WTO Agreements in 1995 thereby
giving indicators that international trade reforms do play an important role in boosting
economic development of various countries. But there are several problems facing these
Multilateral Trade Agreements. Predominance of developed nations in negotiations
extracting more benefits from developing and least developed countries. Currently India tops
the list of Asian countries with 30 FTAs, of which eight are with the integrating Asian region,
while and 22 are outside of Asia. It is a matter of concern that over the $8 billion trade deficit

National Productivity Council i


that India has with South East Asian Nations (ASEAN), as India’s exports to ASEAN is worth
only $16 billion, while ASEAN’s exports to India is to the tune of $24 billion. India’s trade
with Singapore is more balanced, with India’s exports to that country worth $7 billion and
imports of $8 billion. Indo-Thai Free Trade Agreement (FTA) was to the first of India’s FTAs
with another ASEAN country while negotiations with Singapore began almost at the same
time.

The Light Electrical Industry is highly capital intensive and also the obsolescence is very
high. Domestic industry is competing with global players from countries like China,
Malaysia, Thailand and South Korea having the path breaking technologies by their side.
There is an imperative to continuously upgrade manufacturing facilities in line with the latest
technological developments for which a suitable R&D infrastructure need to be in place.
Importing is considered to be a cheaper option than manufacturing locally by many domestic
appliance manufacturers in India.

Indian manufacturers are not able to compete with global majors due to the high level of
technological knowhow and R&D content. Fiscal incentives like rationalization of tariff on
raw materials and capital goods, lowering of excise duty on components, introduction of
Value Added Tax (VAT) etc., in conjunction with free environment to the manufacturers,
speed of business, proper communication, power supply, strong engineering and design base,
adequate R&D facilities etc., are key to a successful and competitive domestic electrical
industry.

Earlier Refrigeration industry was mainly operating at the local level not having much brand
value and brand availability. However, recently the character of the market got changed as
the 90 percent manufacturing has come to the organized sector with high brand value while
only 10 percent remains at the local level. The cost difference between the branded and the
local make was in the range of Rs.8000 to Rs. 12000 per piece earlier but the cost difference
came down substantially in recent years. As a result the small manufacturers stopped
production since they are not able to produce high quality durable products at lower cost.
Another area where there is significant change in the character of production has taken place
was that small manufacturers have become channel partners to major producers as
ancillaries or component manufacturers.

Since refrigerators are bulky items, currently about 80-90 percent refrigerators are
manufactured in India. Many multinational manufacturers of foreign origin have set up their
manufacturing plants in India. Currently the domestic value addition is estimated at the level
of 80-90 percent. It has been recommended by the industry associations that different duty
structures can be introduced for different components so that domestic value addition and
employment can be increased.

National Productivity Council ii


Customer Management or Customer Care is a crucial differentiator in the home appliances
industry. Distribution network could be an excellent source of competitive advantage for a
manufacturer of large home appliance. Manufacturers need to build a good after sales
service network, along with strong brand positioning to take care of customers. Consumer
helpline should address the complaints at the earliest. The idea of customer being the King is
the only sustainable strategy.

Manufacturers need to take special care towards efficient utilization of plant and machinery,
reduction in waste etc. It would result in raising the productivity level of the firms and
lowering the cost of production, thereby increasing the profit margins. A part of enhanced
profit may be passed on to the customers through lowering of product prices. Further better
quality, durability and round the clock customer support would enhance the market value of
the domestic producers.

Many Indian entrepreneurs or companies have already started functioning as Electrical
Manufacturing Services (EMS) companies to larger Original Equipment Manufacturers
(OEMs). In this case, OEMs would provide Indian EMS with a full range of services like
contract design, prototyping, final system assembly, configuration, order fulfillment, and
repair and after-market services. Further, being part of OEMs, Indian EMS could be able to
reap other benefits such as research and product development, brand building, sales and
marketing network of OEMs.

Labour policies in India are not favourable for manufacturing as compared to other
competing countries such as China. Therefore, there is requirement of flexible labour policies
to enable manufacturers to restructure labour force in response to market demand. Basic
infrastructure, raw material availability, government policies and R&D need to be updated
and upgraded.

To tackle the factors hindering the productivity and competitiveness of the sector, a number of
strategic initiatives need to be taken up by Industry Associations, manufacturers and
Government. In order to become competitive in the domestic as well as world market, light
electrical manufacturing units need to formulate strategies based on market intelligence,
product development, R&D, demand forecasting and competitive pricing.

The field survey results indicate that the quality manpower availability for the industry is
declining and there is shortage of skilled and trained personnel. The attrition rate is also high
as the industry salary packages are not competitive with ITES sector. The current educational
system and the training institutes are unable to meet the requirement of the sector. Further,
the course curriculum is theoretical and in plant training of students is missing in most of the
institutes.

There is a requirement of Industrial Training Institutes (ITI) and the Course Curriculum of
ITIs should be redesigned and continuously updated and upgraded to meet the changing

National Productivity Council iii


requirement of light electrical industry particularly large home appliances segment. Industry
Associations involvement in developing course curriculum and in plant training should be
made as a compulsory part of course curriculum. Industry/corporate bodies may be
encouraged through tax benefits/ payment of management fee to adopt government run ITI or
diploma colleges for effective and efficient management. Private Engineering / Management
Institutes may be encouraged to run courses specific to industry requirements.

Lack of adequate physical infrastructure such as roads, ports, airports, electricity etc., are
adversely affect the competitiveness and productivity of the domestic home appliances
manufacturing sector. Uninterrupted power supply is a necessary condition for operation
manufacturing units as power fluctuations can lead to major losses to the manufacturing
processes. Moreover, the demand of home appliances such as Air Conditioners,
Refrigerators, Washing Machines, Microwave Ovens and Vacuum Cleaners are driven by the
electrification of homes and uninterrupted supply of electricity in the already electrified
areas.

There is a need for active government support for the survival of domestic home appliances
manufacturing in India as suggested by industry associations. A time bound plan to upgrade
physical infrastructure needs to be prepared. Adoption of Private–Public–Partnership (PPP)
model can facilitate faster and cost effective development of infrastructure. Financial
incentives may be given to manufacturing units for establishing and maintaining of backup
power units and for utilizing non-conventional energy sources.

Weak supply chain network and lack of vendor support also affects the quality, productivity
and competitiveness of the sector. There should be hassle free import of raw material and
components by streamlining the import policy and systems and through simplification of
import procedures. Maritime Transport is a critical infrastructure for the development of
Logistics and Supply Chain Management. It influences the pace, structure and pattern of
development.

Government should strengthen Research and Development in light electrical manufacturing
sector especially in the applied research like product development through special grants to
leading Research Institutes/Universities and Technical Institutes like IITs/ ITIs. Special
schemes may be formulated to promote the development of Indigenous Technology to reduce
dependence on imported equipments and components. Since the cost of production is high in
India due to low technological levels and poor infrastructure, an appropriate financial
support schemes can be evolved for manufacturing units so that the current level of
technology can be upgraded to global standards. Productivity estimations based on Labour
and Total Factor Productivity Growth rates have been found quite low in the light electrical
sector particularly home appliances segments, there is a need for substantial up gradation of
skill levels and technological knowhow (R&D activities) in this sector for further value
addition at the domestic level.

National Productivity Council iv

Final Report Productivity & Competitiveness of Light Electrical Industry in India

CHAPTER 1
INTRODUCTION
1.1. Background

With the successful completion of the Uruguay Round of negotiations, which marked the
commencement of WTO regime of international trade relations, countries as well as
industry/firms are constantly investing their knowledge/intelligence to evolve strategies to
remain competitive in the global market. In this pursuit of excellence, no country or industry can
afford to remain laggard as the champions are promised huge economic gains, where as the
losers face the dire risk of going out of business. In essence, competitiveness has emerged as the
determinant of winner or loser in the manufacturing scene.

Since, India has been trailing behind Asian neighbours in terms of production, quality and export
of Light Electrical Industry products, performance levels of most of factors of production such as
quality manpower, capital investment, infrastructure, technology etc., need to be enhanced
through conscious policy interventions and managerial action to boost competitiveness of this
sector. In this context, an attempt has been made to understand the productivity and
competitiveness of light electrical manufacturing in India with a view to document, identify and
recommend policy solutions to make the sector internationally competitive. The study also
attempts to identify the factors hindering the progress of the sector and suggest measures for
enhancing the competitiveness of the sector.

A wide range of products such as air conditioners, refrigerators, washing machines, microwave
ovens, vacuum cleaners, dish washing machines apart from household electrical appliances,
electrical fans, electrical lamps, storage batteries, dry cells and others are covered within the
ambit of Light Electrical Industry sector. Besides these items, light electrical industry also covers
electric wires and cables industry, transmission line towers, cranes, lifts & escalators, dairy
machinery industry, food processing machinery, packaging machinery industry, water pollution
control equipment, air pollution control equipment etc.

Domestic electrical appliances are now increasingly being used in the household and, therefore,
it is very important that safety and quality aspects of these products need special attention.

National Productivity Council 1


Government has introduced compulsory Bureau of Indian Standards (BIS) marking with respect
to certain electrical appliances like stoves, plugs and sockets. Greater consumer awareness about
the quality and safety of these goods will go a long way in ensuring that manufacturers adhere to
these standards.

Since the industry covers a large number of diverse product categories which cannot be covered
in a single study, present study limits its scope to large home appliances only. Among the large
home appliances, the study focuses on five large home appliances such as Refrigerators, Air
Conditioners, Washing Machines, Microwave Ovens and Vacuum Cleaners. The biggest
attraction for light electrical industry manufacturers in the world is the growing middle class in
India which is, equated by many, to the size of European market in terms of purchasing power.
With Domestic Electrical Appliances (DEA) characterized by low household penetration,
international brands have an edge over their Indian counterparts in terms of superior technology
combined with a steady flow of capital, while domestic companies compete on the basis of their
well-acknowledged brands, extensive distribution network and an insight into local conditions.

Sales of household domestic electrical appliances in India posted strong growth in the recent
years as the Indian economy recorded sterling growth and personal disposable income levels
increased. Intense competition among manufacturers, influx of Chinese brands, and
rationalization by manufacturers to offer products to cater to the middle and lower-middle class
has kept up pressure on unit prices - particularly for air conditioners and refrigerators. Appliance
manufacturers, having understood the need to localise products for the Indian household strived
to introduce new features and technologies that would appeal to the Indian consumer.
Refrigerators with a separate compartment for onions and fresh herbs, washing machines that
utilise less water, and Microwave ovens designed for Indian style cooking are becoming more
common.

In view of the above, National Productivity Council (NPC) undertakes an in-depth analysis and
study on the sector particularly the large home appliance such as Air Conditioners, Refrigerators,
Washing Machine, Microwave Ovens and Vacuum Cleaners in order to evolve strategies to
promote Indian companies and increase domestic value addition. The study has been sponsored
by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry



with a view to come out with meaningful policy recommendations to increase domestic value
addition by Indian manufacturers.

1.2. Objectives of the Study

The study is carried out with the following major objectives:

1. Prepare a baseline report on the Light Electrical Industry sector in India.
2. Delineate major strengths and weaknesses of Indian light electrical sector especially
Large Home Appliances using SWOT analysis.
3. Estimate productivity and competitiveness of the sector vis-à-vis major overseas
competitors such as China, Thailand, Malaysia and Korea.
4. Evolve strategies to increase the production and export potential of the sector.

1.3. Terms of Reference

The study is carried out in accordance with the following Terms of Reference focusing on Large
Home Appliance segment of Light Electrical Industry:

1. Study and document the structure of diverse Light Electrical manufacturing sectors in
India.
2. Undertake a SWOT analysis of the Light Electrical Industry sector focusing on Large
Home Appliances segment.
3. Analyze factors constraining the growth of the sector including internal factors such as
availability of electrical power etc.
4. Study the productivity & competitiveness of the Large Home Appliances segment during
the last ten years.
5. Identify and study the competitive advantage of major overseas units/clusters who are
having substantial market share of Large Home Appliances such as Refrigerators, Air
Conditioners, Washing Machines, Microwave ovens and Vacuum Cleaners in domestic
market.
6. Develop Unit specific case studies for each of the major product categories listed at
TOR 5 above. Endeavour would be to highlight one case each from successful as well as
failure categories.
7. Identify the support measures needed by the domestic manufacturing units from the
sector to increase the present market share in the wake of intense competition arising



from international brands originating from countries such as China, Thailand, Malaysia
and Korea.

1.4. Methodology

A study on Light Electrical Industry focusing on Large Home Appliances necessarily required
pooling of technical expertise not only from NPC but also from the industry and its associations,
government and domain experts. Hence for the conduct of the study a suitable team has been
constituted as follows:

• A multi disciplinary team of consultants have been drawn from economics, industrial
engineering, energy, finance, management, IT etc., for conducting the study.
• Eminent experts from the field also are included in the study team.
• NPC Study team is headed by Shri. Brijesh Kumar IAS (Retd.) formerly Secretary,
Department of Information Technology, Government of India.
• A number of eminent experts from the concerned industry and industry associations are
also consulted from time to time on various aspects during the course of the study.

The study has been undertaken in two broad phases.

First phase of the study included preparation of a detailed baseline Report on the basis of
secondary sources of data and literature. The study focused on an in-depth study of the present
competitive environment in the aftermath of the opening up of the Indian economy and its
impact on domestic light electric manufacturers especially Large Home Appliances category.
Besides, the study team analyzed all available published and unpublished literature and data over
the years with a view to gauge the growth and development of selected product categories in
terms of sales volume and manufacturing practices.

The study also focused on the overall policy environment and the productivity and
competitiveness of the domestic brands both in the domestic and export markets. Special
emphasis has been given to analyze the impact of WTO agreements in the relative performance
of the sector in the recent years.

The available research studies on the sector have been referred while arriving at suitable
analytical framework including SWOT analysis of the sector. Apart from the detailed study of



literature, the study team compiled published industry specific data from various official and
company sources.

The compiled data from different sources such as CMIE, DGFT, ASI etc., have been used for the
estimation of productivity and export competitiveness of the sector. Relevant data published by
Annual Survey of Industries on the light electrical sector has also been consulted.

Second phase of the study focused on discussions with industry associations and detailed field
survey of the manufacturing units for which data has been collected from randomly selected
units located at major production clusters in the country. Similar field level discussions have
been carried out at two major competing overseas countries (Thailand and China) for identifying
the comparative edge over India in terms of guiding factors such as cost, quality, price,
technology, policy etc. Deliberations are also held with industry associations at respective
countries on the aforesaid aspects. Since similar cooperation could not be received by the study
team from the other competing countries such as Korea and Malaysia, efforts have been made to
find out their relative competitiveness vis-à-vis Indian manufacturers based on data and
information compiled from internet sources.

A sizable number of manufacturing units from each product category has been contacted for the
detailed field survey in India through a structured questionnaire to find out segment-wise specific
productivity and competitiveness parameters for the sector (Annexure 1). The study covered
detailed field surveys based on purposive sampling of at least 10 units each covering all the five
product categories such as Refrigerators, Air Conditioners, Washing Machines, Microwave
ovens and Vacuum Cleaners. The field survey in Indian covered 70 Manufacturing units.
Adequate care has been taken to include both successful as well as not so successful cases in the
selected sample. Major manufacturing units from each of the product categories are selected for
detailed study and survey.
The compiled data has been analyzed using SPSS software for drawing inferences on the factors
such as productivity and competitiveness of the sectors.

The study also included diagnostic case studies of 10 manufacturing units (equal number of
successful and not so successful) selected from each of the product categories for identifying unit
specific problems. The diagnostic case study has been carried out through a check list



(Annexure 2). The study focused on unit specific problems such as logistic problems,
technological problems, market access issues, finance, employment etc., with a view to find out
unit specific issues confronting the industry in achieving competitive edge.

1.5. Limitations

• Originally the study was scheduled to be completed within six months time period.
However, due to number of extraneous factors beyond the control of the study team such as
General Elections to 13th Lok Sabha during April and May 2009 most of the industrial
associations and manufacturing units were reluctant to cooperate with the field surveys.
Hence the field surveys had to be re-scheduled leading to delay in completion of study.

• Responses from the Industrial associations from overseas countries such as Thailand,
Malaysia , China and Korea was equally evasive, hence the study team had to resort to
alternate methods to compile most of the information from those countries. After a lot of
persuasion, Thailand Electrical and Electronics Industry and Thailand Productivity Council
facilitated a limited field study at Thailand. Similarly field study exercise was also carried
out at selected locations in China by NPC study team with the help of FICCI and Chinese
Chamber of Commerce & Industry. However, the field study was limited due to the non
co-operation of Chinese Industry to share manufacturing related information and data.
Therefore, the field study was mainly based on discussions with Chinese Chamber of
Commerce & Industry and discussions and visits to certain manufacturing units.

• Since the present study had to be carried out with the involvement of a number of external
experts and field survey agencies apart from NPC consultants, substantial finances required
for successful implementation of the project. Disbursement of additional 50 percent of the
project cost apart from the initial 10 percent took place only in September 2009, which also
contributed to delays in undertaking field surveys both in India and abroad.



CHAPTER 2
LIGHT ELECTRICAL INDUSTRY: LARGE HOME
APPLIANCES SEGMENT
2.1. Light Electrical Industry in India

Driven by a young population with increasing disposable incomes and easy finance options, the
consumer market in India has been throwing up staggering figures. However, the rupee income
classifications by themselves do not present a realistic picture of market potential for a foreign
business enterprise, because of significant differences in purchasing power parities of various
currencies. In fact, the Indian rupee has very high purchasing power parity as compared to its
international exchange value. For instance, while the exchange rate of one US dollar is 48.50
Rupees, the domestic purchasing power of a US dollar in the US is closer to the purchasing
power of Rs 6 in India, for equivalent needs and services. As a result, India ranks fifth in the
world, on purchasing power parity terms, despite having low per capita national income (US$
340 per capita).

It was not until 1992, when the Indian market first began to open up post liberalization, that the
MNCs started taking a closer look at the purchasing power of country’s middle class. Inevitably,
the first thing they saw was the massive volume of this potential market, rather than its cultural
idiosyncrasies.

The Indian consumer durables segment can broadly be segregated into consumer electronics
(TVs, VCD players and audio systems etc.) and consumer appliances (also known as white
goods) like refrigerators, washing machines, air conditioners (A/Cs), microwave ovens and
vacuum cleaners.

Most of the segments in this sector are characterized by intense competition, emergence of new
companies (especially MNCs) and introduction of state-of-the-art models, price discounts and
exchange schemes. MNCs continue to dominate the Indian consumer durable segment.

In consonance with the global trends, over the years, demand for consumer durables has
increased with rising income levels, double-income families, changing lifestyles, availability of



credit, increasing consumer awareness and introduction of new models. Products like air
conditioners are no longer perceived as luxury products.

2.2. Growth of Durable Products Market in India

Source: Ministry of Information and Technology, Government of India

The biggest attraction for MNCs is the growing Indian middle class. This market is characterized
with low penetration levels. MNCs hold an edge over their Indian counterparts in terms of
superior technology combined with steady flow of capital, while domestic companies compete
on the basis of their well-acknowledged brands, an extensive distribution network and an insight
in local market conditions.

One of the critical factors that influence consumer durable demand is the government spending
on infrastructure, especially the rural electrification programme. Given the government's
inclination to reduce spending, rural electrification programmes have always lagged behind
schedule. This has not favoured durable goods manufacturers till now. Any incremental spending
in infrastructure and electrification programmes could spur growth of the consumer durable
industry.

Apart from steady growth in personal disposable income gains, consumer financing has become
a major driver in the consumer durables industry. In the case of more expensive consumer goods,
such as refrigerators, washing machines, colour televisions and personal computers, retailers are



joining hands with banks and finance companies to market their goods more aggressively.
Among department stores, other factors that support rising sales include a strong emphasis on
retail technology, loyalty schemes, private labels and the subletting of floor space in larger stores
to smaller retailers selling a variety of products and services, such as music and coffee.

Rising disposable income and declining prices of durables have resulted in increased volumes.
An increase in disposable income is aided by an increase in the number of both double-income
and nuclear families.

A recent study conducted by The Economist analyzed the growth trends in consumer electronics
segment. One of the product categories taken up for study was refrigerators. The sales has been
found increasing from 42,30,000 units in 2005 to 55,05,000 units in 2008 and it is expected to
grow to 65,42,000 units of refrigerator by 2010. Consumer durables are expected to grow at 10-
15 per cent in 2007-08, driven by the growth in CTV’s and air conditioners. Value growth of
durables is expected to be higher than historical levels as price decline for most of the products
are not expected to be very significant. Though price declines will continue, it will cease to be
the primary demand driver. Instead, the continuing strength of income demographics will support
volume growth.

Fig 2.1: Sales trend and future projection of consumer electronics segment

Source: Intelligence Unit, The Economist



Another study analysed the major drivers of growth for various consumer durable products such
as Air Conditioner, Refrigerators , Colour televisions and Washing Machines (Table 2.1). It is
reported that reduction in price and increasing disposable income are the major drivers of
growth.

Table 2.1: Growth drivers of Cosumer durables

2.3. Large Home Appliances Segment

2.3.1. Preferential Government Policies

Consumer electronics and appliances manufacturers expect strong growth in the fiscal 2009-10
due to buoyant demand, concessions proposed in the Budget and improved consumer sentiment.

“The growth of the consumer electronics and appliances industry in the first quarter of the
current fiscal was about 10-12%, much better than last year (8%),” according to the Industry
Association for Consumer Electronics and Appliances Manufacturers Association. Factory
output data for May, showed that production of consumer durables grew by as much as 12.4%,
compared with 2.8% in the same month last year. The index of industrial production grew by
2.7% in the month.



In the three months ended June, sales of refrigerators and air conditioners (ACs) rose
significantly compared with the same period last year. “In the case of refrigerators, the growth
was not much in January to March 2009, but after March the growth has been about 5-7%. ACs
has grown 8-10%. Favourable decisions by the government have helped boost consumer
confidence, among other reasons,” said Vice President, sales and marketing, appliance division,
Godrej and Boyce Manufacturing. Co. Ltd.

Consumer Durable manufacturers need to invest Rs.1,000 crores on promotions, raising capacity
and R&D. Consumer durables manufacturers such as LG, Samsung, Whirlpool and Godrej &
Boyce to line up investments amounting to about Rs.1,000 crores over the next few months for
product launches, research and development (R&D) and for upgrading capacity at their existing
manufacturing plants.

Each of these companies are investing in the range of Rs. 100 crores and Rs. 500 crores. Godrej
& Boyce, for instance, will invest around Rs. 100 crores in its plants at Punjab, Maharashtra and
Uttaranchal. The funding will be through internal accruals. "March and April have been very
good for the industry. We have overcome three issues — liquidity crunch, credit crunch and lack
of confidence. The confidence is returning," said Godrej & Boyce's Chief Operating Officer
(appliance division).

LG India, on its part, plans to invest Rs 500 crore in R&D activities as well as on advertising
home appliances during 2009-10. "LG is looking to double the amount of investments done in
R&D to Rs 400 crore and spend Rs 100 crore on advertising and marketing of home appliances,"
said LG Electronics India's Managing Director. Currently, LG has two manufacturing units in
India one at Greater Noida (near Delhi) and the other at Ranjangaon in Pune, which would be
expanded in the next three years. The company may set up another unit by 2012 as a part of its
plans to augment manufacturing capabilities.

Whirlpool had recently effected 4-5 per cent price reduction in its refrigerator offerings, which is
expected to help boost sales. The company would invest more than Rs 300 crore in product
development and promotion over the next three years. It expects a 10 per cent top line growth
during the current fiscal, while the same would touch 25 per cent during the year 2010-11.



Samsung, too, has planned an investment of Rs 100 crore to increase the capacity of its Noida
facility. The company is looking to strengthen its portfolio with a new range of air conditioners,
refrigerators and washing machines.

The Consumer Electronics and Appliances Manufacturers Association (CEAMA) estimate the
size of the industry at Rs 30,000 crore. However, the penetration level of various appliances in
India is fairly low. Refrigerator use is about 18 per cent of the total population, washing machine
6 per cent, air-conditioner less than 2 per cent and microwave ovens about 1 per cent, which
translates into a great potential to tap new consumers.

Major players in this segment are LG, Panasonic, Onida , Samsung, Godrej & Boyce and
Whirlpool have individually introduced a host of new technology and star-rated products across
washing machines, refrigerators, televisions and air conditioners this year.

While Samsung introduced 47 new products in these categories, Godrej & Boyce introduced 13
new air-conditioners and direct-cool range of refrigerators.

2.3.2. India to enforce energy efficiency in climate fight

India will make energy efficiency ratings a must for electric home appliances, including air
conditioners and refrigerators, from January 2010, stepping up domestic efforts to fight climate
change.

Energy efficiency is a key focus in India's national climate change policy, unveiled last year and
which lays out a roadmap to a green economy but doesn't fix a target for carbon emissions. The
government hopes to save 10,000 megawatts of power by efficient use of energy by 2012.

A top climate official said India would unveil a trading scheme centered on energy efficiency
certificates that could possibly expand to renewable energy. The plan involves creating a market-
based mechanism that would allow businesses using more energy than stipulated to compensate
by buying energy certificates from those using less energy or using renewable energy.



The government is setting up energy benchmarks for each industry sector. Companies that do not
meet the benchmarks would have to buy these certificates under a reward and penalty system.
Most firms in India, which is Asia's third-largest economy and the fourth-largest emitter of
planet-warming carbon dioxide, have yet to plan for the impact of climate change and do not
measure emissions or have deadlines to curb them, according to studies.

2.3.3. Air Conditioners

In 1902, Dr. Willis Haviland Carrier invented and secured the patent for a weather control
concept - air conditioning. Ever since, life hasn't been the same. The air-conditioner market is
heating up as more and more people appear to be convinced about the comfort of an air-
conditioner (AC). The extremely hot summers have stirred the demand for ACs and the industry
is experiencing a significant change.

Growth in the white goods segment was largely driven by the Air-conditioner (AC) segment.
Within this, split ACs have been the main growth drivers, recording a growth of over 90 per cent
in 2006. Growth, albeit at a slower rate of 32 per cent, has also been experienced in the segment
of window ACs. The window AC segment is slightly less organised as compared to split AC
segment. The market for air-conditioners is divided quite uniformly across customer segments,
with about 45 per cent share for private sector corporate, 20 per cent for domestic use, 15 per
cent each for public sector companies and government use and 5 per cent for hospitals. Air
Conditioners generally refer to Room Air Conditioners as distinct from Central Air Conditioning
Plants. Room Air Conditioners market is segmented into Window AC (WAC) and Split AC.
Now with the limitation of space and scarce availability of window space and also to reduce the
noise in a room, the Split AC is gaining popularity.

Also split AC has come into prominence due to export orders from abroad. Technologically the
Indian Window Air Conditioner Industry has come a long way and is now at par with
international level. Import of capital goods for the manufacture of non-CFC refrigerator and air
conditioners are allowed duty free.



2.3.3.1 Types of Air-Conditioners

Air conditioning products are divided into Non Ducted products & Ducted systems .The Non
Ducted products are divided into two parts: window ACs & the mini splits. The ducted systems
are divided into central plants, packaged ACs and ducted ACs. Window ACs account for about
54% of the total market for ACs with an estimated market size of about Rs20 billion. Room air
conditioners operate on electricity or gas and are enclosed in a single cabinet. They blow the
conditioned air directly into the room and do not have air ducts leading to and from them. The
three chief types are window air conditioners, consoles and self-contained air conditioners.
Window air conditioners fit into the lower part of a window and can be moved from window to
window and thus the name, Window ACs. Self-contained air conditioners are the large room air
conditioners. Central air conditioners also use electricity or gas. They can supply conditioned air
to a number of rooms or to an entire building from one central source. Fans blow the conditioned
air through air ducts from the air conditioner to the rooms. Central conditioners have a number of
advantages over other kinds. For example, all the equipment for air conditioning is located in one
place. This reduces the cost of cleaning and repairing. Central conditioners can also be zoned i.e.
they can supply air of different temperature to different parts of a building.

2.3.3.2 Penetration in India and Competing Countries

According to Refrigeration and Air-conditioning Manufacturing Association (RAMA) the
penetration of household Air-Conditioners is abysmally low in India at around 2% as compared
to 20% in Indonesia, 24% in China, 40% in Thailand, 45% in Malaysia.

2.3.3.3 Players and Market Share

The size of the room Air-conditioners industry is estimated at 1.1 million in volume terms, and
Rs 24 billion in value terms. According to FICCI, Indian AC industry which is mainly dominated
by players like Carrier and Voltas has been taken over by the new MNCs in the last few years.
AC market is dominated by four major players—LG, Voltas, Carrier and Samsung. LG is the
market leader with a market share of 29 per cent followed by Voltas (11) and Carrier and
Samsung (9.2 each) in addition to other players like Hitachi and Videocon.



Company Brands
Mirc Electronics Limited Onida
Videocon International Limited Videocon
LG Electronics India Limited LG
Samsung India Electronics Limited Samsung
Whirlpool of India Ltd Whirlpool
Godrej & Boyce Mfg. Co. Ltd. Godrej
Voltas Limited Voltas
Electrolux Kelvinator Electrolux
Blue Star India Ltd Blue Star
Daikin Industries, Ltd. Daikin

Market Share (Segmentation), ACs India in 2006
Private Sector 25%
Domestic 20%
Corporate 20%
Public Sector 15%
Government 15%
Hospitals 5%

Market Segment, AC India, 2006

Unorganised
type

Organised

0 20 40 60 80 100
per cent

Windows Split



Table 2.2: Foreign Trade and Domestic consumption of Air Conditioners – India
(Rs. Crores)
Year Export Import Trade Domestic Domestic Sales
Ratio Consumption (Value)
(Value)
2002-03 94 330 0.28 2430 2194
2003-04 205 473 0.43 2920 2652
2004-05 216 715 0.30 3697 3198
2005-06 180 914 0.20 4794 4060
2006-07 198 1278 0.15 6100 5019
2007-08 253 1819 0.14 8403 6837

Table 2.3: Major Players/ Manufacturers in India based on Market Share - Air Conditioner
(%)
Name of the Company 2002-03 2005-06 2007-08
Blue Star 14.53 16.51 17.98
Voltas 12.12 11.95 14.11
L G Electronics India Pvt. 13.54 18.85 13.2
Samsung India Electronics Pvt. 3.93 7.01 6.88
Total 44.12 54.32 52.17
Source: CMIE, Industry Market Size and Share, April 2009

2.3.4. Refrigerators
Refrigerators are one of the most sought after home appliances in Indian middle class homes. The
refrigerator market has two segments: Direct Cool and the relatively new Frost-Free type. The
market for refrigerators in 2006-07 was about 6.5 million units. The growth of refrigerator segment is
projected to be between 18 to 22 per cent over the next 5 years. A critical success factor for the
refrigerator market, given its widespread use, is deeper reach into the market and increased
penetration. Recently, the market is getting reinforced by the replacement segment as well.

Indian refrigerator industry has become highly competitive as many global brands have entered
the market and the consumer has a wide choice. Refrigerators are presently manufactured in two
basic designs, which are referred to as Direct Cool (DC) and Frost Free (FF) refrigerator.
Manufacturers of refrigerators claim to have improved the quality of the product particularly the
reliability of the compressor. Quality products, with superior technology have helped the
industry to achieve higher growth in term of value and also higher realization in value terms.



In so far as new technology is concerned, the concept of Frost Free refrigerator has been gaining
popularity. Capacity wise also, there is a shift in refrigerator market. Till about two years back,
165 litres had a larger share and now units of capacity 185-300 litres are having increasing
market share. Manufacturers are encouraged to adopt environment friendly technology like usage
of non-CFC refrigerant based air conditioners, non-CFC refrigerators are manufactured in the
country but because of their high initial cost, the demand is somewhat sluggish. Refrigerators in
India are inevitability keeping in mind the tropical climate of India. More than 8 months of the
year, 90% India face hot humid weather. And hence, Refrigerators are used in almost all
households. Sale of Refrigerators In India has touched new heights in the recent years as the
living standards of the masses have improved and Refrigerator prices have become more
affordable. Refrigerators for Home as well as Industrial use can be bought for amount starting
from less than Rs. 20,000 to over Rs. 1,10,000. Refrigerators with/without Freezers and separate
Freezers are also available with the Retail Stores. The types of refrigerators available in the
Indian market are:

Bottom Freezer Refrigerators
Compact Refrigerators
Counter Depth Refrigerators
Freezer Less Refrigerators
Side-By-Side Refrigerators
Top Freezer Refrigerators
Wine Coolers
Freezers

The Best Buy ones are mainly the Bottom Freezers one and the Small Refrigerators. The
Consumer Reports show a sharp rise in Online Sale of refrigerators as well. The Indian buyers
have become smarter and prefer the Best Deals giving them complete value for money. They
seek complete information about the Refrigerators At Best Buy Prices as well as reports on
Refrigerator Reliability from the Reviews and Ratings available on many websites. Comparisons
between Refrigerators are made on the basis of the utility features like:

Size and Dimensions - Small or large
Energy Efficient
Capacity ranging from less than 200 liters to above 350 liters depending upon use



Freezer capacity ranging from less than 50 liters to over 100 liters
Defrosting system which can be automatic, semi automatic, frost free or cyclic
The number of doors.

Many Electronic Appliances stores In India offer special festive Discount and Best Buy Deals.
Most of them also provide Maintenance and Troubleshooting services in case the customer faces
any problems with the Refrigerator use. Some of the manufacturers like LG, Samsung,
Whirlpool, Godrej, Videocon and Electrolux also have authorized Service Centers In all parts of
India for their Refrigerators. Some shopkeepers also deal in Wholesale of New or Used
Refrigerators and Spares where one can get Cheap Deals. The Life Span of the Used
Refrigerators may vary with their previous Use and Maintenance. Refrigerators with Built-In or
No Freezers and genuine Stainless Steel Spare Parts are also available with the local dealer or
with the company Service Centers.


The refrigerator industry has become highly competitive as a number of brands have entered the
market and the consumer has a wide choice. Some of the leading companies in the Refrigeration
manufacturing and their brand names are given below.

Company Brands
Videocon International Limited Videocon, Akai
Whirlpool of India Ltd Whirlpool
Voltas Limited Voltas
Electrolux Kelvinator Electrolux Kelvinator, Electrolux
and Allwyn

Refrigerators constitute the second largest product segment within the Indian consumer durables
sector in India, with an estimated annual turnover of Rs 39 billion during FY2005 with an
estimated sale of 4.1 million units. According to FICCI Survey April-March 2003-2004
Whirlpool and Godrej are the top two players with market shares of 27 per cent and 20 per cent
respectively. Electrolux Kelvinator and LG compete for third and fourth position with market



shares of 16 per cent and 14.5 per cent respectively. Videocon (11 per cent), Samsung (6), BPL
(4), Voltas and Akai are the other significant players.

Table 2.4: Foreign Trade and Domestic consumption of Refrigerators– India
(Rs. Crores)
Year Export Import Trade Domestic Domestic
Ratio Consumption Sales (Value)
(Value)
2002-03 59 103 0.58 2843 2799
2003-04 84 94 0.89 2860 2850
2004-05 77 119 0.65 3242 3200
2005-06 115 74 1.56 3559 3600
2006-07 218 115 1.89 3798 3900
2007-08 347 111 3.12 4064 4300

Table 2.5: Major players/ Manufacturers in India based on Market share – Refrigerator
(%)
Whirlpool of India 28.55 24.36 28.48
Total 52.51 66.22 78.08

2.3.5. Washing Machines
During the last few years, the market for Washing Machines has grown quite fast. It is the fully
automatic segment, which in recent times has been getting the attention of the users especially in
those households where both partners are working. Consequently manufacturers have started
paying more attention to this segment and have started introducing more features in their
products. The customers now have a wide range of world-class brands to choose from.

The sales of washing machines have grown from about 780,000 units to 1,948,000 units during
1999 to 2007 period, registering about 12.2 per cent annual growth. The washing machine
market can be segmented into semi-automatic and fully automatic machines. Semi-automatic
washing machines enjoy a dominant share of 85 per cent. Fully automatic washing machines
have been gaining their share as a consequence of product improvement, competitive pricing etc.
However, semi-automatic machines will continue to play a major role in the Indian market for



quite sometime. Fully automatic washing machines have been growing at 44.5 per cent and semi-
automatic segment, at about 18 per cent. The entry of MNC’s has widened the range to more
than 10 brands with a proliferation of models, while ensuring technology upgradation. A visible
impact of this has been the exit of a few established domestic players from the market.

There is also an increasing demand for purchasing smaller washing machines in the range of 3 to 4 kg
capacity as compared to larger machines as nuclear families are growing. In regard to emerging new
technologies in the washing machine sector, it may be noted that aero power, triple cascade tornado
wash, digital intelligence, unique optical sensor and other such innovations and adaptations which are
being gradually introduced by the indigenous manufacturers. Washing Machines demand in India is
increasing with the changing status of women. It is now one of the basic utilities at home. Most of the
women in modern India are working so there is less time left with them to do the manual washing. The
washing machines really help a lot by speeding up domestic work. The leading names in the sector of
washing machines in India have really lowered the prices of their product thus increasing the sale of
washing machines in India. Their sale further increases during the festival seasons as different
companies offer discount rates and gifts along with washing machines and some of the best deals can
be made. From a very crude look in the beginning it has transformed into very stylish one. Now it
ranges from washing machine to washer dryers with front loading, top loading etc. In earlier times
market for washing machines in India was not very lucrative. Videocon introduced India's first washing
machine in 1988 in collaboration with Matsushita Electric Industrial Co. Ltd, Japan.

With the changing status of women the washing machine in India has also undergone
transformation. From the crude and clumsy look it has metamorphosed into modern and trendy
look. Latest technology also gives an added advantage. Electrolux has launched Walky Talky
Machine in India. The first talking machine has 90 different phrases in Hindi and English that
guide a woman in each step. Samsung has introduced Silver Nano technology in washing
machine that is an anti-bacterial technology. It destroys 99.9% of bacteria, germs and keeps
clothes bacteria free even after 30 days of washing.

Whirlpool is one of the leading brands that has fully automatic and semi automatic washing
machines with different capacities. Godrej prides in having fully automatic, semi automatic and
front-loading washing machine for the cleanest wash. Along with these Hitachi, Haier, IFB,



Kenstar are also giving the best possible washing machines in India. Most of the machines now
have the facility of both washing and drying. Further new brands such as Z-line and Unistar have
been launched from Vishal Retail and reliance retail outlets which are basically Chinese in
origin.

Company Brands
Whirlpool of India Ltd. Whirlpool
BPL BPL
IFB Industries Limited IFB
Hitachi Home & Life Sol. India Ltd. Hitachi
Haier Appliances India P. Ltd. Haier
Toshiba India Pvt. Ltd. Toshiba
Kenstar Kitchen Appliances Ltd. Kenstar

2.3.5.1 Penetration of Washing Machines in India and Global
The penetration level of Washing Machine is relatively low in India as compared to global
levels. Many housewives in less affluent households prefer to wash clothes themselves rather
than invest in washing machines. Water scarcity in many Indian cities and timely availability is
another major issue. However, it is expected that penetration of washing machine will rise by
more than 6 per cent in the next two years.


The refrigerator industry has become highly competitive as a number of brands have entered the
market and the consumer has a wide choice. Some of the leading brands are as follows:

LG Electronics has registered a remarkable growth of 36 % in the Washing Machine Segment in
H1 The Fully Automatic Washing Machines segment has recorded a remarkable performance
where volumes have grown by 22% and value by 25% .Here again LGEIL happens to be the
undisputed leader with a 30.7 % market share in Fully Automatic Washing Machine and 33.7 %
market share in Semi Automatic Washing Machine. (ORG-GFK, May 2004)



Table 2.6: Foreign Trade and Domestic consumption of Washing Machines – India
(Rs.Crores)
Year Export Import Trade Ratio Domestic Domestic
Consumption Sales
(Value) (Value)
2002-03 40 45 0.87 1913 1907
2003-04 39 46 0.84 1945 1937
2004-05 67 70 0.96 2027 2024
2005-06 87 108 0.80 2261 2240
2006-07 33 154 0.22 2512 2391
2007-08 35 232 0.15 2962 2765

Table 2.7 Major players/ Manufacturers in India based on Market share – Washing Machines
(%)
Value Industries 50.01 47.72 38.14
Total 68.04 72.33 66.43

2.3.5.3 Future Scenario

Rising rate of growth of GDP, growth in disposable income, improved lifestyles, rising
purchasing power of people with higher propensity to consume with preference for sophisticated
brands would provide constant impetus to growth of white goods industry. While the consumer
durable market is facing a slowdown due to saturation in the urban market, rural consumers
should be provided with easily payable consumer finances schemes. Rural India, which accounts
for nearly 70 per cent of the total households, has a two per cent penetration in case of
refrigerators and 0.5 per cent for washing machines, offers plenty of scope and opportunities for
the white goods industry. Rural market is growing faster than the urban India now. The urban
market is a replacement and up-gradation market now.



2.3.6. Vacuum Cleaners

Vacuum Cleaners are an emerging segment in the Indian market, still at a nascent stage. The
drivers for demand have been the improvement in life style and higher aspirations of urban
middle class and the top income brackets. While the market has been growing, this segment is
not expected to reach significant volumes soon. Part of this could be attributed to the lifestyle
compatibility of Indian customers with the product. In the large majority of Indian houses, for
instance, floors are not carpeted and the product will have to meet dual requirements of sweeping
and mopping. Another impediment to the adoption of vacuum cleaners has been the availability
of cheap domestic help in most cities.

Table 2.8: Foreign Trade and Domestic Consumption of Vacuum Cleaners – India
(Rs. Crores)
Year Export Import Trade Ratio Domestic Domestic
Consumption Sales
(Value) (Value)
2002-03 2 5 0.33 178 175
2003-04 3 5 0.55 174 172
2004-05 3 9 0.31 182 176
2005-06 3 10 0.31 197 190
2006-07 2 14 0.11 226 213
2007-08 6 28 0.22 216 194

Table 2.9: Major players/ Manufacturers in India based on Market share - Vacuum Cleaner
(%)
Eureka Forbes 61.65 64.58 68.25
Forbes & Co. 30.26 18.58
Total 61.65 94.84 86.83

2.3.7. Microwave Ovens

Microwave Ovens until recently were a rarely found and used Home Appliance in India, but in
the recent years we observe an emerging trend of a OTG or Microwave Oven in almost every
modern Indian kitchen. The Microwave Ovens available in the market are of following types:



• Compact Microwaves It is also known as portable microwaves. These are the smallest
and are mainly used to reheat food, cook light meals and make popcorn.
• Countertop Microwaves These are among the popular categories of microwave ovens.
You can put them on a counter or table and hence, these are named as 'countertop'.
• Convection Microwaves Such microwaves possess the features of standard microwaves
and convection ovens. It cooks food quickly and is more expensive.
• Over the Range Microwaves (OTR microwaves) also called built-in microwaves; these
can be installed over a cook top. You may also need to use exhaust fan or chimney hood
along with over the range microwaves.
• Convection and Grill These are convection microwaves with grill.

The facts about Microwave Ovens that need to be checked before buying one are the capacity
that ranges from less than 20 liters to above 30 liters; the programme panel of the Microwave,
available as electronic, manual, single touch rotary, tactile or feather touch which can be seen
according to personal need; and certain security options like if one has kids at home one surely
needs child lock in the Microwave Oven.

In India, many electronic stores offer Discount or Best Deals and even certain Finance Schemes
as the Microwave Ovens can range from less than 7000 Rupees to more than 21000 Rupees
depending upon the desired features. Made of Stainless steel the Microwave Ovens have
toughness and can bear the adverse temperature changes. Available in almost all electronics
shops, they are becoming as essential as refrigerators especially for the working families In
India.

Company Brands
Whirlpool of India Ltd. Whirlpool
Electrolux Kelvinator Ltd. Electrolux
BPL BPL
IFB Industries Limited IFB
Hitachi Home & Life Sol. India Ltd. Hitachi
Haier Appliances India P. Ltd. Haier
Panasonic India Ltd. Panasonic
Inalsa Export Pvt. Ltd. Inalsa
Sanyo India Private Limited Sanyo



Sharp India Ltd. Sharp
Videocon Appliances Ltd. Videocon
Kenstar Kitchen Appliances Ltd. Kenstar

2.8. Financial Analysis of Domestic Electrical Appliances

This section analyses the pattern of growth of Domestic Electrical Appliances during 2000-01 to
2007-08. Domestic sales reported an annual growth of 7.81 percent during the entire period,
however, the expenses have grown slightly lower rate at 6.99 percent per annum. One disturbing
fact is the total expenses are found to be higher than the sales realization. Detailed analysis of
various cost components are reported in Table 2.10.

Table 2.10: Domestic Electrical Appliances (All categories) – Financial Aggregates
(Rs.
Crore)
CAGR(%) CAGR(%) CAGR(%)
S. No. Variables 2000-01 2004-05 2007-08 2000-01 to 2000-01 to 2004-05 to
2007-08 2004-05 2007-08
1 Total Income 3,051 4,126 5,280 8.15 7.84 8.57
2 Sales 2,985 3,983 5,054 7.81 7.48 8.26
3 Total expenses 3,236 4,185 5,192 6.99 6.64 7.45
4 Raw material expenses 1,497 2,022 2,148 5.29 7.81 2.04
5 Power, fuel & water
55 58 47 -2.22 1.34 -6.77
charges
6 Compensation to
196 218 267 4.52 2.70 6.99
employees
7 Selling & Dist.
193 254 408 11.29 7.11 17.11
Expenses
8 Interest paid 244 208 153 -6.45 -3.91 -9.73
9 Depreciation 111 151 121 1.24 8.00 -7.12
10 Forex earnings 88 313 88 0.00 37.33 -34.49
11 Forex spending 276 324 344 3.20 4.09 2.02
12 Reserves & surplus 302 -8 159 -8.76 - -
13 Total borrowings 1,745 1,734 1,931 1.46 -0.16 3.65
14 Current liabilities 887 1,194 1,433 7.09 7.71 6.27
15 Sundry creditors Assets 553 623 717 3.78 3.02 4.80
16 Gross fixed assets 2,279 2,656 2,807 3.02 3.90 1.86
17 Net fixed assets 1,519 1,316 1,258 -2.66 -3.52 -1.49
18 Investments 115 93 88 -3.75 -5.17 -1.83
19 Total assets/liab. 3,369 3,544 3,950 2.30 1.27 3.68
Source: Industry: Financial Aggregates & Ratios, Centre for Monitoring Indian Economy, March 2009



2.9. Financial Analysis of Refrigerators and Air Conditioners

This section analyses the pattern of growth of Refrigerators and Air Conditioners during 2000-01
to 2007-08. Domestic sales reported an annual growth of 9.71 percent during the entire period,
however, the expenses have grown slightly lower rate at 8.79 percent per annum. One disturbing
fact is the total expenses are found to be higher than the sales realization till 2004-05. Detailed
analysis of various cost components are reported in Table 2.11.

Table 2.11: Refrigerators and Air Conditioners – Financial Aggregates
(Rs. Crore)
CAGR(%) CAGR(%) CAGR(%)
S. 2000-01 2000-01 2004-05
Variables 2000-01 2004-05 2007-08
No. to to to
2007-08 2004-05 2007-08
1 Total Income 3607 3770 6780 9.43 1.11 21.61
2 Sales 3494 3666 6683 9.71 1.21 22.16
3 Total expenses 3649 3974 6581 8.79 2.16 18.31
Raw material
4 1742 1994 3686 11.30 3.44 22.73
expenses
Compensation to
5 274 303 388 5.10 2.55 8.59
employees
Selling & Dist.
6 395 421 572 5.43 1.61 10.76
Expenses
7 Interest paid 144 51 40 -16.72 -22.86 -7.78
8 Depreciation 103 90 89 -2.07 -3.32 -0.37
9 Forex earnings 68 252 470 31.81 38.75 23.09
10 Forex spending 317 536 1186 20.74 14.03 30.31
Reserves &
11 190 -406 802 22.84 - -
surplus
12 Total borrowings 1155 842 517 -10.85 -7.60 -15.01
Current
13 1036 1021 2095 10.58 -0.36 27.07
liabilities
14 Sundry creditors 484 471 843 8.25 -0.68 21.41
Gross fixed
15 1708 1388 1529 -1.57 -5.05 3.28
assets
16 Net fixed assets 1229 749 835 -5.37 -11.64 3.69
17 Investments 57 18 24 -11.62 -25.04 10.06
Deferred tax
18 98 116 138 5.01 4.31 5.96
assets
19 Total assets/liab. 3062 2462 3976 3.80 -5.31 17.32
Source: Industry: Financial Aggregates & Ratios, Centre for Monitoring Indian Economy, March 2009



CHAPTER 3
IMPACT OF WTO, FTAs AND GLOBAL ECONOMIC RECESSION

3.1. Introduction

We are living in an interdependent world where go-it-alone policies and actions are not enough
to achieve collective results; nor are they any longer sufficient to even achieve country-specific
goals. World trade has definitely grown since 1995 thereby giving indicators that international
trade reforms do play important role in boosting economic development of various countries. But
there are several problems facing these Multilateral Trade Agreements. Predominance of
developed nations in negotiations extracting more benefits from developing and least developed
countries. Incompatibility of developed and developing countries resource sizes and skill
limitations thereby causing distortions in implementing various decisions. Non-tariff barriers
being created by developed nations. Regional cooperation groups posing threat to utility of WTO
agreement itself, which is multilateral encompassing all member countries.

India's ranking in recent Global Development Reports and World Competitiveness Year books
are not very encouraging due to infrastructure problems, poor governance, poor legal system,
poor market access etc.

It appears that Indian manufacturing does not stand to gain much from the increasing trade as a
result of the integration of world markets. India will have to start major reforms in agriculture
and manufacturing to become globally competitive. Same way it is questionable if India will be
major beneficiary in dismantling of quotas, which were available under Multi Fiber Agreement
(MFA) for market access in US and some EU countries. China, Germany, North African
countries, Mexico and such others have started reaping benefits in textiles and Clothing areas,
toys, home appliances etc. Unless India embarks upon major reforms in modernization and up
gradation of manufacturing sector, Indian manufacturing and domestic value addition will
decline sharply. In this chapter we briefly discuss major developments that are taking place with
respect to WTO, FTAs and recent Global economic recession. All these factors are critically
affecting Indian manufacturing sector particularly Light Electrical Industry.



3.2. WTO and Implications for Indian Economy

Developing countries have generally been apprehensive in particular about the implementation
of special and differential treatment provisions (S&D) in various Uruguay Round
Agreements. Full benefits of these provisions have not accrued to the developing countries, “as
clear guidelines have not been laid down on how these are to be implemented.”

The first Ministerial Conference held in 1996 in Singapore saw the commencement of pressures
to enlarge the agenda of WTO. Pressures were generated to introduce new Agreements on
Investment, Competition Policy, Transparency in Government Procurement and Trade
Facilitation. The concept of Core Labor Standards was also taken up for introduction.

India and the developing countries, which were already under the burden of fulfilling the
commitments undertaken in the Uruguay Round Agreements, and who also perceived many of
the new issues to be non-trade issues, resisted the introduction of these new subjects into WTO.
They were partly successful. The Singapore Ministerial Conference (SMC) set up open-ended
Work Program to study the relationship between Trade and Investment; Trade and Competition
Policy; to conduct a study on Transparency in Government Procurement practices; and do
analytical work on simplification of trade procedures (Trade Facilitation).

Not many people are aware that there is a dispute settlement system in the WTO. This is at the
heart of the WTO and sets it apart from the earlier GATT. Countries like USA and European
Union have brought cases against India and won these cases like in pharmaceutical patents. India
too has complained against the US and Europe and it too has won its fair share of disputes in
areas like textiles. India must effectively use this mechanism to extract fair share in world
markets.

Recognizing the important linkages between trade and economic growth, the Government of
India has simplified the tariff, eliminated quantitative restrictions on imports, and reduced export
restrictions.



3.3. Impediments to the growth of India’s International Trade

New tariff barriers faced by Indian products in various overseas markets are severely
constraining exports. These barriers may broadly be enumerated as: (i) restrictive import policy
regimes (import charges other than customs tariff, quantitative restrictions, import licensing,
custom barriers); (ii) standards, testing, labeling and certification (including phytosanitary
standards), which are set at unrealistic high levels for developing countries or are scientifically
unjustified; (iii) export subsidies (including agricultural export subsidies, preferential export
financing schemes etc.); (iv) barriers on services (visible and invisible barriers restricting
movements of service providers, etc.); (v) government procurement regimes; and (vi) other
barriers including anti-dumping and countervailing measures.

While developed countries, and especially the markets of the United States and the European
Union, still provide the lion's share of market opportunities for developing country exports, this
situation is changing. South-South trade has grown faster than North-South trade over recent
years. It has become increasingly evident that one developing country's trade policies can create
opportunities for more trade with other partners. Much of the expansion in South-South trade has
taken place in Asian developing countries, which are estimated to account for more than two-
thirds of all intra-developing country trade.

Some developing countries such as China have benefitted greatly from international trade.
Unfortunately, there are many developing countries that have yet to reap real gains from trade.
India’s gain from the increasing international trade is mixed due to poor infrastructural facilities
and technological backwardness as compared to its competitors.

3.4. From the Uruguay Round to the Doha Round

The establishment of the WTO at the conclusion of the Uruguay Round in 1995 was in many
ways a great success for multilateral cooperation, and boded well for the global economy. It was
a signal that the majority of the countries in the world wanted a wide far-reaching global trade
body to promote equitable and transparent trade rules — in goods, services and intellectual
property. The WTO is a consensus-based organization, thereby providing the basis of a system in



which each country — even the smallest — counts. And this is where its legitimacy lies. There is
no Security Council in the WTO and no Board of Directors.

But the Uruguay Round was left with some “unfinished business”. For example, while
agriculture was for the first time brought explicitly into the multilateral trading system under the
Uruguay Round, no significant cuts in trade-distorting subsidies or agricultural tariffs were
achieved. In developing countries, the quantum of protection offered by some developed
countries to their agricultural sectors is seen as a major obstacle to development; in particular as
certain developing countries do have a comparative advantage in many agricultural products.
This is the case of India in cereals, spices, coffee, tea, sugar or fish. India is a net food exporter.
In 2007 its food exports were twice as large as its food imports.

On Services, the success achieved by the Uruguay Round was modest compared to the huge
potential of this sector. For the sake of the global economy in general, and developing countries
in particular, there is a need to further open global services trade.

3.5. The Doha Development Round

Almost seven years after the launch of the Doha Round what we now have on the table is at least
two or three times greater than from any previous round of negotiations. Among the areas where
developing countries in particular would gain, is the elimination of agricultural export subsidies,
significant reductions in trade-distorting domestic support in agriculture and agricultural tariffs,
with greater efforts needed on cotton, reduction of high tariffs and tariff peaks on industrial
products of export interest to developing countries, and the opening up of services trade. Not to
mention rules to simplify customs procedures and cut red tape or reduction of fishery subsidies
to help preserve fish stocks.

Even if the use of safeguards has been limited and has only had a minimal impact on overall
trade flows, it has always provided a political response to domestic fears about trade opening
commitments. In fact trade opening in sensitive sectors has often been accompanied by “safety
nets” to reassure constituencies about multilateral commitments to trade opening.



A special safeguard was created in the Uruguay Round to provide a safety net to WTO members
agreeing to transform existing quotas on textiles into tariffs which they also agreed to reduce.
Also in the Uruguay Round, a safeguard measure was created for those developed and
developing countries which agreed to “tariffy”, i.e. convert agriculture quotas into equivalent
tariffs, and then cut those tariffs. In fact, part of the discussions centred successfully around the
request by many developing countries that this Uruguay Round special safeguard be eliminated
for developed countries after a transition period.

The world is interdependent and the solutions must be the result of a collective effort; all need to
contribute to address our collective challenges such as economic development, climatic change,
immigration etc.

3.6. Free Trade Agreements (FTAs)

According to statistics by the Asian Development Bank, currently India tops the list of Asian
countries with 30 FTAs, followed by Singapore with 26, China and Korea with 22 each, and
Japan (19). The total number of FTAs that Asian countries have entered into is 134. Out of
India’s 30 FTAs, eight are with the integrating Asian region, while and 22 are outside of Asia. It
is a matter of concern that over the $8 billion trade deficit that India has with South East Asian
Nations (ASEAN), as India’s exports to ASEAN is worth only $16 billion, while ASEAN’s
exports to India is to the tune of $24 billion. It is a fact that India entered into FTA talks with
ASEAN knowing that we have lesser competitiveness than them in goods trade, speaks volumes
of India’s attempts to integrate economically with Asia. Compared to this, India’s trade with
Singapore is more balanced, with India’s exports to that country worth $7 billion and imports of
$8 billion.

Of late China is emerging as India’s largest trading partner replacing the US. India’s Look East
policy architecture, the Bay of Bengal initiative for Multi-Sectoral Technical and Economic
Cooperation (BIMSTEC), is expected to conclude in FTA. “With the FTA with SAARC (South
Asian Association for Regional Cooperation) countries well on course, the conclusion of the
FTA talks with ASEAN and the hope to conclude FTA with BIMSTEC soon, India will
complete the three pillars of economic integration with Asia”.



Indo-Thai Free Trade Agreement (FTA) was to be the first of India’s FTAs with another ASEAN
country while negotiations with Singapore began almost at the same time. India already has an
FTA in place with Sri Lanka and the one with Singapore

3.6.1. India-Thailand Free Trade Agreement

India aims to increase its share in global trade from a dismal 0.7 percent to 1.9 percent by 2009.
While the government attempts to wrestle its demands vis-à-vis the developed world in the
World Trade Organization, its “Look East” policy is aimed to forge bilateral trade relations in
this part of the globe. As the country does not belong to any trade bloc (the likes of SAARC,
BIMSTEC-EC are hardly strong enough), India is depending on the Free Trade Agreements with
countries in the region.

Thai-Indian business relations have improved since the end of the Cold War, with reciprocal
visits by Prime Minister Rajiv Gandhi in 1986 and Thai Prime Minister General Chatichai
Choonhavan in 1989. The ties strengthened after India became partner of the ASEAN, and a
member of the ASEAN Regional Forum (ARF). The formation of the BIMST-EC (Bangladesh,
India, Myanmar, Sri Lanka, and Thailand Economic Cooperation) and the launching of Mekong-
Ganga Cooperation in 2000 also went a long way in forging closer Indo-Thai relations.

FTA between India and Thailand was supposed to benefit Indian consumers to get cheaper color
television sets, auto parts and other electric goods while Thai consumers would have benefited
from cheaper Indian agro products. Besides, the agreement would give India of using Thailand as
a stepping-stone for growing overseas investments as well as cheaper imports of intermediate
products that India requires in its production value chain.

The two countries signed an agreement in October 2003 that tariffs would be slashed by 50
percent by 2004-05, 75 percent by 2005-06 and completely eliminated by 2006-07. By 2010,
India and Thailand hoped to have a comprehensive FTA for all items of trade. As a starter, 82
items were put under the “early harvest scheme” in September 2004, for which the first 50
percent of tariff cut was imposed. March 1, 2005 was set as the deadline for detailing out the
agreement.



In 2004-05, bilateral trade between India and Thailand reached $2 billion, an increase of 34%
from 2003. Between 1993 and 2003, ASEAN-India trade grew at an annual rate of 11.2%, from
$2.9 billion to $12.1 billion.

There is a fear among Indian businessmen that the FTA might lead Thailand to dump cheap
products in the Indian market. However, to ensure that this does not happen, the Indian
government has imposed a condition that Thai products would have a value addition of 40
percent. Besides, the government is also attempting to reduce state-level mandi and octroi duties
so that Indian products grow competitive to Thai products.

The success of the India-Thailand FTA depends on development of the cost advantage of Indian
business as compared to Thai products. According to a Federation of Chambers of Commerce
and Industry (FICCI) study in 2006, India at present is at a disadvantage regarding this. The apex
chamber ran a survey of 35 companies in the segments of color picture tubes, color televisions
and auto components. It showed that India’s electricity costs are Rs 5.50 in India, compared to
Rs 2.5 in Thailand; interest rates are 13 percent compared to 4.5 percent in Thailand; major
imports like glass parts and chemicals used in the color picture tube manufacture can be
imported duty-free in Thailand while Indian producers have to pay 15 percent duty; alloy steel
and stainless steel attract 5 percent higher duty in India than in Thailand putting auto component
manufacturers at a severe disadvantage.

Indian industry also feels that labor laws in the country are too stringent and the lack of right to
closure deters businesses to operate competitively. "Industry members feel that the option to
right-size their workforce when needed would create more jobs and not less. The existence of
stringent labor laws is forcing the industry to adopt more capital-intensive technologies that at
times are costly and have to be imported. This also has an adverse impact on employment
generation," (FICCI, 2006).

Indian manufacturers may even consider outsourcing production in Thailand to arbitrage on costs
and third-party imports may be routed through Thailand to take advantage of the zero-duty
structure. Both of these could in effect harm the Indian economy, the first resulting in job losses



and the latter by reduced government revenues. However, this could be more than compensated
by India’s access to the South East Asian market which it can enter using Thailand as a gateway.

Thailand has long been a key overseas destination for Indian investors. There are 33 joint
ventures in Thailand, including those led by major industrial groups Aditaya Birla and Indorama.
Thailand now wants to enhance the cooperation from the arena of trade and investment by
welcoming the Indian IT majors, thus pooling the financial resources of Thailand and knowledge
pool of India

3.7. Product Categories under Early Harvest Scheme

As per the ‘Early harvest scheme (EHS)’ under the agreement, a common list of items for
exchange of tariff concession at 6-digit level and tariff on these identified items is slated to be
phased out by March 1, 2006. As per the ‘Early harvest scheme (EHS)’ under the agreement, a
common list of items for exchange of tariff concession at 6-digit level and tariff on these
identified items is slated to be phased out by March 1, 2006.

As per agreement, negotiations on goods started from January 2004 would be concluded in
March 2005 and the FTA for zero duty imports will be put into effect by 2010.

(ii) Tariff Reduction and Elimination:
(a) The products covered under this Early Harvest Scheme shall be subjected to the
following tariff reduction and elimination:

Period Tariff reduction on applied MFN
tariff rates as of 1st January 2004
1.3.2004-28.2.2005 50%
1.3.2005-28.2.2006 75%
1.3.2006 100%

(b) All products where the applied MFN tariff rates are 0%, shall remain at 0%.
(c) Where the implemented tariff rates are reduced to 0%, they shall remain at 0%.

Detailed list of items under EHS are given in Annexure 3.



Results of econometric analysis confirmed that only two out of 84 import items from India that the
Thailand India Free Trade Agreements (TIFTA-EHS) tariff reductions have had positive impacts on
raising their import shares and caused trade diversion. (Ake –Aroon Auansakul, 2007)

Thailand is certainly benefiting over India with respect to the TIFTA- EHS as total exports’
values to India have increased much more than its total imports from India. The TIFTA-EHS
agreement is now ended. Thailand, in particular, should support a continuation and extension of
the Tifta-EHS and propose a merge of it into the broader Thailand and India FTA for the benefits
of the two countries [Ake –Aroon Auansakul, 2007]. Relevant authorities should be very
carefully in listing the products to be included in the agreement, by examining the trade diversion
impacts on the country’s economic efficiency and welfare.

A FICCI Survey on ‘India Thailand FTA: Emerging Issues, 2006’ notes that imports from Thailand of
the 82 Early Harvest Items stood at USD 104.84 million for the period April-December 2005 as against
USD 84.44 million for the same basket of commodities for the whole of 2003-04.

3.8. India signs FTA with ASEAN

India finally signed the Free Trade Agreement (FTA) with 10 nations in South Asian bloc
ASEAN amidst concerns and protests from within the cabinet, state governments and NGOs.

The FTA would eliminate tariffs on over 4000 products including electronics, chemicals and
textiles that account for more than 80 percent of total trade in goods between the two sides.
Tariffs on those products would be reduced to zero by 2016. Table 3.1 provides the list of
products from home appliances category included in the FTAs with ASEAN.

Table 3.1: India’s Revised offer list for ASEAN under AI-FTA dated 7th Feb 2008
Sl.No. HS Description Tariffs Offered
Code 2007-08 under
1 841821 Compression-type Refrigerators, Household 10 NT-1
2 845012 Other machines, with built-in centrifugal drier 10 NT-1
of a dry linen capacity
3 845019 Other machines of a dry linen capacity <=10 Kg 10 NT-1
4 851650 Microwave Ovens 10 NT-1



3.9. Global Economic Recession

The global financial crisis has significantly slowed down the growth of the world economy in the
interim period, with the global GDP growth falling to 3.7 per cent and 2.2 per cent in 2008 and
2009, respectively, from 5 per cent in 2007. The downward GDP growth eased the demand side
pressures on inflation due to a fall in commodity prices, a trend that is already visible.

Due to greater integration with world economy, India though having a robust domestic demand
is also affected by the recent global financial crisis. However, strong domestic demand, which
has been a key growth driver for the Indian economy, has provided a buffer against global
turbulence. However, it should be noted that even before the onset of the global crisis, the Indian
economy had started slowing down on account of proactive monetary tightening policy adopted
by RBI during the first half of 2008, aimed at controlling domestic price inflation. As a result of
the combined effect of global and domestic slowdown, GDP growth declined to moderate to 6.5-
7.0 per cent in 2008-09 (CRISIL-NMCC, (March 2009).

To reinforce the monetary measures announced on December 6, 2008, the Government of India
unveiled a multi-dimensional fiscal stimulus package on December 7, 2008 that is expected to
stimulate growth across sectors and fuel consumption. The Government of India effected an
across-the-board cut of 4 percentage points in the ad-valorem CENVAT for the remainder of the
current fiscal (2008-09) on all products other than petroleum and those where the existing rate
was below 4 per cent.

The steps taken by Government are in the right direction and have reduced the adverse impact of
the global slow-down on these industries. Further, the lower cost of debt for export oriented
industries like textiles and garments marginally improved their competitiveness vis-à-vis global
players. Though domestic demand generation insulates industries, the quest for higher levels of
competitiveness in the export oriented segments need to be supported actively as global buyers
become more price sensitive. The current global economic scenario represents both a challenge
and an opportunity for Indian exporters.

In the second stimulus package announced on January 2, 2009, the Duty Entitlement Passbook
(DEPB) scheme has been extended till December 31, 2009 which would benefit the exporters.



While the cumulative growth rate of manufacturing sector during the first half of this fiscal
stands at 5.2 per cent, the figures for mining and electricity for the same period are 3.9 and 2.6
per cent, respectively. As the US financial turmoil and its ripple effects are still being faced
globally, Industrial growth during current fiscal estimated in the range of 5.5-6.0 per cent for
2008-09. The year on year growth in secondary sector for the period from April to September for
the financial year 2008 and for the financial year 2009 is provided in Table 3.2.

Table 3.2: Year on Year Growth in Secondary Sector

Apr-Sep, Financial Apr-Sep, Financial
Details
Year 2008 Year 2009
Manufacturing 10.0 5.2
Mining 5.1 3.9
Electricity 7.7 2.6
Secondary Sector 9.5 4.9
Source: CRISIL-NMCC, March 2009

The manufacturing industries which have performed relatively better during the first six months
of this fiscal (FY2008-09) are beverages (23.3%), transport equipment (12.8%) and machinery
and equipment (9.8%). Eight industries have posted negative growth during the first 6 months of
this fiscal as compared to just one industry during the same period last fiscal (FY2007-08). In the
textiles and garments industry, the textiles segment has posted negative growth in a) cotton
textiles segment and b) jute and other vegetable fibre textiles segment. The textile products
segment including wearing apparel has posted a high growth rate of 3.8% in first six months of
FY 2008-09 as compared to 3.3% in corresponding period in FY2007-08 (CRISIL-NMCC,
March 2009).

Though the MFA has expired with effect from 1st January 2005, certain provisions of quota
policy were extended initially for a period of one year; again it was extended till 31st December
2006. Hence, the changing scenario definitely indicates that the future of Indian textile and
clothing industry is bright. It has been recently reported that textile exports in 2009-10 period
will be equal or could be even lower than the one achieved in 2008-09. In this global financial
meltdown situation, it is an immediate task for all stake holders to takes a note of situation and
takes stock of the difficulties and chart plans for sustainability and growth of the Indian light
electrical industry.


CHAPTER 4
PRODUCTIVITY GROWTH IN LIGHT ELECTRICAL INDUSTRY
4.1 Introduction

This chapter analyses productivity growth performance of organized registered manufacturing
segment of Light Electrical Sector such as Air Conditioners, Refrigerators and Washing
Machines. The organized factory sector occupies an important position in light electrical sector
in India*. Structurally, the organized factory sector consists of small, medium and large-scale
registered enterprises. The developments in the organized factory sector are easily visible and the
implications of government policy (both domestic and global) can be easily assessed since the
data are available on a continuous time series. Considering these facts an attempt has been made
in this chapter to analyze the large home appliances segment of light electrical industry
(organized factory sector/ registered manufacturing) in India.

In this chapter productivity estimations have been undertaken separately for three large home
appliances such as Air Conditioners, Refrigerator and Washing Machines. Annual Survey of
Industries data is not available for the other two product categories such as Microwave Ovens
and Vacuum Cleaners.

4.2. Air Conditioner Sector

4.2.1 Key Features of Registered Factory Sector

An examination of the air conditioner sector (registered manufacturing) at the all India level
suggests that the industry has not experienced any significant growth in terms of Gross Value
Added during the study period (Table 4.1). However, annual growth rate estimations of
employment during 1999-00 to 2005-06 has shown positive trends at an annual rate of 1.22 per
cent. By 2002-03 total employment, value of output and value added declined in absolute terms
as compared to 1999-00 levels.
*(Factory is one that is registered under sections 2m (i) and 2m (ii) of the Factories Act, 1948. The sections 2m (i)
and 2m (ii) refer to any premises including the precincts thereof (a) whereon ten or more workers are working, or
were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being
carried on with the aid of power, or is ordinarily so carried on; or (b) whereon twenty or more workers are working
or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is
being carried on without the aid of power, or is ordinarily so carried on).



In 2004-05, the industry has shown the signs of recovery. A comparison between the levels of
1999-00 and 2005-06 reveals that the value of output has increased by 37% during the last seven
years (Table 4.1). The number of workers and the number of factories have also increased
considerably during this period whereas the value added has decreased.

The above analysis suggests that the organized air conditioner industry in India has started
showing signs of growth in the recent years as compared to `nineties. This probably indicates
that the measures adopted during this period did help the organized segment of air conditioner
manufacturing in India.

Table 4.1: Characteristics of Registered Air Conditioning Industry in India

(Value in Rs. Lakhs, others in Numbers)

Indicators 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

Number of Factories 2755 2589 2735 2720 2547 2919 2752

Number of Persons Employed 109704 105114 110074 107446 101526 120394 117986

Gross Value Added
211119 237433 237772 166831 172768 203030 210588
(Constant Prices1993-94=100)

Value of Output
755264 819304 962167 860943 790936 979536 1037586
(Constant Prices 1993-94=100)

Capital Stock
360369 261838 257609 213643 166341 189707 245680
(Constant Prices 1993-94 = 100)
Source: Computed from Annual Survey of Industries, CSO, Summary results of Factory Sector

4.2.2. Data and Variables

Gross value added (net value added + depreciation) has been considered for the estimation of
productivity ratios. In order to eliminate the price effect from the increasing value added, the gross
value added figures have been deflated by whole-sale Price Index (WPI). From the WPI, the price
index for the basic metals, alloys and metal products at 1993-94 base prices has been taken into
account for deflating the data on gross value added since it covers all categories of the products from
the sector.



4.2.3 Growth of Air Conditioner Sector

A period wise growth rate analysis of the organized segment air conditioner sector in India has
been presented in Table 4.2

Table 4.2: Growth of Organized Air Conditioner Sector
Period I Period II Period III
(1999-00 to 2002- (2002-03 (1999-00 to 2005-
Indicators
03) to 2005-06) 06)
CAGR (%)

Gross Value Added (At Constant Prices) -7.55 8.07 -0.04

Value of Output (At Constant Prices) 4.46 6.42 5.44

No. of Factories (Nos) -0.43 0.39 -0.02

Persons Employed (Nos) -0.69 3.17 1.22
Capital Stock (Constant Prices
-15.41 1.55 -7.32
1993-94 = 100)
Note: Labour Productivity has been estimated as GVA/Number of Persons Employed

Value of Output (at constant prices) was found increasing during the 2002-03 to 2005-06 as
compared to 1999-00 to 2002-03 periods. The gross value added has shown negative growth
rates for the first period 1999-00 to 2002-03 and for the entire period 1999-00 to 2005-06. The
number of factories has considerably declined during both the periods at the rate of -0.43% and -
0.02%.

4.2.4 Partial and Total Factor Productivity Growth for Air Conditioner Sector

In this section, analysis of partial productivities (labour and capital) and total factor productivity
growth (TFPG) has been given. The detailed methodology adopted for the estimation of partial
(labour & capital) and TFPG are given in Annexure 4. The estimated partial productivity ratios
such as labour and capital productivities and capital intensity figures are given in Table 4.3.



Table 4.3: Productivity Estimates for Labour and Capital inputs
(Rs.)
Capital Labour Capital Intensity
Year
Productivity Productivity (Capital/Labour)
1999-00 0.59 192444 328492
2000-01 0.91 225881 249099
2001-02 0.92 216011 234033
2002-03 0.78 155270 198838
2003-04 1.04 170172 163841
2004-05 1.07 168638 157572
2005-06 0.86 178485 208228
Note: Productivity has been estimated as GVA/Factor input
Source: Estimated from ASI- Summary results of factory sector, CSO.

From Table 4.3 it may be noted that partial productivity estimations for labour and capital
productivity at the all India level have reported wide fluctuations during 1999-00 to 2005-06
period. Capital productivity was found fluctuating in the range of Rs. 0.59 to Rs. 1.07. The
labour productivity increased at a slow pace in the beginning 1999-00 but dipped to a lower
value of Rs. 155270 in 2002-03 and again slightly increased to 178485 in the year 2005-06
which is still lower than the initial figure of Rs.192444.

Table 4.4 provides year on year growth rate estimations for capital, labour and total factor
productivity growth. It may be noted that capital productivity growth during 1999-00 to 2002-03
was 13.73% while 2002-03 to 2005-06 period exhibited growth at the rate of 5.38%. However,
labour productivity growth reported negative growth for the period 1999-00 to 2002-03 at -
5.04% and positive growth for the perid 2002-03 to 2005-06 at 4.85% respectively. In the case of
Total Factor Productivity Growth we find average growth rate at -12.55% during 1999-00 to
2002-03 and 4.10% during 2002-03 to 2005-06.



Table 4.4: Labour, Capital and Total Factor Productivity Growth
(%)
Capital Labour
Year Productivity Productivity Total Factor
Growth Growth Productivity Growth
1999-00 -- -- --
2000-01 54.78 17.38 -24.34
2001-02 1.79 -4.37 0.21
2002-03 -15.40 -28.12 -13.52
2003-04 33.01 9.60 -18.12
2004-05 3.04 -0.90 14.65
2005-06 -19.91 5.84 15.78
Average for the Period
13.73 -5.04 -12.55
1999-00 to 2002-03
5.38 4.85 4.10
2002-03 to 2005-06

Since the annual growth rates exhibit wide fluctuations, for getting a better picture of the growth
rate analysis it has been depicted in an index form in Table 4.5. Among the three growth rates
capital, productivity has reported the highest growth at 177.22 by 2004-05, while labour
productivity has reported 93.58 and Total Factor Productivity has grown to 58.88 for the 2004-05
year.

Table 4.5: Index of Labour, Capital and Total Factor Productivity Growth

Capital Productivity Labour Productivity Total factor Productivity
Year
Growth Index Growth Index Growth Index
1999-00 100.00 100.00 100.00
2000-01 154.78 117.38 75.66
2001-02 156.57 113.01 75.87
2002-03 141.18 84.89 62.35
2003-04 174.18 94.48 44.23
2004-05 177.22 93.58 58.88
2005-06 157.32 99.42 74.66



Though TFP is lower as compared to Capital and Labour Productivity Growth, it may be noted
that technology is very critical to the growth of air conditioner sector in India. Therefore, it may
be noted that technology upgradation schemes are vital for making the sector more productive
and competitive in the global setting.

4.3 Refrigerator Sector

4.3.1 Key Features of the Registered Factory Sector

An examination of the refrigerator sector (registered manufacturing) at the all India level
suggests that the Refrigerator sector of the Light Electrical Industry has experienced significant
decline in terms of Gross Value Added over the years (Table 4.6). However, compound annual
growth rate of employment during 1999-00 to 2002-03 has shown negative growth at an annual
rate of -7.17 per cent. By 2005-06 total employment, value of output and value added declined in
absolute terms as compared to 2002-03 levels.

In 2002-03 however, the Refrigerator sector has recovered. A comparison between the levels of
2000-01 and 2005-06 reveals that the value added and value of output has considerably declined
during this period (Table 4.6). The number of workers and the number of factories have also
decreased considerably during this period.



Thus, the above analysis suggests that the organized refrigerator sector in India has started
showing signs of growth in the recent years as compared to nineties. This probably indicates that
the measures adopted during economic liberalization did help the organized segment of
refrigerator manufacturing in India.

Table 4.6: Characteristics of Refrigerator Sector in India

Indicators 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Number of Factories 651 784 630 752 662 706 687
Number of Persons 42704 36986 30659 34163 29650 29524 32158
Employed
Gross Value Added 74989 75343 55443 54808 50339 41783 41835
(Constant Prices
1993-94=100)
Value of Output 345201 325196 264150 370151 308852 281653 262330
(Constant Prices
1993-94=100)
Capital Stock 219618 154438 122302 170188 125475 94423 77962
(Constant Prices
1993-94 = 100)
4.3.2 Data and Variables
productivity ratios. In order to eliminate the price effect from the increasing value added, the
gross value added figures have been deflated by using the whole-sale Price Index (WPI). From
the WPI, the price index for the basic metals, alloys and metal products at 1993-94 base prices
has been taken into account for deflating the data on gross value added since it covers all
categories of the products from the sector.

4.3.3 Growth of Refrigerator Sector
A period wise growth analysis of the organized refrigerator sector of Light Electrical Industry in
India has been presented in Table 4.7.



Table 4.7: Growth of Organized Refrigerator Sector
Indicators (1999-00 to (2002-03 (1999-00 to
2002-03) to 2005-06 2005-06)
CAGR (%)
Gross Value Added
-9.92 -8.61 -9.27
(At Constant Prices)
Value of Output (At Constant Prices) 2.35 -10.84 -4.47
No. of Factories (Nos) 4.92 -2.97 0.90
Persons Employed (Nos) -7.17 -2.00 -4.62
Capital Stock
(Constant Prices -8.15 -22.91 -15.85
1993-94 = 100)

Value of Output (at constant prices) was found to be decreasing for the 2002-03 to 2005-06 and
1999-00 to 2005-06 periods as compared to 1999-00 to 2002-03. The compound annual growth
rate for employment has shown negative trends for the three periods. Similar is the case with the
gross value added where it is also showing negative growth for all the three periods.

4.3.4 Partial and Total Factor Productivity Analysis of Refrigerator Sector

In this section we analyze partial productivities (labour and capital) and total factor productivity
growth (TFPG). The detailed methodology adopted for the estimation of partial (labour &
capital) and TFPG are given in Annexure 4. The estimated partial productivity ratios for both
labour and capital factor inputs are given in Table 4.8.

(Rs.)
Capital Labour Capital Intensity
Year
Productivity Productivity (Capital/labour)
1999-00 0.34 175602 514280
2000-01 0.49 203706 417557
2001-02 0.45 180838 398909
2002-03 0.32 160432 498164
2003-04 0.40 169776 423188
2004-05 0.44 141523 319818
2005-06 0.54 130092 242434



productivity at the all India level have reported wide fluctuations during 1999-00 to 2005-06
period. Capital productivity was found fluctuating in the range of Rs. 0.32 to Rs. 0.54 while
labour productivity was found in the range of Rs. 130092 to Rs. 203706 during 1999-00 to 2005-
06. Table 4.8 shows that the labour productivity increased at a slow pace in the beginning 1999-
2000 to 2000-01 but dipped to a value of 180838 in 2001-02 and since then the labour
productivity kept declining to a level of Rs. 130092 in 2005-06.

productivity growth. It may be noted that capital productivity growth during 2000-01 to 2002-03 was
low as compared to 2003-04 to 2005-06 period exhibited high growth at the rate of 18.71% per
annum. However, labour productivity growth reported negative growth for both periods at -2.17%
and -6.30% respectively. In the case of Total Factor Productivity Growth we find annual average
growth rate at -8.28% during 2000-01 to 2002-03 and -21.41% during 2003-04 to 2005-06.

(%)
Capital Labour Total factor
Year Productivity Productivity Productivity
Growth Growth Growth
1999-00 -- -- --
2000-01 42.88 16.00 -31.72
2001-02 -7.08 -11.23 -22.59
2002-03 -28.96 -11.28 29.47
2003-04 24.57 5.82 -27.79
2004-05 10.30 -16.64 -23.12
2005-06 21.26 -8.08 -13.33
2.28 -2.17 -8.28
2000-01 to 2002-03
18.71 -6.30 -21.41
2003-04 to 2005-06

capital productivity has reported the highest index at 162.98 by 2005-06, while labour
productivity has reported 74.60 and Total Factor Productivity has grown to 10.91 for the same
period.



Table 4.10: Index of Labour, Capital and Total Factor Productivity Growth Rates
Labour
Capital Total factor
Productivity
Year Productivity Productivity
Growth
Growth Index Growth Index
Index
1999-00 100.00 100.00 100.00
2000-01 142.88 116.00 68.28
2001-02 135.80 104.78 45.69
2002-03 106.84 93.49 75.15
2003-04 131.41 99.32 47.37
2004-05 141.71 82.68 24.24
2005-06 162.98 74.60 10.91

Though TFP is lower as compared to Capital and Labour Productivity Growth, it may be noted
that technology plays a significant role in the growth of refrigerator sector in India. Therefore, it
may be noted that technology upgradation schemes are vital for making the sector more
productive and competitive in the global setting.



4.4 Washing Machines Sector

4.4.1 Key Features of the Registered Factory Sector

An examination of the Washing Machine segment of the Light Electrical Industry (registered
manufacturing) at the all India level suggests that the sector has not experienced any significant
growth in terms of Gross Value Added over the years (Table 4.11). However, compound annual
growth rate of employment during 1999-00 to 2002-03 has shown positive trends at an annual
rate of 36.00 %. By 2005-06 total employment and value added declined in absolute terms as
compared to 2002-03 levels.

A comparison between the levels of 2000-01 and 2005-06 reveals that the value added and value
of output has started showing signs of recovery (Table 4.11). The number of workers has also
increased considerably during this period but the number of factories has shown a decline.

Thus, the above analysis suggests that the organized washing machine industry in India has
started showing signs of growth in the recent years as compared to nineties. This probably
indicates that the measures adopted during economic liberalization did help the organized
segment of washing machine manufacturing in India.

Table 4.11: Characteristics of Washing Machine Sector in India

Indicators 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

Number of 1526 1382 1283 1321 1310 1279 1298
Factories
Number of Persons 46382 33899 38269 116684 114167 46038 48321
Employed
Gross Value Added 76958 67718 76557 71115 68876 66811 69283
(Constant Prices
1993-94=100)
Value of Output 344017 296064 312917 310693 295567 330839 359619
(Constant Prices
1993-94=100)



4.4.2 Data and Variables
productivity ratios. In order to eliminate the price effect from the increasing value added, the
gross value added figures have been deflated by using the whole-sale Price Index (WPI). From
the WPI, the price index for the basic metal, alloys and metal products at 1993-94 base prices has
been taken into account for deflating the data on gross value added since it covers all categories
of the products from the sector.

4.4.3 Growth of Washing Machine Sector
A period wise growth analysis of the organized washing machine sector of Light Electrical
Industry in India has been presented in Table 4.12.

Table 4.12: Growth of Organized Washing Machine Sector

Indicators (1999-00 to (2002-03 (1999-00 to
2002-03) to 2005-06 2005-06)
CAGR (%)
Gross Value Added (At Constant Prices) -2.60 -0.87 -1.74
Value of Output (At Constant Prices) -3.34 5.00 0.74
No. of Factories (Nos) -4.69 -0.58 -2.66
Persons Employed (Nos) 36.00 -25.46 0.68

Value of Output (at constant prices) has been found increasing continuously during the period
2002-03 to 2005-06. Nevertheless, the sector has experienced a great deal of recovery in the
decade and a half of liberalization. Internal liberalization and trade reforms have certainly helped
the washing machine industry to gain some market share in the world market. However, the
extent to which Indian washing machine industry can survive or grow or emerge as a leader
depends on its competitive potential. Since, the washing machine industry, be it organized or
unorganized, across the globe is basically capital intensive, the improvement in capital
productivity will primarily govern the competitiveness of the sector.



4.4.4 Partial and Total Factor Productivity Analysis of Washing Machine Sector

In this section we analyze partial productivities (labour and capital) and total factor productivity
growth (TFPG). The detailed methodology adopted for the estimation of partial (labour &
capital) and TFPG are given in Annexure 4. The estimated partial productivity ratios for both
labour and capital factor inputs are given in Table 4.13.

(Rs.)
Year Capital Productivity Labour Productivity
1999-00 0.31 117592
2000-01 0.54 124171
2001-02 0.64 151335
2002-03 0.72 147836
2003-04 0.79 145197
2004-05 0.86 127303
2005-06 1.05 132934

productivity at the all India level have reported wide fluctuations during 1999-00 to 2005-06 period.
Capital productivity was found fluctuating in the range of Rs. 0.31 to Rs. 1.05 while labour
productivity was found in the range of Rs. 117592 to Rs. 151335 during 1999-00 to 2005-06.

productivity growth. It may be noted that capital productivity growth during 2000-01 to 2002-03
exhibited growth rate at 34.74% while 2003-04 to 2005-06 period exhibited growth at the rate of
13.59% per annum. However, labour productivity growth reported positive growth for period
2000-01 to 2002-03 at 8.39% while negative growth for the period 2003-04 to 2005-06 at -
3.23%. In the case of Total Factor Productivity Growth we find annual average growth rate at -
25.20% during 2000-01 to 2002-03 and -8.05% during 2003-04 to 2005-06.



(%)
Year Capital Productivity Labour Productivity Total Factor
Growth Growth Productivity Growth
1999-00 -- -- --
2000-01 73.14 5.60 -54.59
2001-02 18.43 21.88 -5.34
2002-03 12.65 -2.31 -15.67
2003-04 10.40 -1.79 -9.74
2004-05 8.56 -12.32 -4.15
2005-06 21.81 4.42 -10.25
Average for the Period 34.74 8.39 -25.20
2000-01 to 2002-03
Average for the Period 13.59 -3.23 -8.05
2003-04 to 2005-06

capital productivity has reported the highest index at 244.99 by 2005-06, while labour
productivity has reported 115.47 and Total Factor Productivity has grown to 0.27 for the same
period.

Table 4.15: Index of Labour, Capital and Total Factor Productivity Growth Rates

Capital Labour Total factor
Year Productivity Productivity Productivity
Growth Index Growth Index Growth Index
1999-00 100.00 100.00 100.00
2000-01 173.14 105.60 45.41
2001-02 191.57 127.47 40.07
2002-03 204.22 125.16 24.41
2003-04 214.62 123.37 14.67
2004-05 223.18 111.05 10.52
2005-06 244.99 115.47 0.27



TFP for the sector is declining continuously as compared to Capital and Labour Productivity
Growth during the study period. It indicates that the technological progress is not taking place in
the washing machine segment in the country. It is a major area of concern. Therefore, it may be
noted that technology upgradation schemes are vital for making the sector more productive and
competitive in the global setting.



CHAPTER 5

COMPETITIVENESS OF LIGHT ELECTRICAL INDUSTRY
5.1. Introduction

In a scenario where the entire world is shrinking into a global village, all the economies whether
developed or developing need to fortify themselves for protecting their domestic manufacturing.
Globalization demands vibrant economies that perpetually strengthen themselves by remaining
competitive and bring drastic changes in their economies.

Despite some highly competent companies in India, the industry average level remains low when
benchmarked with other emerging economies including Thailand, Korea and China. The
situation may get worse if there is further delay in government support to industry. On the whole,
it may be noted that any lack of investment and preparedness across the industry with adequate
government support, it is quite possible that Indian industry and the national economy shall be
competitively disadvantaged relative to other countries. This would also imply job losses, factory
closures, operational losses of companies and depressed incomes impacting the entire economy.

In this chapter we analyze segment wise export and import of large home appliances such as Air
Conditioners, Refrigerators, Washing Machines, Vacuum Cleaners and Microwave Ovens from
India to the rest of the world. Competitiveness of each of the product segments have been
analyzed through estimated trade ratios for each of the product categories and for all the five
products as a whole.

5.2. Export Trends

Table 5.1 reports export trend in air-conditioner sector in India. It may be noted that exports
were increasing continuously from 2000-01 and reached the highest level during 2003-04.
However, subsequent years witnessed a decline. On the other hand the export of refrigerator has
shown a continuous increase during the study period from 1996-97 to 2007-08. The exports of
microwave oven exhibited an increasing trend during the years 1996-97 to 2007-08 with wide
variations. The export trends for the vacuum cleaners during the years 1996-97 to 2000-01 was
reported at a negative annual growth rate of -20.40 percent while the second period during 2000-



01 to 2007-08 reported a positive annual growth of 26.93 percent. On the other hand the exports
of washing machine have shown an annual growth rate of 27.26 during 1996-97 to 2000-01 but it
has declined during 2000-01 to 2007-08 to 6.16 percent.

Aggregate export from India reported for all the five product categories together has shown a
healthy annual growth rate of 34.87 percent during the study period 1996-97 to 2007-08.

Table 5.1: Segment wise Export of Home Appliances – India Total
(Rs. Lakhs)
Year Air Refrigerator Washing Vacuum Microwave Total
Conditioner Machine Cleaner Oven
1996-1997 305 706 447 284 16 1759
1997-1998 326 1358 359 136 16 2195
1998-1999 728 1439 519 48 113 2847
1999-2000 333 1832 616 152 33 2965
2000-2001 1179 3117 1174 114 0 5584
2001-2002 2213 3949 2719 141 12 9034
2002-2003 4901 5940 2928 154 21 13943
2003-2004 12722 8355 3089 284 510 24960
2004-2005 12395 7660 3129 281 60 23525
2005-2006 8479 11539 1347 325 1548 23237
2006-2007 6643 21758 1289 164 1683 31537
2007-2008 10156 34661 1783 605 21 47226
CAGR 1996-97 40.17 44.95 27.26 -20.40 -100 33.48
to 2000-01
CAGR 2000-01 36.02 41.07 6.16 26.93 - 35.66
to 2007-08
CAGR 1996-97 37.52 42.47 13.39 7.12 2.50 34.87
to 2007-08
Source: dgft.delhi.nic.in
5.3. Import Trends

Table 5.2 shows segment wise import of selected five large home appliances by India. It may be
seen from the table that growth rates for the imports of all the five products considered such as
air conditioner, refrigerator, washing machine, vacuum cleaner and microwave oven have shown
very high growth rates during the study period. A period wise analysis reveals that the first
period under study such as 1996-97 to 2000-01 reported higher relative growth as compared to
the second period i.e., 2000-01 to 2007-08. Among the five product categories, highest annual
growth rate for imports during 1996-97 to 2007-08 was reported for microwave ovens at 106.92



percent per annum while lowest import growth rate was reported for refrigerator at 10.20 per
annum. However, Import for all the five products taken together reported an annual growth rate
of 33.72 percent which is slightly lower than the export annual growth rate of 34.87 percent.

Table 5.2: Segment wise Import of Home Appliances – India Total
(Rs.lakhs)
Year Air Refrigerator Washing Vacuum Microwave Total
Conditioner Machine Cleaner Oven
1996-1997 558 3814 622 11 5 5010
1997-1998 875 5182 1242 36 297 7632
1998-1999 1164 7579 2332 65 351 11491
1999-2000 3448 9637 3019 350 1817 18271
2000-2001 5818 9177 5467 412 2978 23852
2001-2002 4779 10470 3320 296 2411 21276
2002-2003 5013 10314 1928 464 3024 20743
2003-2004 10027 9372 2082 513 3460 25454
2004-2005 14755 11864 4496 912 6372 38399
2005-2006 28375 7394 7175 1034 11015 54993
2006-2007 44469 11540 11592 1423 12729 81753
2007-2008 77351 11103 16360 2779 14885 122478
CAGR 1996-97 79.69 24.55 72.18 147.39 394.01 47.71
to 2000-01
CAGR 2000-01 44.72 2.76 16.95 31.35 25.84 26.33
to 2007-08
CAGR 1996-97 56.57 10.20 34.61 65.35 106.92 33.72
to 2007-08

5.4. Export Competitiveness of Large Home Appliances

Table 5.3 reports the product segment wise export-import trade ratio for the large home
appliances such as Air Conditioners, Refrigerators, Washing Machines, Vacuum Cleaners and
Microwave Ovens.

In the case of Air Conditioners, it may be noted that the net exports during 2003-04 reported
positive as the trade ratio became more than one. However, the subsequent years reported
substantial decline in trade competitiveness as the trade ratio started declining consistently and it
reached a low 0.13 in the year 2007-08.



In the case of Refrigerators, the industry found to be trade competitive as the trade ratio show a
steady increase during the period 2000-01 to 2007-08. The trade ratio reached to a maximum
value of 3.12 in the year 2007-08.

In the case of Washing Machines, it may be noted that the net exports during 2002-03 and 2003-
04 reported positive as the trade ratio became more than one. However, the subsequent years
reported substantial decline in trade competitiveness as the trade ratio started declining
consistently and it reached a low 0.11 in the year 2007-08.

In the case of Vacuum Cleaner, it may be noted that there is substantial decline in the trade
competitiveness as the trade ratio declined tremendously from 25.78 in the year 1997-98 to a low
of 0.11 in the year 2006-07.

In the case of Microwave Ovens, it may be noted that there is substantial decline in the trade
competitiveness as the trade ratio declined from 3.20 in the year 1997-98 to a negligible export
of product in 2007-08 as compared to import of the product in the same period.

Table 5.3: Product Segment wise Export- Import Ratio of Home Appliances
Year Air Refrigerator Washin Vacuum Microwave Total
Conditioner g Cleaner Oven
Machine
1996-1997 0.55 0.19 0.72 25.82 3.20 0.35
1997-1998 0.37 0.26 0.29 3.78 0.05 0.29
1998-1999 0.63 0.19 0.22 0.74 0.32 0.25
1999-2000 0.10 0.19 0.20 0.43 0.02 0.16
2000-2001 0.20 0.34 0.21 0.28 0.00 0.23
2001-2002 0.46 0.38 0.82 0.48 0.00 0.42
2002-2003 0.98 0.58 1.52 0.33 0.01 0.67
2003-2004 1.27 0.89 1.48 0.55 0.15 0.98
2004-2005 0.84 0.65 0.70 0.31 0.01 0.61
2005-2006 0.30 1.56 0.19 0.31 0.14 0.42
2006-2007 0.15 1.89 0.11 0.12 0.13 0.39
2007-2008 0.13 3.12 0.11 0.22 0.00 0.39



From the above trade ratio analysis, it may be noted that the light electrical (large home
appliance) manufacturing industry needs a special package in the form of technological
advancement, R&D support and financial guidance from the government to make the industry
more productive and competitive.

5.5. Air Conditioners

The exports of other window/wall types self-contained air conditioning machines have been
shown in Table 5.4 for the period 2003-04 to 2007-08 to the countries like China, Korea,
Malaysia, and Thailand.

The highest exports were reported to Korea in the year 2005-06 and to Thailand in 2004-05. The
total exports to the four countries were seen highest during 2005-06 whereas it has declined
during the period 2006-07 and 2007-08.

Table 5.4: Export of Other Window/Wall Types Self-contained Air Conditioning Machines

H.S. Code: 84151090 (Rs. Lakhs)
Year China Korea Malaysia Thailand Total
2003-2004 0 1 2 0 3
2004-2005 1 0 0 87 88
2005-2006 11 234 1 4 250
2006-2007 0 11 0 0 11
2007-2008 0 1 8 11 20
[
Source: delhi.dgft.nic.in

Similarly the imports of other window/wall types self-contained air conditioning machines have
been shown in Table 5.5 for the period 2003-04 to 2007-08 from the countries like China,
Korea, Malaysia, and Thailand.

The maximum imports were reported from China during 2007-08. It is being observed that the
imports from China were maximum during the period 2004-05 and 2005-06 as compared to other
countries. The total imports from the four countries were seen maximum during 2007-08 which
has shown continuous trend of increase since 2003-04.



Table 5.5: Import of Other Window/Wall Types Self-contained Air Conditioning Machines

2003-2004 648 1148 69 572 2437
2004-2005 2315 340 84 1940 4679
2005-2006 4392 142 37 3608 8179
2006-2007 7409 162 303 7416 15290
2007-2008 31358 82 351 8268 40059

In Table 5.6 trade ratio (export/import) of other window/wall types self-contained air
conditioning machines has been calculated from total exports to the four countries and total
imports from these countries for the period 2003-04 to 2007-08. The highest trade ratio observed
was 0.0306 during 2005-06 and has gone to low of 0.0005 in 2007-09.

Table 5.6: Trade Ratio (Export/ Import) of Other Window/Wall Types Self-contained Air

H.S. Code: 84151090
Year Total Export to Total Import from Total Trade Ratio:
four countries* four countries* Export / Import
2003-2004 3 2437 0.0012
2004-2005 88 4679 0.0188
2005-2006 250 8179 0.0306
2006-2007 11 15290 0.0007
2007-2008 20 40059 0.0005
*China, Korea, Thailand and Malaysia

Table 5.7 shows the country-wise export of split system air conditioning machines for the period
2003-04 to 2007-08. The highest exports were reported to Korea during 2005-06. The total
exports to the four countries were reported maximum for the year 2005-06 and it has declined
during 2006-07. There were hardly any exports to the four countries during 2007-08.



Table 5.7: Country wise Export of Split System Air Conditioning Machines

2003-2004 0 0 36 17 53
2004-2005 1 196 0 0 197
2005-2006 1 376 5 53 435
2006-2007 0 1 0 1 2
2007-2008 0 0 0 0 0

Table 5.8 shows the country wise imports of split system air conditioning machines from the
four countries for the period 2003-04 to 2007-08. The imports were reported maximum from
China for the period 2004-05 to 2007-08 and touched the value of Rs. 16593 lakhs during 2007-
08. The total imports from the four countries have shown steady increase for the entire period
from 2003-04 to 2007-08.

Table 5.8: Country wise Import of Split System Air Conditioning Machines

2003-2004 995 247 6 3564 4812
2004-2005 3612 190 11 2802 6615
2005-2006 9236 244 37 5972 15489
2006-2007 11769 133 208 8877 20987
2007-2008 16593 212 487 10954 28246

Table 5.9 trade ratio (export/import) of split system air conditioning machines for the four
countries for the period 2003-04 to 2007-08. The trade ratio is highest for the year 2004-05
and is observed to be declining in the subsequent years. The trade ratio has declined to zero
in 2007-08.



Table 5.9: Trade Ratio (Export/ Import) of Split System Air Conditioning Machines

H.S. Code: 84151010
2003-2004 53 4812 0.0110
2004-2005 197 6615 0.0298
2005-2006 435 15489 0.0281
2006-2007 2 20987 0.0001
2007-2008 0 28246 0.0000
*China, Malaysia, Korea and Thailand

From the above observations it can be noted that India is exporting very low volumes of air
conditioners to the four countries but the large chunk of it is being imported from the countries
like China, Thailand and therefore the sector is lagging behind in competitiveness.

5.6. Refrigerator

The country wise exports of refrigerator (household compressor type refrigerator) has been
shown in Table 5.10 for the year 1996-97 to 2007-08 to the countries like China, Korea,
Malaysia and Thailand.

The maximum exports by India were reported to Thailand during 2002-03 and 2004-05 and
2005-06 as compared to other countries. The total exports to the four countries were seen highest
in the year 2002-03 whereas it has declined in the year 2003-04. There were no exports to these
countries during 1997-98, 1999-2000 and 2001-02. During 2006-07 and 2007-08 the major
exports were reported to Thailand.



Table 5.10: Country wise Export of Refrigerator (Household Compressor type refrigerator)
1996-1997 0 0 34 0 34
1997-1998 0 0 0 0 0
1998-1999 0 0 1 0 1
1999-2000 0 0 0 0 0
2000-2001 0 1 0 0 1
2001-2002 0 0 0 0 0
2002-2003 0 1 0 179 180
2003-2004 14 0 39 50 103
2004-2005 0 0 0 148 148
2005-2006 45 1 0 105 151
2006-2007 0 0 0 87 87
2007-2008 0 0 0 44 44

Similarly the country wise imports of refrigerator (household compressor type refrigerator) has
been shown in Table 5.11 for the year 1996-97 to 2007-08 from the countries like China, Korea,

The highest imports were reported from Korea during 1999-2000 while imports from Thailand
were highest during 2006-07 and 2007-08 as compared to other countries. The total imports from
the four countries were seen highest for the year 2007-08 touching the value of Rs. 7745 lakhs.

Table 5.11: Country wise Import of Refrigerator (Household Compressor type refrigerator)
1996-1997 0 1487 0 22 1509
1997-1998 0 2402 0 164 2566
1998-1999 1 1961 0 0 1962
1999-2000 11 6489 20 366 6886
2000-2001 0 5053 13 878 5944
2001-2002 54 5565 0 1002 6621
2002-2003 3 5183 0 1695 6881
2003-2004 302 3431 2 1741 5476
2004-2005 226 3120 1 651 3998
2005-2006 190 2417 104 1001 3712
2006-2007 356 1235 45 5068 6704
2007-2008 649 1475 0 5621 7745



The Table 5.12 shows the trade ratio (export/import) of refrigerator (household compressor type
refrigerator) for the Period 1996-97 to 2007-08. The highest trade ratio calculated observed is
0.0407 during 2005-06.

Table 5.12: Trade Ratio (Export/ Import) of Refrigerator (Household Compressor type refrigerator)

H.S. Code: 84182100
four countries four countries Export / Import
1996-1997 34 1509 0.0225
1997-1998 0 2566 0.0000
1998-1999 1 1962 0.0005
1999-2000 0 6886 0.0000
2000-2001 1 5944 0.0002
2001-2002 0 6621 0.0000
2002-2003 180 6881 0.0262
2003-2004 103 5476 0.0188
2004-2005 148 3998 0.0370
2005-2006 151 3712 0.0407
2006-2007 87 6704 0.0130
2007-2008 44 7745 0.0057

The country wise exports of refrigerator (other household type refrigerator) has been shown in
Table 5.13 for the period 1996-97 to 2007-08 to the countries like China, Korea, Malaysia, and
Thailand.

The highest exports were reported to Malaysia during 2004-05. The total exports to the four
countries were seen highest during 2004-05 whereas it has declined in the year 2006-07 and
2007-08. There are hardly any exports to these countries for the period 1996-97 to 1999-2000
and 2006-2007 to 2007-08.



Table 5.13: Country wise Export of Refrigerator (Other Household type refrigerator)

1996-1997 0 0 0 0 0
1997-1998 0 1 1 0 2
1998-1999 0 0 0 0 0
1999-2000 0 0 0 0 0
2000-2001 0 0 0 4 4
2001-2002 0 0 0 12 12
2002-2003 0 0 0 1 1
2003-2004 0 0 2 0 2
2004-2005 0 0 18 2 20
2005-2006 1 12 0 0 13
2006-2007 0 0 3 0 3
2007-2008 0 0 0 0 0

Similarly the country wise imports of refrigerator (other household type refrigerator) has been
shown in Table 5.14 for the period 1996-97 to 2007-08 from the countries like China, Korea,

The highest imports were reported from Korea during 1998-99 while the imports from Korea
were highest during 2006-07 and 2007-08 as compared to other countries. The total imports from
the four countries were seen highest for the year 1998-99 which touched to a value of Rs4500
lakhs. The total import value of Refrigerator was seen to be as low as Rs.1017 lakhs during
2003-04.



Table 5.14: Country wise Import of Refrigerator (Other Household type refrigerator)

1996-1997 2 1599 0 0 1601
1997-1998 154 1723 0 1 1878
1998-1999 18 4466 1 15 4500
1999-2000 6 1976 0 0 1982
2000-2001 8 2495 0 52 2555
2001-2002 1 2200 0 415 2616
2002-2003 19 521 27 540 1107
2003-2004 66 535 2 414 1017
2004-2005 1770 1498 24 225 3517
2005-2006 432 1434 5 255 2126
2006-2007 297 2375 0 10 2682
2007-2008 419 1391 1 46 1857

The Table 5.15 trade ratio (export/import) of refrigerator (other household type refrigerator) for
the period 1996-97 to 2007-08. The highest trade ratio observed to be 0.0061 during 2005-06. It
has shown a sudden decrease in the year 2006-07 and 2007-08.

Table 5.15: Trade Ratio (Export/ Import) of Refrigerator (Other Household type refrigerator)

H.S. Code: 84182900

1996-1997 0 1601 0.0000
1997-1998 2 1878 0.0011
1998-1999 0 4500 0.0000
1999-2000 0 1982 0.0000
2000-2001 4 2555 0.0016
2001-2002 12 2616 0.0046
2002-2003 1 1107 0.0009
2003-2004 2 1017 0.0020
2004-2005 20 3517 0.0057
2005-2006 13 2126 0.0061
2006-2007 3 2682 0.0011
2007-2008 0 1857 0.0000



5.7. Washing Machine

The country wise exports of other machines, dry linen capacity <= 10 kg has been shown in
Table 5.16 for the period 1996-97 to 2007-08 to the countries like China, Korea, Malaysia, and
Thailand.

The highest exports were reported to China during 2003-04. The total exports to the four
countries were seen highest during 2003-04 whereas it has declined in the year 2006-07 and
2007-08. There were no exports to these countries during 1996-97 and 1999-2000.

Table 5.16: Country wise Export of Other Machines, dry linen capacity <= 10kg

1996-1997 0 0 0 0 0
1997-1998 0 1 0 4 5
1998-1999 2 0 0 0 2
1999-2000 0 0 0 0 0
2000-2001 0 17 0 5 22
2001-2002 0 1 16 0 17
2002-2003 0 1 0 80 81
2003-2004 426 0 0 0 426
2004-2005 0 3 17 41 61
2005-2006 0 1 0 13 14
2006-2007 0 1 0 1 2
2007-2008 0 1 1 0 2

Similarly the country wise imports of other machines, dry linen capacity <= 10kg has been
shown in Table 5.17 for the period 1996-97 to 2007-08 from the countries like China, Korea,

The highest imports were reported from China during 2007-08 while the imports from China
were also highest in the years 2005-06 and 2006-07 as compared to other countries. The total
imports from the four countries were seen highest for the year 2007-08 and it has been increasing
since 2005-06.



Table 5.17: Country wise Import of Other Machines, dry linen capacity <= 10kg
1996-1997 0 25 0 0 25
1997-1998 6 43 0 0 49
1998-1999 143 138 0 0 281
1999-2000 13 6 0 0 19
2000-2001 272 353 1 0 626
2001-2002 190 61 0 0 251
2002-2003 66 35 0 24 125
2003-2004 37 42 0 12 91
2004-2005 910 14 3 16 943
2005-2006 1914 61 4 327 2306
2006-2007 2282 1 3 362 2648
2007-2008 4574 1 2 144 4721
Table 5.18 shows the trade ratio (export/import) of other machines, dry linen capacity <= 10kg
for the period 1996-97 to 2007-08. The highest trade ratio is 4.6813 during 2003-04. The total
exports were much higher than total imports during that year hence trade ratio was coming out to
be so high. It has shown a sudden decrease in the year 2006-07 and 2007-08.

Table 5.18: Trade Ratio (Export/ Import) of Other Machines, dry linen capacity <= 10kg
H.S. Code: 84501900
1996-1997 0 25 0.0000
1997-1998 5 49 0.1020
1998-1999 2 281 0.0071
1999-2000 0 19 0.0000
2000-2001 22 626 0.0351
2001-2002 17 251 0.0677
2002-2003 81 125 0.6480
2003-2004 426 91 4.6813
2004-2005 61 943 0.0647
2005-2006 14 2306 0.0061
2006-2007 2 2648 0.0008
2007-2008 2 4721 0.0004


The country wise exports of other machines, with Built-in centrifugal drier of a dry linen
capacity not exceeding 10kg has been shown in Table 5.19 for the period 1996-97 to 2007-08 to
the countries like China, Korea, Malaysia, and Thailand.

The highest exports were reported to Thailand during 2001-02. The total exports to the four
countries were seen highest during 2001-02. There were no exports to these countries during
most of the years.
Table 5.19: Country wise Export of Other Machines, with Built-in centrifugal drier of a
dry linen capacity not exceeding 10kg
1996-1997 0 0 0 0 0
1997-1998 0 0 0 0 0
1998-1999 0 0 0 0 0
1999-2000 0 0 0 0 0
2000-2001 0 0 0 0 0
2001-2002 0 0 0 28 28
2002-2003 0 0 0 0 0
2003-2004 0 0 7 17 24
2004-2005 0 0 0 7 7
2005-2006 0 0 0 0 0
2006-2007 0 0 0 0 0
2007-2008 0 0 0 0 0

Similarly the country wise imports of other machines, with Built-in centrifugal drier of a dry
linen capacity not exceeding 10kg has been shown in Table 5.20 for the period 1996-97 to 2007-
08 from the countries like China, Korea, Malaysia, Thailand and similarly it has also been sum
total.

The highest imports were reported from China during 2007-08 while imports from China were
also highest during 2006-07 as compared to other countries. The total imports from the four
countries were seen highest for the year 2007-08 and it has been increasing since 2005-06.



Table 5.20: Country wise Import of Other Machines, with Built-in centrifugal drier of a dry linen
capacity not exceeding 10kg

1996-1997 0 93 0 0 93
1997-1998 0 0 0 0 0
1998-1999 0 0 0 0 0
1999-2000 0 78 0 0 78
2000-2001 611 69 0 0 680
2001-2002 0 0 0 0 0
2002-2003 20 0 0 0 20
2003-2004 49 0 0 0 49
2004-2005 126 0 0 0 126
2005-2006 324 0 0 0 324
2006-2007 2345 0 1 0 2346
2007-2008 3780 0 0 0 3780

In Table 5.21 trade ratio (export/import) of other machines, with Built-in centrifugal drier of a
dry linen capacity not exceeding 10kg has been calculated from total exports to the four
countries and total imports from these countries for the period 1996-97 to 2007-08. The highest
trade ratio calculated was 0.4898 during 2003-04. The trade ratio is coming out to be zero for
most of the years as either exports are nil or both exports and imports are nil during those years.



Table 5.21: Trade Ratio (Export/ Import) of Other Machines, with Built-in
centrifugal drier of a dry linen capacity not exceeding 10kg
H.S. Code: 84501200

1996-1997 0 93 0.0000
1997-1998 0 0 0.0000
1998-1999 0 0 0.0000
1999-2000 0 78 0.0000
2000-2001 0 680 0.0000
2001-2002 28 0 0.0000
2002-2003 0 20 0.0000
2003-2004 24 49 0.4898
2004-2005 7 126 0.0556
2005-2006 0 324 0.0000
2006-2007 0 2346 0.0000
2007-2008 0 3780 0.0000

The country wise exports of fully automatic machines of dry linen capacity <=10 kg has been
shown in Table 5.22 for the period 1996-97 to 2007-08 to the countries like China, Korea,
Malaysia and Thailand .The highest exports were reported to Thailand during 2004-05. The total
exports to the four countries were seen highest during 2004-05.

Table 5.22: Country wise Export of fully automatic machines of dry linen capacity <=10 kg

1996-1997 0 0 0 0 0
1997-1998 0 0 0 0 0
1998-1999 9 0 0 0 9
1999-2000 0 0 0 0 0
2000-2001 0 0 0 27 27
2001-2002 0 0 0 67 67
2002-2003 0 1 0 76 77
2003-2004 0 0 0 98 98
2004-2005 0 1 0 177 178
2005-2006 0 1 7 0 8
2006-2007 0 0 0 0 0
2007-2008 4 15 0 0 19



Similarly the country wise imports of fully automatic machines of dry linen capacity <=10 kg
has been shown in Table 5.23 for the period 1996-97 to 2007-08 from the countries like China,
Korea, Malaysia, Thailand and similarly it has also been sum total.

The highest imports were reported from China in the year 2007-08 and also imports from China
were highest in the year 2005-06 and 2006-07 as compared to other countries. The total imports
from the four countries were seen highest for the year 2007-08 and it has been increasing since
2004-05.

Table 5.23: Country wise Import of fully automatic machines of dry linen capacity <=10 kg


1996-1997 0 212 0 0 212
1997-1998 168 791 0 0 959
1998-1999 591 1098 0 0 1689
1999-2000 701 1826 0 0 2527
2000-2001 1097 1829 0 0 2926
2001-2002 900 1033 0 0 1933
2002-2003 126 574 0 156 856
2003-2004 280 312 2 525 1119
2004-2005 1639 537 3 221 2400
2005-2006 2788 184 3 71 3046
2006-2007 4063 105 0 412 4580
2007-2008 4853 218 0 478 5549

In Table 5.24 trade ratio (export/import) of fully automatic machines of dry linen capacity <=10
kg has been calculated from total exports to the four countries and total imports from these
countries for the year 1996-97 to 2007-08. The highest trade ratio calculated was 0.0900 and was
seen in the year 2002-03.



Table 5.24:Trade Ratio (Export/ Import) of fully automatic machines of dry linen capacity <=10 kg

H.S. Code: 84501100


1996-1997 0 212 0.0000
1997-1998 0 959 0.0000
1998-1999 9 1689 0.0053
1999-2000 0 2527 0.0000
2000-2001 27 2926 0.0092
2001-2002 67 1933 0.0347
2002-2003 77 856 0.0900
2003-2004 98 1119 0.0876
2004-2005 178 2400 0.0742
2005-2006 8 3046 0.0026
2006-2007 0 4580 0.0000
2007-2008 19 5549 0.0034

5.8. Vacuum Cleaners

The country wise exports of vacuum cleaners has been shown in Table 5.25 for the year 1996-97
to 2007-08 to the countries like China, Korea, Malaysia, Thailand and it has also been sum total.

The highest exports were reported to Thailand in the year 2007-08. The total exports to the four
countries were seen highest in the year 2007-08. There were no exports reported to Korea during
most of the years.



Table 5.25: Country wise Export of Vacuum Cleaners


1996-1997 0 0 0 54 54
1997-1998 23 0 0 0 23
1998-1999 0 0 0 0 0
1999-2000 0 0 0 0 0
2000-2001 0 6 0 0 6
2001-2002 0 0 0 0 0
2002-2003 0 0 0 4 4
2003-2004 23 0 2 1 26
2004-2005 1 0 6 1 8
2005-2006 15 0 12 1 28
2006-2007 0 0 4 0 4
2007-2008 1 0 2 116 119

Similarly the country wise imports of vacuum cleaners has been shown in Table 5.26 for the
period 1996-97 to 2007-08 for the countries like China, Korea, Malaysia, Thailand.

The highest imports were reported from China in the year 2007-08 and also imports from China
were highest in the year 2005-06 and 2006-07 as compared to other countries. The total imports
from the four countries were seen highest for the year 2007-08 and it has been increasing since
2004-05. There were no imports from Thailand during all the years since 1996-97.



Table 5.26: Country wise Import of Vacuum Cleaners
1996-1997 0 0 0 0 0
1997-1998 0 0 0 0 0
1998-1999 2 0 0 0 2
1999-2000 6 0 0 0 6
2000-2001 47 46 1 0 94
2001-2002 50 98 2 0 150
2002-2003 115 107 3 0 225
2003-2004 332 31 5 0 368
2004-2005 634 76 2 0 712
2005-2006 792 5 7 0 804
2006-2007 926 59 10 0 995
2007-2008 1268 90 75 0 1433

In Table 5.27 trade ratio (export/import) of vacuum cleaners has been calculated from total
exports to the four countries and total imports from these countries for the year 1996-97 to 2007-
08. The highest trade ratio calculated was 0.0830 and was seen in the year 2007-08.

Table 5.27: Trade Ratio (Export/ Import) of Vacuum Cleaners

H.S. Code: 85091000

1996-1997 54 0 0.0000
1997-1998 23 0 0.0000
1998-1999 0 2 0.0000
1999-2000 0 6 0.0000
2000-2001 6 94 0.0638
2001-2002 0 150 0.0000
2002-2003 4 225 0.0178
2003-2004 26 368 0.0707
2004-2005 8 712 0.0112
2005-2006 28 804 0.0348
2006-2007 4 995 0.0040
2007-2008 119 1433 0.0830



5.9. Microwave Ovens

The country wise exports of microwave ovens has been shown in Table 5.28 for the year 1996-
97 to 2007-08 to the countries like China, Korea, Malaysia, Thailand and it has also been sum
total.

As we can see from the table there are almost nil exports of microwave ovens to the four
countries. The total exports to the four countries were seen highest in the year 2001-02 and 2002-
03. There were no exports reported to China and Thailand during all the years.

Table 5.28: Country wise Export of Microwave Ovens

1996-1997 0 0 0 0 0
1997-1998 0 0 0 0 0
1998-1999 0 0 0 0 0
1999-2000 0 0 0 0 0
2000-2001 0 0 0 0 0
2001-2002 0 1 1 0 2
2002-2003 0 1 1 0 2
2003-2004 0 0 1 0 1
2004-2005 0 0 0 0 0
2005-2006 0 0 0 0 0
2006-2007 0 0 0 0 0
2007-2008 0 0 0 0 0

Similarly the country wise imports of microwave ovens has been shown in Table 5.29 for the
period 1996-97 to 2007-08 for the countries like China, Korea, Malaysia, Thailand.

As we can see from the table there was much more imports of microwave ovens than their
exports. The highest imports were reported from China in the year 2007-08 and also imports
from China were highest from 2002-03 to 2006-07 as compared to other countries. The total
imports from the four countries were seen highest for the year 2007-08 and it has been increasing
since 2004-05. There were no imports from Thailand during all the years since 2002-03.



Table 5.29: Country wise Import of Microwave Ovens

1996-1997 0 0 0 0 0
1997-1998 0 269 0 0 269
1998-1999 1 337 0 0 338
1999-2000 207 1152 0 89 1448
2000-2001 767 1524 0 265 2556
2001-2002 552 836 63 171 1622
2002-2003 1893 124 156 70 2243
2003-2004 2736 172 0 222 3130
2004-2005 3815 73 342 1806 6036
2005-2006 6619 12 770 3349 10750
2006-2007 8054 21 734 3556 12365
2007-2008 9929 44 969 3468 14410
In Table 5.30 trade ratio (export/import) of microwave ovens has been calculated from total
exports to the four countries and total imports from these countries for the year 1996-97 to 2007-
08. The highest trade ratio calculated was 0.0012 and was seen in the year 2001-02. The trade
ratio for most of the years is coming out to be zero as the total exports for these years are
reported to be nil.

Table 5.30: Trade Ratio (Export/ Import) of Microwave Ovens
H.S. Code: 85165000
1996-1997 0 0 0.0000
1997-1998 0 269 0.0000
1998-1999 0 338 0.0000
1999-2000 0 1448 0.0000
2000-2001 0 2556 0.0000
2001-2002 2 1622 0.0012
2002-2003 2 2243 0.0009
2003-2004 1 3130 0.0003
2004-2005 0 6036 0.0000
2005-2006 0 10750 0.0000
2006-2007 0 12365 0.0000
2007-2008 0 14410 0.0000



5.10. Conclusions

From the competitive analysis, it may be noted that the light electrical (large home appliance)
manufacturing industry needs a special package in the form of technological advancement, R&D
support and financial guidance from the government to make the industry more productive and
competitive.

The competitiveness in the Indian light electrical industry needs to be placed within the context
of the restructuring taking place in the global light electrical industry. This restructuring is
brought about primarily by changes in demand and technology, which require different
configuration of capabilities, and which result in organizational changes. In the past decade, a
similar change is taking place in technology as well as market demand, which is changing the
contours of the global light electrical industry. The customer tastes and preferences are changing;
and finally, growth in emerging markets, coupled with technological changes with respect to
material used and cost efficiency, are making it feasible to manufacturers in countries like China.

These changes are resulting in standardization of product platforms by global manufacturers,
who are aggressively focusing on the emerging markets, while giving rise to a “niche market”
which gives opportunity for domestic manufacturers to gain market share. This is a systemic
change, which is leading to a change in industrial structure, even though it may appear to be
more concentrated with few manufacturers. Systemic change requires simultaneous coordinated
adjustments in many different spheres of activity, which is easier under unified ownership. This
is because the dynamic transaction costs of informing and persuading many independent agents
is high. However, given the idiosyncratic nature of tastes and preferences, capabilities with
respect to knowledge of local market are dispersed, and coordinating these capabilities under
unified ownership will be costly. Under such circumstances, indigenous firms in emerging
markets have a role to play, which will depend on how fast they are able to develop and match
the capabilities that are necessary to enter the global value chain.



CHAPTER 6

FIELD SURVEY FINDINGS:
REFRIGERATOR, AIR-CONDITIONER, WASHING MACHINE,
VACUUM CLEANER AND MICROWAVE OVEN

6.1 Profile of Large Home Appliance Manufacturing Units

National Productivity Council has carried out a nationwide survey across various Light Electrical
Manufacturing units (Large Home Appliances like Air Conditioners, Refrigerators, Washing
Machine, Vacuum Cleaners and Microwave Oven) to identify major constraints that are
hindering the growth of manufacturing units in India in terms of productivity and export
competitiveness. The field survey has been carried out across various states in India with a view
to provide sector specific policy recommendations for enhancing productivity and export
competitiveness of the large home appliances sector in the country.

The survey of the manufacturing units has been carried out with a structured questionnaire
(Annexure 1). List of units included in the field survey are given in Annexure 5. The field
survey tries to capture firm level information such as turnover, employment, domestic and
foreign trade, product description, cost related information, factors affecting productivity, factors
responsible for competitiveness and specific suggestions from each of the units.

The field survey covers total 70 manufacturing units spread across various states in India. State
wise distribution of the responding manufacturing units are given in Table 6.1.

Table 6.1: Distribution of Manufacturing Units: NPC Field Survey
S.No. States No. of Units Percentage
1 Andhra Pradesh 7 10.00
2 Delhi/NCR 24 34.29
3 Haryana 2 2.86
4 Karnataka 10 14.29
5 Maharashtra 12 17.14
6 Tamil Nadu 8 11.43
7 Uttar Pradesh 2 2.86
8 West Bengal 5 7.14
Total 70 100
Source: NPC Field Survey, July-September 2009



6.2. Product Category wise distribution of the manufacturing units

Table 6.2 provides the distribution of manufacturing units according to five product categories.

Table 6.2: Distribution of Manufacturing Units - Product category wise
Sl. No Product No. of Units
1 Refrigerator 16
2 Air Conditioner 19
3 Washing Machine 11
4 Vacuum Cleaner 14
5 Microwave Oven 10
Total 70

In the following section we analyze the findings of the field survey in terms of five large home
appliance categories.

6.3. REFRIGERATOR

6.3.1. General Profile of Respondents

This section analyzes the finding of the field survey conducted at different manufacturing
locations in India. The field survey includes 16 major manufacturers of refrigerators in India.
The survey was conducted by NPC field survey team during July-August 2009. Six states have
been covered in the field survey and a total 16 manufacturing units have been considered (Table
6.3) for detailed interview using structured questionnaire (Annexure 1). The manufacturing units
have been established in the range of 1969 to 2004 period. Among the manufacturing units 56%



of them belong to proprietorship firms while 25% of them are partnership firms and the
remaining 19% of them are private limited companies.
Table 6.3: Refrigerator units surveyed: Statewise

States No. of Units Percent
Andhra Pradesh 3 18.8
Delhi 6 37.5
Haryana 1 6.3
Karnataka 2 12.5
Maharashtra 2 12.5
Tamil Nadu 2 12.5
Total 16 100

There is hardly any merger and acquisitions reported among the surveyed units. More than 77%
of the units are having quality accreditations of which 80% of them are having ISO 9000.

6.3.2. Employment Trend

In regard to the pattern of employment it is reported that 87.5% of the units reported that this
trend is on the increase. A significant proportion of the employees are skilled. All the
manufacturing units reported increase in wages and salaries.

6.3.3. Domestic Market Trend

More than 76% units have reported that their market share is in the range of 0-10% only (Table
6.4). About 75% of the manufacturing units have reported that proportion of domestic sales to
total sales is over 51% (Table 6.5).



Table 6.4: Market share of Refrigerator

Response Percent
0-10% 76.9
11-25% 7.7
51% & above 15.4

Table 6.5: Proportion of Domestic Sales to Total Sales
Response Percent
0-10% 6.3
11-25% 12.5
26-50% 6.3
51% & above 75.0

Most of the manufacturing units (81%) reported an increase in domestic demand of the product.
For 46% of the units, the domestic demand increase was in the range of 11-25%.

In the case of local competition it reported to be medium by 75% units (Table 6.6). Only 25%
units reported that it is intense. As regards to foreign competition, 40% units reported that it is
intense.



Table 6.6: Local and Foreign Competition

Response Local (%) Foreign (%)

Low - 20.0

Intense 25.0 40.0

Medium 75.0 40.0

Among units surveyed, only 15.4% units reported that they are exporting to other countries.
However, 44.4% units reported that they are importing from other countries (Table 6.7). In the
case of import, about 50% units reported that the import is in the form of completely knocked
down (CKD) form for more than 51% imports (Table 6.8).

Table: 6.7: Refrigerator Units: Import

Response Percent
Yes 44.4

No 55.6

Table: 6.8: Complete Knock Down (CKD)

Response Percent
0-10% 30.0
11-25% 20.0
51% & above 50.0

However, semi-knocked down form was reported in the range of 0-10% by more than 80%
manufacturing units.

Low cost of production in India is considered to be a favorable environment in the age of
competitiveness. As 42% of manufacturing units supported the claim, 50% of units say that some
or the other government policies are helping the Indian industry to grow (Table 6.9).



Table: 6.9: Government Policies & Growth of Industry

Response Percent
Yes 50.0
No 50.0

According to 67% units registered, the Government interface in business is satisfactory (Table
6.10). Moreover, 58% units believed that Government is friendly towards the investors (Table
6.11).

Table: 6.10: Government Interface with business/private sector

Response Percent

Average 66.7

Poor 33.3

Table: 6.11: Government friendly towards investor

Response Percent

Yes 57.1
No 42.9

As regards to get clearances to start manufacturing in India, it was reported by 67%
manufacturing units that it takes 3-5 months while 20% of them reported that it takes 10-12
months (Table 6.12)

Table: 6.12: Clearance to start manufacturing unit in India

Response Percent
3-5 months 66.7
6-9 months 6.7
10-12 months 20.0
more than one year 6.7



6.3.4. Productivity and Competitiveness

According to 94% units infrastructure needs fast improvement as at present poor infrastructure a
major constraint affecting the overall business efficiency and competitiveness. About 70% units
felt that the infrastructure in competing countries are good and has been helping the industries to
grow at faster pace (Table 6.13).

Table: 6.13: Availability and quality of basic Infrastructure in India and Competing
countries
Response India (%) Competing
Countries (%)
Poor 33.3 7.7
Reasonable 60.0 15.4
Good 6.7 69.2
Excellent - 7.7

India manufacturers lack competitiveness due to the multiplicity of taxes. The tax regime in
India is very high as compared to competing countries. About 69% of the units reported that the
tax rates in India are high and procedures are complex. On the other hand, 59% units reported
that taxes in competing countries are low and procedures related to taxes are uniform and simple
(Table 6.14).

Table: 6.14: Taxes and other controls in India and Competing Countries:

Response India Competing
Countries
Low - 58.3
Moderate 25.0 41.7
High 68.8 -
Very High 6.3 -

About 54% manufacturing units believed that the cost of production is low in competing
countries as compared to India because of the availability of raw material in good quality with
reasonable price, and good infrastructure supported by government policies (Table 6.15).



Table: 6.15: Cost of Production In Competing Countries Responses of Refrigerator Units

Response Percent
Low 53.8
Moderate 38.5
High 7.7

Global financial crisis, according to 54% units, has not made adverse effect on their business.
Exports and domestic demand for the product was not seriously affected by the global economic
crisis (Table 6.16).

Table: 6.16: Any affect of Global Financial Crisis on company
Response Percent
Yes 46.7
No 53.3

6.4. AIR CONDITIONERS

6.4.1. General Profile of Respondents

locations in India. The field survey includes 19 major manufacturers of refrigerators in India.
The survey was conducted by NPC field survey team during July-August 2009. Six states have
been covered in the field survey and a total 19 manufacturing units have been included (Table
6.17) for detailed interview using structured questionnaire (Annexure 1). The manufacturing
unites have been established in the range of 1957 to 2003 period. Among the manufacturing units
42% of them belong to proprietorship while 16% of them are partnership and the remaining 32%
of them are private limited companies.



Table 6.17: Air-Conditioners units surveyed: Statewise

States Frequency Percent
Delhi 6 31.6
Haryana 1 5.3
Karnataka 3 15.8
Maharashtra 4 21.1
Tamil Nadu 1 5.3
West Bengal 3 15.8
Total 19 100.0



It is reported a significant proportion of the employees is skilled. However, 63.2% of the units
have made appointments on contractual basis. All the manufacturing units reported increase in
wages and salaries.

More than 72.2% units have reported that their market share is in the range of 0-10% only.
Domestic sales to total sales have been reported more than 51% by 74% of the manufacturing
units (Table 6.18 and Table 6.19).



Table 6.18: Market Share of Air Conditioners
Response Percent

0-10% 72.2
11-25% 22.2
51% & above 5.6

Response Percent
11-25% 15.8
26-50% 10.5
51% & above 73.7


In the case of local competition it reported to be medium by 61% units. Only 22% units reported
that it is intense. As regards to foreign competition, 59% units reported that it is intense (Table
6.20).


Response Local Foreign

Intense 22.2 58.8
Medium 61.1 29.4
Low 16.7 11.8



Among units surveyed, only 31% units reported that they are exporting to other countries.
However, 31% units reported that they are importing from other countries (Table 6.21). In the
case of Import, about 43% units reported that the import is in the form of completely knocked
down (CKD) firm for more than 51% imports (Table 6.22).

Table: 6.21: Import: Responses of Air Conditioner Units
Response Percent

Yes 30.8

No 69.2

Response Percent
0-10% 42.9
11-25% 14.3
51% & above 42.9

However, semi-knocked down firm was reported in the range of 0-10% by more than 85%

competitiveness. More than 50% of manufacturing units supported the claim. More than 56% of
units say that some or the other government policies are helping the Indian industry to grow
(Table 6.23).

Table: 6.23: Government Policies & growth of Industry
Response Percent
Yes 55.6
No 44.4

According to 72% registered units, the Government interface with the business is satisfactory
(Table 6.24). Moreover, 60% units believed that Government is friendly towards the investors
(Table 6.25). But investors complain that to start a unit in India normally it takes around 3-



5months (41% surveyed) in India as compared to 1-2 months in competing countries (Table
6.26).


Response Percent

Excellent 5.6
Average 72.2
Poor 22.2

Response Percent

Yes 60
No 40

Response Percent
3-5 months 41.2
6-9 months 11.8
10-12 months 29.4

Infrastructure in India is considered to be in terrible conditions. 78% units considered that the
Infrastructure have to be improved as faster rate as this is one of the major cause which is
affecting the overall business and Indian industry. About 80% units felt that the infrastructure in
competing countries is excellent and has been helping the industries to grow at smoother and
faster pace (Table 6.27).



Table: 6.27: Avalability and quality of basic Infrastructure in India and Competing
Countries

Countries
Poor 11.1 6.7
Good 11.1 60.0
Excellent 11.1 20.0

India manufacturers lack competitiveness due to the multiplicity of taxes and are considered to
be complicated. The tax regime in India is very high as compared to competing countries. The
thought can be drawn from the fact that 63% of the units believed that the tax rates to be high
and complex as compared to 81% units considered that taxes in competing countries are low and
procedures related to taxes are uniform and simple (Table 6.28).

Table: 6.28: Taxes and other controls in India and Competing Countries

Countries
Low - 81.3
Moderate 36.8 12.5
High 42.1 6.3
Very High 21.1 -

75% manufacturing units considered that the cost of production is low in competing countries as
compared to India because of the availability of quality raw material availability with reasonable
price and good infrastructure supported by government policies (Table 6.29).

Table: 6.29: Cost of Production In Competing Countries

Response Percent
Low 75.0
Moderate 12.5
High 12.5



Global financial crisis according to 22.2% units didn’t put much effect on their business. Exports
and fall in domestic demand for the product is hardly affected by the global economic crisis
(Table 6.30).

Table: 6.30: Effect of Global Financial Crisis on company

Response Percent
Yes 77.8
No 22.2

6.5. WASHING MACHINES

6.5.1. General Profile of the Respondents

locations in India. The field survey includes 11 major manufacturers of washing machines in
India. The survey was conducted by NPC field survey team during July-August 2009. Six states
have been covered in the field survey and a total 11 manufacturing units have been considered
(Table 6.31) for detailed interview using structured questionnaire (Annexure 1). The
manufacturing unites have been established in the range of 1975 to 2006 period. Among the
manufacturing units 46% of them belong to proprietorship while 9% of them are partnership and
the remaining 36% of them are private limited companies.

Table 6.31: Washing Machines units surveyed: Statewise

Delhi 3 27.3
Karnataka 2 18.2
Maharashtra 2 18.2
Tamil Nadu 1 9.1
West Bengal 1 9.1
Total 11 100.0




It is reported that 81.8% units have employed people on contractual basis. It is learnt that this
trend is on the increase. A significant proportion of the employees are skilled. All the
manufacturing units have reported an increase in wages and salaries.


More than 63.6% units have reported that their market share is in the range of 0-10% only.
Domestic sales to total sales have been reported more than 51% by 54.5% of the manufacturing
units (Table 6.32 and Table 6.33).

Table 6.32: Market share of Washing Machines

Response Percent

0-10% 63.6
11-25% 18.2
51% & above 18.2



Response Percent
11-25% 9.1
26-50% 36.4
51% & above 54.5

Most of the manufacturing units (63.6%) reported an increase in domestic demand of the
product. For 50% of the units, the domestic demand increase was in the range of 0-10%.

In the case of local competition it reported to be medium by 36.4% units. More than 64% units
reported that it is intense. As regards to foreign competition, 50% units reported that it is intense
(Table 6.34).


Intense 63.6 50
Medium 36.4 40
No Competition - 10

Among units surveyed, only 33.3% units reported that they are exporting to other countries.
However, 22.2% units reported that they are importing from other countries (Table 6.35). In the



Table: 6.35: Import: Responses of Washing Machine Units
Response Percent

Yes 22.2

No 77.8

Response Percent
0-10% 25
51% & above 75


units say that some or the other government policies are helping the Indian industry to grow
(Table 6.37).

Table: 6.37: Government Policies & Growth of Industry

Response Percent
Yes 60
No 40

According to 77.8 % registered units, the Government interface with the business is satisfactory
6.40).




Response Percent

Average 77.8
Poor 22.2

Response Percent
Yes 60
No 40


Response Percent
1-2 months 9.1
3-5 months 45.5
6-9 months 9.1
10-12 months 18.2


faster pace (Table 6.41)

Countries:

Countries
Poor 11.1 11.1
Good 11.1 44.4




Countries
Low - 25.0
Moderate 27.3 50.0
High 54.5 25.0
Very High 18.2 -

66% manufacturing units considered that the cost of production is low in competing countries as
compared to India because of the availability of quality raw material availability with reasonable
price and good infrastructure supported by government policies (Table 6.43).


Response Percent
Low 44.4
Moderate 22.2
High 33.3

Global financial crisis according to 45.5% units didn’t effect on their business. Exports and fall
in domestic demand for the product is hardly affected by the global economic crisis (Table
6.44).


Response Percent
Yes 54.5
No 45.5



6.6. VACUUM CLEANERS


locations in India. The field survey includes 14 major manufacturers of Vacuum Cleaners in
have been covered in the field survey and a total 14 manufacturing units have been considered
manufacturing unites have been established in the range of 1981 to 2007 period. Among the
manufacturing units 14% of them belong to proprietorship, 7 % of them belong to public limited
while 14% of them are partnership and the remaining 64% of them are private limited
companies.

Table 6.45: Vacuum Cleaners units surveyed: Statewise
Delhi 3 21.4
Karnataka 2 14.3
Maharashtra 3 21.4
Tamil Nadu 5 35.7
West Bengal 1 7.1
Total 14 100.0

There is hardly any merger and acquisitions reported among the surveyed units. Around 43% of
the units are having quality accreditations of which 63% of them are having ISO 9000.



The pattern of employment shows that 87.5% of the units employed people on contractual basis.
However, a significant proportion of the employees are skilled. It may be noted that the there is a
considerable increase in wages and salaries.

More than 35.7% units have reported that their market share is in the range of 0-10% only
(Table 6.46). Domestic sales to total sales have been reported more than 51% by 50% of the
manufacturing units (Table 6.47).

Table 6.46: Market share of Vacuum Cleaner
Response Percent
0-10% 35.7
11-25% 28.6
26-50% 21.4
51% & above 14.3

Response Percent
0-10% 14.3
11-25% 28.6
26-50% 7.1
51% & above 50




In the case of local competition it reported to be medium by 50% units. Only 28.6% units
reported that it is intense. As regards to foreign competition, 36% units reported that it is intense
(Table 6.48).


Intense 28.6 35.8
Medium 50.0 50.0
Low 21.4 7.1
No Competition - 7.1


Table: 6.49: Import: Responses of Vacuum Cleaner
Response Percent

Yes 75.0

No 25.0


Response Percent
0-10% 30.8
11-25% 30.8
51% & above 38.5

However, semi-knocked down firm was reported in the range of 0-10% by more than 54.5%



units say that some or the other government policies are helping the Indian industry to grow.

Table: 6.51: Government Policies & growth of Industry

Response Percent
Yes 61.5
No 38.5

According to 76.9% registered units, the Government interface with the business is satisfactory
(Table 6.52). Moreover, 76.9% units believed that Government is friendly towards the investors
6.54).

Response Percent

Average 76.9
Poor 23.1

Table: 6.53: Government friendly towards Investor
Response Percent
Yes 76.9
No 23.1

Response Percent
1-2 months 27.3
3-5 months 45.5
6-9 months 18.2
10-12 months 9.1




faster pace (Table 6.55).

Countries

Response Percent Competing
Countries
Good 15.4 50.0
Excellent - 33.3

India manufacturers lack competitiveness due to the multiplicity of taxes and are complicated tax
regime. On the other hand, 57% of the units covered under the survey reported that the tax rates
in India is quite high while tax rates in competing countries are low and procedures related to
taxes are uniform and simple (Table 6.56).

Countries
Low - 46.2
Moderate 42.9 35.8
High 42.9 -
Very High 14.3 -

About 75% manufacturing units believed that the cost of production is low in competing
countries as compared to India because of the availability of quality raw material with reasonable
price along with good infrastructure supported by government policies (Table 6.57).



Response Percent
Low 41.7
Moderate 33.3
High 25.0

According to 42 % units, global financial crisis has not made much effect on their business. They
have reported that exports and fall in domestic demand for the product are hardly affected by the
global economic crisis (Table 6.58).

Response Percent
Yes 58.3
No 41.7

6.7. MICROWAVE OVEN


locations in India. The field survey includes 10 major manufacturers of microwave ovens in
have been covered in the field survey and a total 10 manufacturing units have been covered
manufacturing units were established during 1938 - 2007. Among the manufacturing units 10%
of them are proprietorship firms while 20% of them are public limited companies and the
remaining 70% of them are private limited companies.

Table 6.59: Units under Field Survey: State wise Distribution
Andhra Pradesh 1 10
Delhi 6 60
Karnataka 1 10
Maharashtra 1 10
West Bengal 1 10
Total 10 100.0




The results of the survey show that there is an increasing trend among the manufacturing units to
appoint employees on a contract basis. About 80% of the units reported that appointments are
made on contractual basis. While significant proportions of the employees are skilled, an
increase in wages and salaries are reported by the respondents.

More than 33.3% units have reported that their market share is in the range of 0-10% only
(Table 6.60). Over 51 % manufacturing units have reported that the proportion of domestic sales
to total sales has been reported is about 50% (Table 6.61).

Table 6.60: Market share of Microwave Oven

Response Percent

0-10% 33.3
11-25% 33.3
26-50% 33.3



Table 6.61: Proportion of Domestic Sales to Total Sales: Microwave Oven
Response Percent
0-10% 20.0
11-25% 20.0
26-50% 10.0
51% & above 50.0


In the case of local competition it reported to be medium by 40% units. Only 30% units reported
that it is intense. As regards to foreign competition, 50% units reported that it is intense (Table
6.62).


Intense 30 50.0
Medium 40 20.0
Low 20 20.0
No Competition 10 10.0




Table: 6.63: Import: Responses of Microwave Oven Units
Response Percent

Yes 50.0

No 50.0

Response Percent
0-10% 33.3
11-25% 16.7
51% & above 50.0


units say that some or the other government policies are not enough for growth of Indian industry
(Table 6.65).

Table: 6.65: Government Policies and Growth of Industry

Response Percent
Yes 11.1
No 88.9

According to 72% registered units, the Government interface with the business is satisfactory
6.68).




Response Percent

Average 71.4
Poor 28.6

Response Percent

Yes 28.6
No 71.4


Response Percent
1-2 months 25.0
3-5 months 50.0
6-9 months 12.5

About 66% units reported that the infrastructure is a major constraint and it has to be improved
in order to improve the competitiveness of industry. On the other hand, 80% units felt that the
infrastructure in competing countries is excellent and has been helping the industries to grow at
smoother and faster pace (Table 6.69).
Countries:

Countries
Poor 22.2 25.0
Good 33.3 25.0
Excellent - 12.5






Response Percent Competing
Countries
Low - 81.3
Moderate 36.8 12.5
High 42.1 6.3
Very High 21.1 -

About 75% manufacturing units reported that the cost of production is low in competing
countries as compared to India because of the good infrastructure supported by government
policies, availability of quality raw material with reasonable price (Table 6.71).


Response Percent
Low 25.0
Moderate 75.0

Global financial crisis, according to 50% units, had made an adverse effect on their business.
However, another 50 percent reported that export as well as the domestic demand for the product
is hardly affected by the global economic crisis (Table 6.72).

Table: 6.72: Effect of Global Financial Crisis on company: Responses of Microwave Oven
Units
Response Percent
Yes 50.0
No 50.0



6.8. Conclusion

Refrigerator and Air Conditioners

The domestic market is dominated by the presence of key international players, a few of whom
are setting up manufacturing facilities for greater cost-effectiveness. These external factors have
fuelled intense competition, generating pressure on margins. The combination of greater
competition and sharp increase in input costs is therefore putting pressure on margins in the
refrigeration and air conditioner industry, thereby offsetting the positive effect of strong growth.
There has been an unprecedented spurt in global prices of metals. The labour market is also
causing an annual increase in salaries, thereby increasing the cost pressure. Manufacturing costs
are going up substantially. There is non-availability of skilled manpower because of which R&D
is not taking place. Poor government spending on rural and small town electrification program
are major concerns.

Washing Machine
In view of the global slowdown, the consumer sentiments are getting muted as a result of which
it is expected that overall spending go down and so as demand for the products. Poor government
spending on rural and small town electrification program are major concerns. There is severe
volatility in the metals market, particularly for steel, copper and aluminum, with unpredictable
forward movements causing difficulty in factoring them for pricing purposes.

Vacuum Cleaner
The domestic market is dominated by the presence of key international players, a few of whom
are setting up manufacturing facilities for greater cost-effectiveness. These external factors have
fuelled intense competition, generating pressure on margins. Poor government spending on rural
and small town electrification program are major concerns. Present industry production level in
India is extremely small due to the high prices of finished products.

Microwave Oven
There is a need for a mechanism to ensure the standards of performance and safety. The
manufacturing technology is primarily based on modest investments on in-house equipment for
assembly & quality control. Present industry production level in India is extremely small due to
the high prices of finished products. There is little evidence of R&D activity at national level in



the field of microwave systems. The present R&D activity of indigenous manufacturers of
microwave ovens is aimed at development of components/parts locally. Poor government
spending on rural and small town electrification program are major concerns.



CHAPTER 7

SUMMARY OF DIAGNOSTIC CASE STUDIES
7.1. Introduction

The diagnostic case studies have been conducted in order to find out the problems and issues
faced by the manufacturing units from the product categories such as Air Conditioners,
Refrigerators, Washing Machines, Microwave Ovens and Vacuum Cleaners. In this chapter we
summarize major areas of concern with respect to each of the manufacturing units selected from
five large home appliances categories (Report II: Diagnostic Case Studies). The case studies
have been developed based on a detailed checklist (Annexure 2).

Details regarding product categories and manufacturing units are given below.

Product Category Manufacturing Unit

Air Conditioner Manufacturing Unit 1 , Mumbai , Maharashtra
Manufacturing Unit 2, Mumbai, Maharashtra
Refrigerators Manufacturing Unit 3 , NOIDA, Uttar Pradesh
Manufacturing Unit 4, Aurangabad , Maharashtra
Washing Machines Manufacturing Unit 5,Gurgaon, Haryana
Manufacturing Unit 6, NOIDA, Uttar Pradesh
Microwave Ovens Manufacturing Unit 7 , NOIDA, Uttar Pradesh
Manufacturing Unit 8, Mumbai, Maharashtra
Vacuum Cleaners Manufacturing Unit 9 Mumbai, Maharashtra
Manufacturing Unit 10: NOIDA, Uttar Pradesh

7.2. Manufacturing Unit 1: Mumbai, Maharashtra
Product Category: Air Conditioner

• It was established in 1943. It is India’s largest air conditioning manufacturing company.
It is an end to end solution provider in the field of air conditioning and commercial
refrigeration as a manufacturer, contractor, after sales service provider. Company is
having a turnover of Rs 2270 crores with net profit of Rs.174 crores and market
capitalization of Rs 4275 crores with 2500 employees. It operates in three lines of



business i.e. cooling products, professional electronics, industrial system and medical
electronic, material testing and test and measuring instruments.
• The company operates in three lines of businesses Central Air-conditioning Systems,
where it design, engineer, manufacture, Install central air-conditioning plants, packaged
air conditioners and ducted, Split air conditioners, catering to IT&ITES, retail malls,
multiplexes, hospitals etc.
• Products, medical electronics, material testing and test and measuring instruments. The
Company has four manufacturing facilities located at different parts of the country. The
company has a total workforce of 2000 employees and has Network of 23 offices.
• Conservation of energy: Energy consumption in the Company’s manufacturing facilities
is not a major cost factor. Moreover, the Company is committed to maximize energy
savings. Further, the Company has an Energy Management team, comprising over 30
BEE certified energy auditors who carry out energy audits and conserve energy for the
Company’s customers.
• Research & Development: With unprecedented increase in the raw material costs, the
focus was on design optimization and adoption of alternate technologies and raw
materials. This approach helped in cost reduction and increased profitability. A
performance test lab was set up at the Himachal plant, for validating performance of star
rated products.
• Technology absorption, adaptation and innovation: Efforts continued in strengthening the
R&D facilities in order to reduce cost of production and provide a comprehensive range
of products to suit the market needs. This also enabled provision of energy efficient
equipment, widening the export opportunities, import substitution and adaptation of
imported technology to suit the Indian market.
• The units strength lies in its trained personnel, priority service, preventive checks,
genuine spares, extended life and seasonal settings. Their competitive advantage lies in
technical competitive, credential of over 6 decades with vast pool of talented engineers
and energy efficient and differentiated products.
• Short term liquidity has fallen which indicates that composition of cash is increasing over
the years in current assets and percentage increase in current liabilities has also increased.
Company has started retaining more and as a result dividend payout ratio is falling.



• The Company continues to satisfactorily address the various financial risks relating to
interest rates, exchange rates and credit risks as well as operating risks arising out of high
input costs, changes in technology, customer preferences, increasing size and complexity
of contracts and competitive pressures.
• While the strong fundamentals of the Company and its sound financial base have placed
it in a strong position to face, the overall uncertain economic scenario coupled with local
and global inflation and the high price of oil are causes for concern and consequently a
slowdown in the economy impact the growth of the Company to some extent in the
coming year.
• Environment, Health & Safety (EHS) has gained relevance as a new management
discipline in recent times. In order to improve its performance in the EHS domain, the
Company decided to provide a corporate focus by creating a new department called
'Environment, Health & Safety'. The EHS Department will be responsible for creating
standards and conducting workshops to sensitize all employees and business partners on
the EHS norms to be followed in the course of business.

Product Category: Air Conditioner

• This company was set up in 1954 in Bombay. In the 1960s, it started manufacturing air-
conditioning and refrigeration equipment. Gradually, it became a leading player in the
Indian AC market. By 2006, the company was second in the retail AC market and its
electromechanical division was the fastest growing and the highest revenue earning
division in the company.
• The business segments of the Company are: (A) Electro-mechanical Projects and
Services (B) Engineering Products and Services (C) Unitary Cooling Products for
Comfort and Commercial Use.
• Company has a turnover of Rs.30861 million (USD 722 million) with operating profit of
Rs 2778 million (USD 65 million) and net profit of Rs.2084 million (USD 49 million).
• Company’s strength lies in the design and manufacture of industrial equipment,
management and execution of air conditioning and public works projects sourcing,



installation and servicing of technology-based systems, representation of global
technology leaders and serving diverse industrial sectors and applications.
• Company’s came up with the big bang strategy to revitalize every facet of AC business
product channel, systems, service, cost and brand. The company used to offer dividend of
12% in 2000 which increased to 135% in 2008.
• The market has become highly competitive in the MEP domain, with a large number of
players of international stature competing in the domestic market. This could lead to
pressure on margins. To avert this outcome, the Company has re-modeled its
organizational structure, with a focus on contract management and strong design support
to meet the requirements of various applications.
• The Company’s decision to pursue MEP as a provider of integrated customized solutions
was timely. The Company’s domestic Electro-mechanical business ended the year with
an all-time high order book. The orders secured include 65% of the stadium projects for
the prestigious Commonwealth Games 2010, as well as Waterside Tech Park, Kolkata.
Also noteworthy has been the execution of the single largest Variable Refrigerant Flow
(VRF) installation in India, with a capacity of 3000 tons of refrigeration (TR), for TCS’
Kensington IT Park, at Powai.
• The Indian room air conditioner industry grew by 28%, reflecting the strong growth of
the economy and the changing perceptions of consumers, who increasingly see air
conditioners as a necessity rather than a luxury. Within the category, Split Air
Conditioners grew by 45% while Window Air Conditioners grew by 17%. The market for
air conditioners is expected to continue growing at over 20% in volume and the product
mix is likely to shift in favour of splits over window air conditioners.
• The Company’s domestic Electro-mechanical business has established nationwide
footprint of its energy-efficient and eco-friendly technologies and continues to promote
widespread acceptance of ‘Green’ products and services. Its network of System Solution
Providers has been drawn into this effort, which is consistent with the Company’s
dedication to the principles of sustainability in business and especially the ‘Green’
movement in India, spearheaded by the Indian Green Building Council, of which the
Company is a founder member.



• In preparation for an eventual economic upturn, the Company has rigorously pursued its
quality drive and became the first India-based recipient of the ISO 9001:2000
certification from TUV NORD, encompassing design, marketing, installation,
commissioning and servicing of electro-mechanical and refrigeration projects, inclusive
of manufacture of air conditioning and refrigeration products.
• A major challenge is the steep inflation rate. There has been an unprecedented spurt in
global prices of metals like copper and steel – major raw material constituents of air
conditioners and commercial refrigeration products. The tight labour market is also
causing an annual increase in salaries of about 15%, thereby increasing the cost pressure.
Manufacturing costs are therefore going up substantially.
• The domestic market is dominated by the presence of key international players, a few of
whom are setting up manufacturing facilities for greater cost-effectiveness. These
external factors have fuelled intense competition, generating pressure on margins. The
combination of greater competition and sharp increase in input costs is therefore putting
pressure on margins in the air conditioning and refrigeration industry, thereby offsetting
the positive effect of strong growth in sales volumes.

7.4. Manufacturing Unit 3: NOIDA, Uttar Pradesh
Product Category: Refrigerator

• Established in 1997, the company is a wholly owned subsidiary. In India for a decade
now, it is the market leader in consumer durables and recognized as a leading technology
innovator in the information technology and mobile communications business.
• The company has established its first manufacturing plant in 1998 with an investment of
Rs. 5 billion. In its first year, it recorded a turnover of Rs. 1.25 billion, and by 1999, its
turnover increased to Rs. 10.56 billion. By 2001, the unit became India's fastest growing
electronics, home appliances and computer Peripherals Company. By the end of 2003, it
emerged as the market leader in consumer electronics and home appliances. Innovative
and customer friendly products, along with competitive pricing and vast distribution
network enabled it to become market leader in its business.



• To meet the growing demand for its products, the company started its second
manufacturing plant in 2004. By the end of 2004, the company had more than 50 million
customers and its turnover was more than Rs. 65 billion.
• Product localization - Product localization is a key strategy used. It came out with Hindi
and regional language menus on its TV.
• Regional distribution model - This has resulted in quicker rotation of stocks and better
penetration into the B, C and D class markets.
• Leveraging India’s IT advantage – The company has awarded a contract to develop IT
solutions. The project involves development and support for ERP,SCM, CRM and IT-
enabled services.

7.5. Manufacturing Unit 4: Aurangabad, Maharashtra
Product Category: Refrigerator

• In 1985, through a technical tie-up with Toshiba Corporation of Japan, this company
launched India’s first world class Color Television. Today, the company is India’s
leading manufacturer of Consumer electronic products.
• The company is now a global player, the first Indian company to win the prestigious CE
approval for exporting its Color TV to Europe. The unit is now entering world market
with its operations in the Middle East, Europe, Indonesia and South Africa.
• Refrigerators are one of the most sought after appliances in Indian middle class homes.
The refrigerator market is estimated at around 5.3 million units in 2008 exhibiting a
growth of 8% over the previous year. Direct cool segment remains the dominant sector
with a total contribution of 75% to the sales. However, frost free segment is witnessing
the highest growth in the category and is expected to take over direct cool sales in coming
years. Frost free segment would contribute 37% of the total sales in coming years.
• The Company gives utmost importance to conservation of energy. The Company believes
that using energy more efficiently is a simple way to conserve it. As such, the Company
continues to take conscious efforts to minimize energy consumption. The Company has
been taking more and more efforts on innovation and improvement so as to further reduce
energy consumption.



• The Company has applied the concept of Resource Productivity at its manufacturing
facilities. The Company extracts the most value from its resources, making the best use of
renewable resources and minimizing waste produced. The Company aims at drive down
of costs by reducing waste and pollution and by creating opportunities for growth through
process and product innovations.
• Research and Development activities are the strength of the Company, with the help of
which the Company has continued its growth path in the Consumer Electronics & Home
Appliances business segment. A number of new technologies have been introduced in
Consumer Electronics & Home Appliances. As a result of Research and Development,
the Company is able to introduce innovative models of products with advanced
technology to fulfill the requirements of its customers.
• To sustain its competitiveness in the domestic and international markets, the Company
has broadened its scope of activity of process research. Considering the fast-growing &
changing TV market, R&D activity has been focusing on the image quality improvement
and the cost reduction to make product competitive.
• Health and Safety of employees and maintenance of healthy and safe working conditions
are on top of the agenda of the Company at its manufacturing facilities even though it is a
legal responsibility of any organization. The Company firmly believes that poor health
and poor safety leads to illness, accidents and significant costs for business. The
Company takes all the precautions to provide healthy atmosphere and safety working
conditions to the employees at all level.
• In view of the global slowdown, the consumer sentiments are getting muted as a result of
which it is expected that overall spending go down and so as demand for the Company’s
products.
• The regulatory environment continues to be uncertain and changes from time to time can
delay the projects.
• Poor government spending on rural and small town electrification program and Poor
distribution network are major concerns.



7.6. Manufacturing Unit 5: Gurgaon, Haryana
Product Category: Washing Machine

• This company is a joint venture between a MNC and an Indian company and started its
operation in India in the late 1980s. In Washing Machines, the high rate of growth
witnessed continued, across all segments. The product portfolio was expanded with the
introduction of a front load fully automatic range in the highly salient <6 kg capacity. A
Fully Automatic Dryer was also introduced to complement the range and establish as a
complete Fabric Care brand in appliances.
• Benefits/ achievements derived as a result of the R&D: Lower running cost to the
consumer due to increased energy efficiency. Increased product performance, 6th sense
intelligent cooling. Better space management options for the consumer. Washing
frequency is reduced by providing bigger capacity.
• There is severe volatility in the metals market, particularly for steel, copper and
aluminum as well as PVC, with unpredictable forward movements causing difficulty in
factoring them for pricing purposes.
• The estimated growths in the Refrigerator and Washer category have been 13% and 14%
respectively. As in the previous year, the growths have been higher in Frost Free (20%)
and Fully Automatic (28%) segments of these two categories, and we expect this trend -
of a more buoyant growth in high-end formats - to continue.
• The Air Conditioner and Microwave markets have been growing at an estimated rate of
20% + and this growth is expected to be robust, even if the rate of growth drops as the
categories mature. Growth is being driven by Split AC format in Air Conditioners and by
Convection models in Microwave. The high-end cooking market comprising of Built-In
hobs, hoods, ovens and dishwashers, currently niche and sold through specialized
channels, will grow in line

Product Category: Washing Machine

• During the financial year 2007-08, the turnover of the Company increased to Rs.1655.06
crore. The profit before tax stood at Rs. 40.55 crore as against Rs. 51.42 crore in the



previous financial year. The profit after tax for the financial year ended March 31, 2008
stood at Rs. 34.59 crore as against Rs. 34.12 crore in the previous financial year.
• The company recognizes that a vigorously intelligent research initiative works at two
ends: cost reduction through effective process improvement and value-addition through a
sustained ability to put innovative and customized products in line with customer needs.
A team of dedicated engineers is at work at the Research and Development Centres,
making products with the help of the latest technology, satisfying customer expectations.
• The Company is conscious about its responsibility to conserve energy, power and other
energy sources wherever possible. It lays great emphasis towards a safe and clean
environment and continues to adhere to all regulatory requirements and guidelines. This
is ensured through the adoption of the latest techniques of production which helps in
better productivity levels, timely maintenance and upgradation of machines and
equipments to ensure that energy consumption is at the minimal level possible, on-the-job
training to production team members to conserve energy.
• At the Research and Development Centre, new, innovative and quality products in the
field of consumer electronics are developed to provide better customer value for money.
Products are developed through customer research and customer centric innovation.
• The company has not imported any technology. However, the management believes that
information technology can be extensively used in all spheres of its activities to improve
productivity and efficiency levels. The company has already implemented SAP, a
customized ERP module, at all its branches and manufacturing facilities.
• With stiff competition, the consumer durables industry faces a persistent pressure on
margins due to its inability to pass on input cost rises to consumers. The interest rates
have moved up, which is a cause of concern. Hence the Company's future profitability
may come under pressure. However, the company is confident that interest rates will
come down on par with prevailing international rates.

Product Category: Microwave Ovens

• This company, a subsidiary of the overseas unit has been operating in India since 1995.



• It is a leading provider of high tech consumer electronics, home appliance, IT and
telecom products in the country.
• The company has set up manufacturing facilities for color televisions, microwave ovens,
washing machines, air conditioners, color monitors and more recently, refrigerators in the
country. It has a plant in India. The revenue for 2005 was US$ 1086 million.
• The company used creativity to strengthen the foundation for global leadership. Fueled
by creativity, its ambition to become one of the world’s top companies has driven
continuous improvement in every area of their organization thanks to hard work and
success in attracting the best and brightest people, pursuing innovative R&D, and
building a strong, distinctive brand.
• It has launched its sustainability strategy in 1996. Over the years, the company has
implemented ISO 14001- and OHSAS 18001-certified integrated environment, safety,
and health (ESH) management systems.
• The company is actively involved in a number of initiatives to mitigate climate change.
Launched in 2002 as part of their efforts to voluntarily reduce greenhouse gas (GHG)
emissions, Catch CO2 project has enabled it to progressively lower the carbon footprint of
each manufacturing process.

Product Category: Microwave Ovens

• This manufacturing unit was started as a joint venture between an Indian company with a
multinational company.
• It went on to manufacture of washing machines and air conditioners. The multinational
exited from the joint venture in 2001. In 1993, the company entered into a manufacturing
and marketing alliance with another MNC. A new company, with each company holding
50%, was incorporated. The entire distribution network was transferred to this company
and the joint venture was entrusted with the task of marketing both the brands.
• The joint venture manufactures and/or markets various consumer durables and industrial
products. It offers appliances, including refrigerators, washing machines, air conditioners,
microwave ovens, and DVD players; office and home furniture, such as desking, seating,
open plan office systems, computer furniture, and storages, as well as living, dining, and



bedroom furniture; locks, including furniture locks, mechanical and electromechanical
door locks, door controls, and architectural and glass hardware; and security equipment
and solutions, such as safe deposit lockers, cash boxes and coffers, data/ATM safes,
burglary and fire resisting safes, video door phones, CCTV system, and access control
systems.

Product Category: Vacuum Cleaners

• The company acquired reputation for high quality products and excellent customer/dealer
relations.
• The company is a joint venture and it first launched the Vacuum cleaners in India in 1984
• Leaders in domestic and industrial Water Purification Systems, Vacuum Cleaners, Air
Purifiers & Security Solutions. The company is a pioneer in Direct selling - Asia's
Largest Direct Sales Organization
• Customer family now numbers over 6 million - enduring relationships as "Friends for
Life" and has operations in over 131 cities & 398 towns across India.
• The company name itself is a Business Super brand
o Ranked among India's Most Admired Consumer Durable Companies
o Best Employers (4 times in a row)
o Winner of 'Most Admired Knowledge Enterprise' MAKE- Asia Awards
o Winner of awards on Customer Responsiveness

Product Category: Vacuum Cleaners

• The company is a leading Manufacturer of Cleaning machines.
• The line of activity, in which company is engaged, is having a very positive trend and the
requirements are growing in the fast growing economy and with the increase in
awareness towards cleaning in the modern India.
• The company is extensively working in the area of Manufacturing of cleaning machines
for own brand as well for other established brands. The company is focusing on
manufacturing and installation of specialized cleaning plants. The company is also



engaged in manufacture and trading in specialized Flame Proof and other specialized
lights and other Interior jobs for projects like Airports etc.
• From the sales figures for the last 5 years it is found that the company is more or less
stagnant in terms of performance.
• The company is of the view that government should interface with the business and
proactively engage in promoting domestic manufacturers as it is being done by
competing countries.
• The company is already affected by global financial crisis and reported marginal fall in
exports and domestic sales during the study period.



CHAPTER 8
SWOT ANALYSIS OF LIGHT ELECTRICAL INDUSTRY

8.1. Air Conditioner
Strengths

• Large customer base both rural and urban India.
• Increased acceptability due to change in environmental conditions
• Availability of all the major brands
• Presence of established distribution networks in both urban and rural areas
• Foreign joint venture

Weaknesses

• Weak Component base
• Poor technological innovation base
• High power consumption and requirement of continuous power supply
• Seasonal demand of the product due to weather conditions
• Import of split air-conditioners from competing countries.

Opportunities

• India's accelerated growth as an economic super-power
• More Energy efficient technologies available
• Changing dynamics due to increasing FDI inflows
• Shift of public perception on the product from being a luxury item to necessity
• Other government projects e.g. Metro rail

Threats

• Waste Disposal amongst the most critical
• Availability of power
• International policies on environment
• Unavailability of skilled labour force
• Import requirement of integral components
• Rising cost of inputs
• Expectation of highly energy efficient, low/zero noise, environment efficient product



8.2. Refrigerator
Strengths
• Generation of Employment in the rural & urban areas
• Energy saving, efficient refrigerators produced in the country
• Existence of the product since long time

Weaknesses
• Need to Regularly update the technology
• Difficult to adapt to the international market - little efficient breakthrough among
international competitors

Opportunities
• India's emergence as an economic super-power
• Upliftment of middle class
• Easy availability of finance has stimulated consumers to buy durables.
• Safeguard against use of Dangerous electrical appliances

Threats
• Seasonal demand
• Fiscal Policy including taxes & duties

8.3. Washing Machine
Strengths

• Generation of Employment

Weaknesses
• Need to regularly update technology
• Stagnation of research & development activities in the development process of the sector



Opportunities

• More Energy conservation technologies needs to be included
• Easier to enter global market
Threats

• High sensitivity to international market fluctuations

8.4. Vacuum Cleaner
Strengths

• Availability of cheap labor & Mindset
• Vacuum cleaners are suitable for long-distance shipping, as the shipping cost per unit is
relatively low.
• The growing demand for vacuum cleaners with high environmental performance has
created a new market niche.
• The strongest growth has been for vacuum cleaners with innovative functions and higher
prices.

Weaknesses

• More Energy conservative technologies needs to be included
• Increased awareness of health issues is generating demand for products that clean the air,
have low noise levels, and are ergonomically designed.

Opportunities

• India's accelerated growth as an economic super-power
• New & Niche market
• Safeguard against use of Dangerous electrical appliances



• Growing numbers of consumers also want more than one vacuum cleaner in the home: a
cordless unit for limited daily cleaning, and a larger more powerful vacuum cleaner for
cleaning the entire home.

Threats

• Pressure from the government
• Customers are looking for vacuum cleaners that are energy-efficient, are produced by
sustainable production systems, and are made of recyclable materials.

8.5. Microwave Oven
Strengths

•
Changing dynamics due to increasing FDI inflows
•
Generation of Employment
•
Home microwave applications are expected to grow in the coming decade as a result of
the increasing consumer demand for convenient and safe food products of high
nutritional value and organoleptic quality
Weaknesses

• Need to regularly update the technology
• Inadequate indigenous vendor base for quality components for manufacture of
microwave ovens.
• Inability to allocate sufficient funds for in-house research & development

Opportunities

• More Energy conservative technologies needs to be included
• Inadequate user awareness of microwave cooking
Threats

• The focus of customers is shifting on energy efficient appliances. Providing such
appliances at competitive price is a challenge.



CHAPTER 9
FACTORS CONSTRAINING GROWTH OF LIGHT
ELECTRICAL INDUSTRY

9.1. Electrical Energy Generation Review

Electricity generation during the month of January 09 has been 61163 MU against the target of
66735 MU representing an achievement of 91.7% of the target (Table 9.1). The energy
generation growth has been 1.38% with reference to generation during Jan. 2008. Generation
achievement during the period April 08 – Jan. 09 has been 93.0% of the target and growth rate
was 2.53% with respect to generation during the corresponding period last year.

Table 9.1: Electricity Generations – Target & Achievement
(Jan 2009)

The details of energy generation during the month of Jan. 09 and the period April 08 – Jan. 09
are given in Table 9.2.
Table 9.2: Electricity Generation – Target & Achievement
(Cumulative period April 2008 to Jan. 2009)



It may be seen that during the month of Jan. 09, the growth of 4.26% has been achieved in
thermal generation whereas there was reduction in generation from hydro electric stations mainly
due to less water inflows and from nuclear power plants due to low availability of fuel. During
the period April 08 – Jan. 09, the growth in thermal generation has been 5.56% whereas there has
been decline in hydro and nuclear generation due to the reasons stated above.

The monthly and cumulative growth in the generation during the period April 08 to Jan 09 is
given in the graph below:

The fuel-wise components of thermal generation during the period April’ 08- Jan. ’09 are given
in Table 9.3.

Table 9.3: Fuel-wise components of thermal generation



The actual energy generation from the hydro electric stations during the month of Jan 2009 was
5.60% less than the target for the month. It may be mentioned that the low rainfall received
during the monsoon this year resulted in lower overall hydro energy generation in the country
and its uneven distribution in the country resulted in varying degree of shortages in realizing
hydro energy targets excepting in the northern region where targets were exceeded. (Table 9.4)

Table 9.4: Hydro energy Generation

It may be seen from above that the April 08-Jan 2009 generation in Southern region almost
corresponds to the target generation which is on account of higher level of hydro generation
during the period of April – May/June 08 due to better water availability of the previous
hydrological year.

The storage position of 32 major reservoir based hydroelectric stations which account for about
51% of the total hydro installed capacity in the country are monitored in the CEA. The storage
position at these reservoirs gives indication of the trend in the generation during the next few
months prior to the onset of next monsoon. The analysis of data indicates that the present storage
position of the reservoirs in the Northern, western and North-Eastern Regions as obtaining at the
end of January 2009 has generally been almost similar to the last year, whereas the storage
position of the reservoirs in Southern and Eastern regions is much below the level obtaining
during the last year. The reservoir levels and the corresponding storage position of major
reservoirs is given in Annexure 6. The region wise position of the energy content in the
reservoirs is summarized in Table 9.5.



Table 9.5: Energy Content in the Reservoirs – Region wise

It may be mentioned that the water releases from most reservoirs in the Northern region are
controlled by irrigation requirement which impact the hydro generation. The hydro generation in
Northern Region during Jan 09 was about 20% higher than the last year’s generation during the
month. The energy content in the reservoirs of Northern Region was 31% higher towards Dec 08
end as compared to the same period during the previous year. As a result of higher withdrawals
from reservoirs during the month of Jan 09, the energy content in the reservoirs which had
generally been higher than the last year’s level has gone 5% below the last year level by the end
of month.

The reasons for low growth rate during the current year (April’08 –Jan.’09) in comparison to the
corresponding period last year are as under:

• Delay in achieving commercial operation of some of new thermal generating units
synchronised during 2006-07 and 2007-08. Generation capacity of 125 MW synchronised
in 2006-07 and 750 MW synchronised in 2007-08 are yet to achieve commercial
operation.

• The lower generation from lignite based units at NLC’s Neyveli complex in Tamil Nadu
due to shortage of lignite on account of slow progress in land acquisition for expansion of
mining activities and strike by contract workers of lignite mine during April 2008 & June
2008 resulting in loss of generation of about 1939 MU.



• Loss of generation due to shortage of coal. Actual coal receipts during the period April 08
– Jan.’09 have been 87% of linkage. As on 31st Jan 09, out of 77 thermal power stations,
37 stations had critical stock of less than 7 days including 22 stations with coal stock less
than 4 days. Actual coal stock at the stations was 7.8 million tonnes which was adequate
for seven days requirement only. The loss of generation due to coal shortage reported by
NTPC, DVC, M.P, Maharashtra, Orissa and West Bengal has been 9718 MU during the
2008-09 (till date).

• Although total generation from Gas Turbine Stations increased by about 7.2%, the
shortfall w.r.t target was about 7290 MU. Shortage of 9485 MU as compared to last
year in hydro generation as mainly been due to low water inflow as discussed in the
preceding paragraphs.
• The loss of generation at nuclear power stations due to non availability of fuel has been
1825 MU compared with last year. Had there been no loss of generation due to
constraints in fuel supplies (Coal / lignite / gas /LNG /nuclear fuel) it would have been
possible to achieve growth rate of 6.45%. An analysis of shortfall in generation with
reference to targets is given in Table 9.6.

PLF of thermal stations during the month of Jan.’09 was 81.2% against a target of 77.6% and the
cumulative PLF during April 08-Jan.’09 was 75.8% as against a target of 78%. This has been
mainly due to:-
• Lacking performance of some of the new thermal generating units synchronized during
2006-07 & 2007-08 due to non completion of balance of plants works.

• Loss of generation due to shortage of coal. NTPC, DVC, M.P, Maharashtra, Orissa,
WBPDCL reported loss of 9718 MU so far during April 08– Jan’09.

• Poor quality of coal. During monsoon, supply of wet coal caused operational problems
resulting in partial loading of the generating machines.



Table 9.6: Shortfall in Generation

S.No. Category Energy (MU)
Shortfall in Generation - Reasons
1. Lacking performance of some of the new Thermal 14631
power Stations commissioned during the year
2006-07 and 2007-08 (enclosed at Annexure 7)
2. Long duration of forced outages, unscheduled and 17020*
extended planned maintenance of some thermal
stations and coal shortage (enclosed at Annexure
8)
3. Delay in commissioning of units during the year 14895
2008-09
4. Shortfall due to gas availability
i) Central 6436
Sector 854
ii) Others
5. Shortfall due to non availability of nuclear fuel 3264
6. Hydro generation – poor hydrology 4887
Total shortfall due to above reasons (a) 59217
Generation where targets were exceeded
1. Import above target from Hydro stations in Bhutan 372
2. Generation above target from existing thermal
stations
i) Stations achieving more than target and 11635
operating above 90% PLF (enclosed at
Annexure 9)
ii) Others 1885
Energy generation due to above (b) 13892

Net shortfall in generation (a) – (b) 45325

*Out of this 9718 MU reported due to shortage of coal during April 08- Dec.’08 so far.



CHAPTER 10
SUMMARY OF FINDINGS: STUDY OF MAJOR ASIAN TRADE
PARTNERS
10.1. Introduction
In this chapter we present the summary of major findings from the study of large home
appliances segment of Light Electrical Industry reported from competing countries such as
China, Korea, Malaysia and Thailand. This chapter also discusses various aspects related to
energy efficiency norms and labeling adopted by these countries.

Detailed report is given separately as Report III – A Study of Major Asian Trade Partners.

10.2. China: Chinese large home appliances manufacturers are able to significantly undercut
prices offered by foreign competitors over a wide range of products including microwave ovens,
air conditioners, refrigerators and washing machines. As a result of the “China Price,” China has
captured more than a third market for air conditioners, refrigerators, washing machines, vacuum
cleaners and microwave ovens.

The Eight major “economic drivers” of the China Price can be identified as follows:
1. Low wages
2. Counterfeiting and piracy
3. Minimal worker health & safety regulations
4. Lax environmental regulations & enforcement
5. Export industry subsidies
6. A highly efficient “industrial network clustering”
7. The catalytic role of foreign direct investment (FDI)
8. An undervalued currency

Among developing countries, the openness of China’s trade and industrial policy are often cited
as its comparative advantage. While interventionist government policies are often noted as
adversely affecting economic efficiency, these policies have worked for China’s manufacturing
sector. Shanghai area is considered one of the most robust manufacturing centers for electronics
and automotive parts.



The Chinese government has led investment in the manufacturing sector by giving preferential
loans to targeted industries. In recent years, the government has promoted growth in the value
added manufacturing industries such as electronics and automotive components. Tools used to
promote the electronics industry include public research, trade protection, sector-specific
financial incentives, selective government procurement, and control of foreign participation,
relaxed antitrust regulation, and the provision of training and education for sector-specific skills.

By welcoming foreign investment, China’s open-door policy has added power to the economic
transformation. In 2005, China received $153 billion in foreign direct investment. This foreign
money has built factories, created jobs, linked China to international markets, and led to
important transfers of technology.

One of the most important success factors is China’s superior infrastructure. It is especially
essential in manufacturing. Good roads are needed to transport raw materials and finished
products. Resources such as power supply are needed to prevent the interruption of production.

China invests heavily in maintaining its transport system. It makes enormous efforts to lower
congestion levels on main railways. Additionally, China has built 25,000 km of four- to six-lane,
access-controlled expressways in the past 10 years.

Having a stable power supply is very vital to manufacturing efficiency. To prevent power
shortages, China is continuing to invest in power generating structures. The Chinese government
continues to pay close attention to investing in infrastructure such as roads and transportation
systems, manufacturing machinery, and communications systems.

Cheap labor is one of the main draws for firms relocating to China. Firms come in search of
human resources. One of the reasons global electronics and car manufacturers are relocating its
headquarters to Beijing and Shanghai is to access the readily available supply of cheap, skilled
human capital.

In addition to its vast supply of cheap but skilled human capital, China has large numbers of
foreign educated people coming back from Silicon Valley and other centers of innovation. China



currently has 1,731 universities and continues to build more universities and trade schools. In
terms technical resources, China adds 600,000 new engineers every year.

10.2.1. Lessons from Chinese Industry:

In capital intensive industries, government interventions such as preferential industrial and fiscal
policies are needed to channel growth.

• Foreign direct investment is important in facilitating technology transfer and capital
investments.
• Manufacturing sector requires good infrastructure such as transport system and power supply.
• Investment in tertiary education is vital in the promotion of hi-tech industries because human
capital is the key in a firm’s expansion strategy.

10.3. Thailand

At present, the electrical, electronics and allied industries have an important role in driving the
growth of the Thai economy. The industry has gone through different development stages.
Currently it is in the reconstructing era .Many industries have improved their manufacturing
efficiency and technology for entering into the digital era. Wireless computer system has become
more important. Electrical and Electronic industries have reconstructed their efficiency for
increasing their competitiveness. After the entry into the era of producing for exports, the
electrical and electronic industries in Thailand have grown up significantly. The air-conditioning
and refrigeration industry is one of the export potential industries of Thailand as the product
range could serve customers in both the tropical (Cooling mode) and temperature zone (Heating
&Cooling mode).

Synergy among major exporters of electrical and electronics products has propelled the
combined value of Thai exports to top 1.5 trillion baht in 2008, an increase of 5% over the
previous year .

The major rethink of strategies was responsible for the rosy export outlook. Declining orders
from their major overseas market, such as Japan, the European Union and the United states, in



the fourth quarter of 2008 have prompted Thai manufacturers to revise their strategies, with the
focus on acquiring new potential markets, such as India, the middle-east and Africa. Foremost of
these is India, where 250 million people have good purchasing power. Radio TV & Electronics
and office & Home Appliances are produced primarily for exports: these industries are generally
through ways for re-exporting (high import content relative to value added)

Electrical and Electronic Development Strategies of Thailand are:

• Improve industrial competitiveness
• Moving industrial structure into high value added products
• Products design and innovation initiative
• Human resources & Technology knowledge development
• Domestics supply chain linkages
• New /Emerging market expansion & local branding
• Encourage best practices & good management for Thai small & medium enterprises

Over the past 30 years, Thailand’s Electrical and Electronics and allied industries have
continually grown as they have enhanced their competitiveness in terms of both manufacturing
capacities and export potential. There are two major clubs which are basically working for the
further promotion of Thailand’s electrical and electronics and allied industries. These are (1)
Electrical, Electronics &Allied Industries Club (EEAIC) and (2) Air Conditioning &
Refrigeration Industries Club

In fact, Air Conditioning and Refrigeration Industry Club acts as a representative of the members
of the club in coordinating policy and operation between members and the state. It also promotes
product quality and reliable standards and seek support channels for market expansion for local
industrial products in both domestic and international markets.

10.4. Malaysia

Malaysia’s exports declined by 22.6% to RM45.1 billion and imports also decreased by 20.8% to
RM36.0 billion, year on year basis during 2008 and 2009. However, electrical & electronic
products continued to be the top export revenue earner, accounting for RM18.6 billion or 41.2%
of total exports, recorded a decline of RM3.8 billion (17.1%) over the corresponding month last
year. For a month on month basis, electrical & electronic products recorded an increase of



RM795.4 million (4.5%). Electrical & electronic products, valued at RM98.7 billion, remained
as Malaysia’s leading exports earner and accounted for 39.4% of total exports during the first
half of 2009. However, exports revenue from this category of products declined by RM26.5
billion or 21.2% from a year ago. The major component namely electronic integrated circuits,
which accounted for 29.4% of total exports of electrical & electronic products, down by 12.1%
to RM29.0 billion. Malaysia’s top ten exports destinations were the Republic of Singapore, the
United States of America, and the People’s Republic of China, Japan, Thailand, Hong Kong, the
Republic of Korea, Australia, India and Netherlands. These countries accounted for RM178.3
billion or 71.2% of Malaysia’s total exports during the period of January - June 2009. The top
ten import sources of Malaysia were the People’s Republic of China, Japan, the United States of
America, the Republic of Singapore, Thailand, the Republic of Indonesia, the Republic of Korea,
the Federal Republic of Germany, Taiwan and Hong Kong. The imports from these countries
amounted to RM143.9 billion or 75.2% of Malaysia’s total imports in the first half of 2009.

10.5. Republic of Korea

Republic of Korea was one of the least developed countries in terms of industrial development in
the early 1960s. It has been transformed into one of leading industrial countries in the world
during the last 45 years. Korea started export-oriented industrialization, based on processing and
assembly manufacturing with matured technologies from advanced countries. In order to
overcome the narrow domestic market, large enterprises were promoted. These large enterprises
utilized OEM for foreign companies and the technological support from them so that the large
Korean enterprises secured processing and assembly technologies to certain extent.

10.6. Energy Efficiency Standards and Labeling: International Scenario

Broadly speaking, endorsement labels and comparison label are two distinct types of energy
labels in use around the world. Endorsement labels are a seal of approval indicating that products
meet certain specified criteria. Typically they are applied to the top-tier of energy-efficient
products in the market. An example of an endorsement label for energy efficiency is the U.S.
ENERGY STAR label initiated in 1992. During the past decade, a number of endorsement labels
have been developed and implemented in developing countries. China initiated energy –efficient
endorsement-labeling program in 1998. Comparison label shows the relative energy use of a



product compared to other models available on the market. Categorical labels, Continuous labels
and Information-only labels are three sub-categories of comparative labels: Categorical labels
use a step-ranking system to indicate relative energy use compared to other models in the market.
This type of labeling is being followed in EU, Thailand, Iran, Korea, and India etc. A few
countries, like Australia, have initiated half –step ranking, thus effectively doubling the number
of qualifying categories. Continuous labels use a bar graph or scale to show the range of models
available in the market. This scale allows consumers to see where the labeled unit fits into the
full range of similar models. This type of label is used in USA and Canada. Information-only
labels (as in the Philippines) give data on the technical performance of the labeled product but
offers no simple way (such as ranking system) to compare energy performance among products.

10.6.1. CHINA

China promulgated the Energy conservation Law of the People’s Republic of China (the Energy
conservation law for short) in 1998, and the revised version of the Energy Conservation law was
implemented in April, 2008. The aim and objectives of the Energy Conservation law are to

a) Promote energy saving of the whole society
b) Increase the efficiency of energy utilization
c) Protect and improve the environment
d) Promote the overall and sustainable development of the society.
e) Encourage rational use of energy and energy conservation

China attaches much importance to energy conservation and takes many measures such as
energy efficiency standards, energy labeling system etc. In the Eleventh Five Year Plan of China,
it is targeted to achieve 20% energy saving per unit of GDP.

The development history of China’s energy efficiency standards: In 1990, China implemented
the first batch of energy efficiency standards which included 9 categories of household
appliances such as household refrigerators, room air conditioners, washing machines etc. these
standards specified the maximum allowable values of energy consumption or the minimum
allowable values of energy efficiency, and the test methods for these products, and the main
purpose of these standards was to eliminate the high-energy-consuming household appliances
from the market.



The energy grade index is used to express the energy efficiency level of a product. Normally, the
energy efficiency of a product is graded from 1 to 5. Grade 1 is the most efficient and grade 5 is
set at the minimum allowable value of energy efficiency. In special cases, the energy efficiency
level of a product can also be set as 3 or 4 grade criteria, where grade 1 also is the most efficient.

Energy efficiency index is the minimum allowable value of energy efficiency to be implemented
3-5 years after the promulgation of the energy efficiency standard.

The energy efficiency standards under development are: Household appliances, including
microwave ovens, electric water heaters, set top boxes etc

The functions of energy efficiency standards in China’s energy conservation efforts are as
follows:

(i) New measure for the government to control the market under the conditions of market
economy;
(ii) To eliminate the products with high energy consumption from the market.
(iii) To mitigate the supply and demand contradiction of energy , and ensure sustainable
development of the economy;
(iv) To meet the requirements of international trade, and it is the technical tie of the activities
of international market economy;
(v) To improve the environmental protection;
(vi) One of the main foundations for China to carry out the work of energy conservation.

Its major characteristics are small investment, take effect quickly and great influence China
formally implemented the energy labeling system in March, 2005. The first labeled two products
are room air conditioners and household refrigerators. In March, 2007, household washing
machines and unitary air conditioners were included.

10.6.2. INDIA

India promulgated the Energy conservation act, 2001 with the aim and objective of reducing the
overall energy consumption in Indian economy by promoting market in favour of energy
efficient equipments, products, services and technologies. Bureau of Energy Efficiency (BEE),



the statutory body under Ministry of Power, Government of India, was set up in 2002 to facilitate
this process. BEE has initiated many policy measures toward this avowed goal. Market
transformation policies are being structured by BEE to promote manufacture, purchase, and use
of the energy-efficient products, services, and/or practices.

The goals are to:
• Enhance market share for energy-saving products, services, and technologies.
• Encourage market mechanisms to promote efficiency;
• Reduce overall energy intensity of India’s growth, without compromising the quality;
• Leverage technological and other best practices through bilateral and multilateral
engagements;
• Prepare domestic industry to challenges in this area in global markets to retain
competitiveness.

10.6.3. THAILAND

The Electricity Generating Authority Thailand (EGAT) initiated the refrigerator labeling
program in September 1994 and refrigerators have been labeled since February 1995 with focus
on residential refrigerators. In 1998, labels have been made mandatory for single-door, 5-6 ftÂ³
(140-170 litre), manual-defrost models and expanded to include two-door and larger sizes
models for voluntary labeling.

A rating system is introduced. Using a scale of 1 to 5, where 5 is the highest efficiency level and
3 is the average of all model tested. The label also shows consumers the average energy
consumption per year (kWh/year) and the average electricity bill per year (Baht/year) for that
unit under specified condition. A tested refrigerator may receive a ranking number of 1, 2, 3, 4,
or 5 depending on its efficiency value compared to the average efficiency value within one of the
size categories .Level 5 - Annual electricity consumption is at least 25% below the mean
consumption of tested refrigerators. Level 4 - Annual electricity consumption is 10% to 25% less
than the mean consumption of tested refrigerators. Level 3 - Annual electricity consumption is
between Â± 10% of the mean consumption of tested refrigerators. Level 2 - Annual electricity
consumption is 10% to 25% more than the mean consumption of tested refrigerators.



Level 1 - Annual electricity consumption is at least 25% more than the mean consumption of
tested refrigerators. Labeling Requirements: The average refrigerator efficiency value is
specified to Thai CFC and non-CFC refrigerators of various sizes.

An "efficiency value" is defined as the ratio of the capacity of the refrigerator (volume; in litres)
to the amount of energy consumption (kWh) per day (24 hours); thus the units are litres/kWh. A
higher efficiency value indicates a more efficient refrigerator

10.6.4. MALAYSIA

The energy efficiency rating and labeling program for domestic refrigerators was introduced in
2005 and made it open to all manufacturers for implementation on voluntary basis. The ranking
of refrigerators for all tested models is based on the Star Index, which will determine the star
ranking of specific models for 1 and 2 -door type’s domestic refrigerators. The least energy
efficient products are labeled with a “One star” and the most efficient products with a “Five Star”
rating. The “Star” rating for each model is shown by the comparative label that will be used for
models approved by the Energy Commission. An Endorsement label by Energy Commission
will be used and only applicable for products with the approved “Five Star” rating. These labels
would be affixed on energy efficient refrigerators by the manufacturers. The comparative
ranking of refrigerators was based on the results of energy performance of refrigerators that had
been tested by SIRIM.

10.6.5. KOREA

The Ministry of Commerce, Industry and Energy (MOCIE), through Korea Energy Management
Corporation (KEMCO), operates three energy efficiency programs to facilitate products
embodying low energy input. These three programs are "Energy Efficiency Standards and
Labeling Program", "Certification of High Efficiency Energy-using Appliance Program",
"Energy-Saving Office Equipment and Home Electronics Program". The objective of these
programs is to stimulate manufacturers to improve their products' efficiency by giving incentives
and to induce consumers to purchase more energy efficient products available in the market
place. Energy efficiency standards & labeling program was started in 1992 to encourage the
efficiency in the production, to use of energy and to help consumers choose more energy



efficient goods through appliances with energy efficiency label. This programme shows the
energy efficiency grade of the model from 1 to 5. Energy Efficiency Standards are divided into
"Minimum Energy Performance Standards" aiming at stopping manufacture and sale of products
embodying high energy inputs and "Target Energy Performances Standards" designed to give
manufacturers to achieve higher efficiency. The objectives of Energy Efficiency rating labeling
Program are to induce manufacturers to consistently make products with high energy efficiency,
to stimulate importers to introduce more energy-efficient products into the domestic market and
to help consumers choose more energy-efficient goods



CHAPTER 11
CONCLUSIONS AND RECOMMENDATIONS

The analysis of the Light Electrical Sector has revealed the major factors hindering productivity
and competitiveness of the sector. To tackle these hindrances, and enhance the productivity and
competitiveness of the sector, a number of strategic initiatives need to be taken up by different
agencies, industry associations and government. In order to become competitive in the world
market, light electrical manufacturing firms need to formulate strategies based on market
intelligence, demand forecasting and competitive pricing of the rival’s products.

11.1. Policy Guidelines for Skill Development and Training of Manpower

Majority of the home appliance manufacturers surveyed by NPC have expressed their concern
that the availability of quality manpower for their industry is declining and there is shortage of
skilled and trained personnel. The attrition rate is also high as the industry salary packages are
not competitive with ITES sector. The current educational system and the training institutes are
unable to meet the requirement of sector. Further the course curriculum is theoretical and in plant
training of students is missing in most of the institutes.

It is suggested that more number of Industrial Training Institutes (ITI) be opened and the Course
Curriculum of ITIs should be redesigned and continuously updated to meet the changing
requirement of light electrical industry. Industry Associations may be involved in developing
course curriculum and in plant training be made compulsory part of course curriculum.
Industry/corporate bodies may be encouraged through tax benefits/ payment of management fee
to adopt government run ITI or diploma colleges for effective and efficient management. Private
Engineering /Management Institutes may be encouraged to run courses.

The manufacturers may sponsor either one or two centers or some students through fellowship in
the technical institutes and get them trained according to their requirement. This may partially
solve the problem of unavailability of technical manpower. Course curriculum needs to be
designed to cater to the requirement of the industry. Ministry of HRD and Industry Associations
need to take a pro-active stand in development of such curriculum.



The manufacturing firms may undertake the development of human capital by adopting institutes
such as ITIs/IITs or can open similar kind of recognized institutes for running courses.

11.2. Infrastructure Development
Lack of adequate physical infrastructure like transport system, roads, ports, airports etc.
adversely affect the competitiveness and productivity of the manufacturing sector. Uninterrupted
power supply is a necessary condition for operation of manufacturing units as power fluctuations
can lead to breakage of entire system. Many of the respondents to the survey have shown their
dissatisfaction with the existing availability and quality of infrastructure.

It has been suggested by industry associations that preferential pricing on land, building and
infrastructure etc., are required to save the industry. For example, in China land and power are
assured by Government. Industry and industry association has been supported by Government in
China. There is need for active government support for the survival of domestic manufacturing
in India.

It is important that Government should prepare a time bound plan to upgrade physical
infrastructure to ensure long term competitiveness and sustained development of light electrical
manufacturing sector. Adoption of Private–Public–Partnership (PPP) model can facilitate faster
and cost effective development of infrastructure. Financial incentives be given to manufacturing
units for establishing and maintaining of backup power units and for utilizing non-conventional
energy sources.

11.3. Raw Material, Components & Machinery

Some of the raw materials like Polypropylene are being manufactured by a single company
(monopoly) and as a result price is exorbitantly high. Due to the unavailability of good quality of
aluminum, copper tubes, gear boxes and other components several Indian manufacturers are
forced to import from countries like China. Domestic component manufacturers may be given
adequate support to overcome these constraints.

The manufactures of large home appliances are generally dependent on imported raw material as
the availability of good quality raw material is a serious problem. Due to the unavailability of



good quality of aluminum, copper tubes, gear boxes and other components and subassemblies
are forced to import from the countries like China and assembled in India to produce finish
product. The Quality of these imported raw materials available in local markets is not fully
reliable.

Government can evolve necessary mechanisms such as removal of safeguard duties on certain
raw materials such as Aluminum and Polypropylene. An agency may over see the pricing of raw
material to ensure abnormal fluctuations in raw material prices.

The domestic manufacturers of Air Conditioners reported problems in getting good and quality
Copper Tube in India hence they are relying on imports from China. Even 40 percent of the main
component is imported by most of the manufacturers. Even this is same in the case of
compressors. Rotary compressors which are considered to be more energy efficient than
reciprocating compressors are mainly being imported from China. These compressors are cost
effective as well. Only the reciprocating compressors which are used in Refrigerators are being
manufactured in India. Nowadays, due to the adoption of energy efficiency norms, the
production of reciprocating compressors is declining in India. Cooling coil and condenser etc.,
cost about 60 percent of the windows and split ACs. Most of the Indian manufacturing units
producing reciprocating compressors were reported to be taken over by large MNCs.

Weak supply chain network and lack of vendor support also affects the quality, productivity and
competitiveness of the products. Manufacturing units directly importing raw materials face delay
in import clearances which slows down completion of time bound projects as well as export
production by these units. Government should ensure hassle free import of raw material and
components by streamlining the import policy and systems and through simplification of import
procedures. Maritime Transport is a critical infrastructure for the development of Logistics and
Supply Chain Management. It influences the pace, structure and pattern of development.
Ministry of Shipping may undertake appropriate action plans for hassle free Handling of raw
material and finished products at the ports.

The Light Electrical Industry is a highly capital intensive industry and also the obsolescence is
very high. The industry is competing with major players in countries like China, Malaysia,



Thailand and South Korea. Thus, there is the imperative to continuously upgrade manufacturing
facilities in line with the latest technological developments. Importing is considered to be
cheaper than manufacturing locally by many manufacturers in India.

It is recommended that the government should promote modernization of units through a special
scheme with fiscal incentives and minimum import duties. Special Financing Schemes need to be
formulated for encouraging the entrepreneurs in the manufacturing sector. Depending on the
needs and performance of existing manufacturers, special loans may be granted for technology
up gradation, infrastructure building or expansion of business.

11.4. Building a Global Supply Chain Network

The competitiveness of light electrical industry could be enhanced only through strengthening
the global supply chain network as the industry is highly dependent on the import of raw
materials. The cost of the supply network or logistic management network also needs to be
assessed through value chain analysis. Unless it is intervened at the right time there will be a
spiraling effect (e.g., rise in price of raw materials leading to high cost of production, that would
result in either rise in product price or incurring of loss by the manufacturer) that would hinder
the competitiveness of both the product and the firm. However, while calculating cost, the
efficiency and reliability of the supply chain also need to be considered, as most of the products
require handling with care and to be delivered in time.

11.5. R&D and Technology Up gradation

A tech-savvy customer would always like to possess electronics products built on latest available
technology. Hence, product differentiation is a necessary condition for competitiveness of
electrical Industry as a successful differentiator would not only attract new customers but also
invokes a competitive reaction that will encourage others towards vertical movement in the
product market.



The one liner by Onida “Owner’s Pride and Neighbour’s Envy” is a good example to understand
consumer’s psychology. However, there needs to be continuous R& D leading to innovation and
product differentiation based on technology. This will help a manufacturer to become the market
leader as it would be very difficult for its competitors to replicate the product without violating
IPR norms. Thus the right mix of unique and innovative products that are acceptable to the
consumers is critical to sustain and augment profits in the long run. Government of India may
encourage R&D activities through establishment of technology parks and industry- technical
college compulsory interactive projects for the development of the industry.

Government should strengthen Research and Development in manufacturing sector especially
the applied research like product development through special grants to leading Research
Institutes/Universities and Technical Institutes like IITs/ ITIs. Special schemes may be
formulated to promote the development of Indigenous Technology to reduce dependence on
imported equipments and components. Development of incubators should be promoted and the
linkages between Government Agencies, Universities, as well as Industry and other stakeholders
like NGOs and industry associations need to be strengthened. Doctoral/Post Graduate
Programmes in Electrical industry oriented curricula may be developed with attractive
Fellowships to attract best talent for the courses/programmes.

Window Air Conditioners are mainly assembled in India while about 60 percent of Split Air
Conditioners are still being imported from the countries like China mainly. For the Window Air
Conditioners the rotary compressors are being imported mainly from China. It may be noted that
40% of the manufacturing cost of Air Conditioners is for the compressor alone. And about 16%
of the total value addition is being made by the industry in India. During the research the fact
came out that most of the companies are importing full unit from the countries like China and
selling in their brand name which in ways loosing the development of manufacturing units in
India. Since the cost of production is high in India due to low technological levels and poor
infrastructure, Ministry of Industry and Commerce can evolve appropriate financial support
schemes for manufacturing units so that the current level of technology can be upgraded to
global standards.



Since productivity estimations based on Labour and Total Factor Productivity Growth rates have
been found quite low in electrical sector, there is a need for substantial up gradation of skill
levels and technological knowhow (R&D activities) in this sector for further value addition at the
domestic level.

11.6. Implementation of Quality Standards/ Certification and Energy Efficiency Standards
labeling Programme

Quality standards and systems are critical for ensuring the quality of electrical products.
Government needs to promote implementation of standards and certification. Incentives may be
given to small scale enterprises for getting quality system certification. Special Cells at
regional/state level needs to be created that would work as facilitating centers for implementation
of standards and getting certification. Quality Council of India, Bureau of Indian Standards (BIS)
can help manufacturing units to get Quality Accreditation like ISO 9000/ 14000.

Encourage application of total quality and productivity programs like Total Preventive
Maintenance (TPM), Continuous Improvement Program (CIP), minimum waste of energy,
materials and time, zero defects and other aspects of quality to reduce production inefficiencies
and enhance the competitiveness of firms. To reach out to companies, productivity centres and
technical institutes and centres should be in a position to provide effective and competent
extension services.

Moreover, energy efficient appliances reduce the usage power consumption leading to
substantial saving on electricity usage. It is important to induce manufacturers to consistently
make products with high energy efficiency and help consumers to choose more energy-efficient
goods. A financial incentive scheme, preferably in the form of subsidy may be extended to
domestic manufacturers in maintaining energy efficiency standards. Bureau of Energy Efficiency
can facilitate the manufacturing units particularly the SMEs to acquire star ratings.

11.7. FDI in Light Electrical Sector

Light Electrical manufacturing sector has a great growth potential in India and export market.
Government needs to promote modern manufacturing processes and infrastructure requirements.
Promotional activities need to be undertaken to attract FDI and MNCs to start manufacturing



units in India. “INDIA ADVANTAGE” needs to be promoted. Manufacturing units producing
large home appliances and also the components manufacturing units may be given special tax
benefits.

11.8. Policy for Disposal of e-waste

Since disposal of e-waste by individuals is not always possible, the manufacturers need to take
care of it through schemes like exchange offer. This would help them not only in getting back the
old products for scientific disposal and creating safe environment but also help in sales
promotion. Policies for safe disposal of e-waste i.e., electronic and some of the electrical
equipment that is no longer useful but may or may not be re-usable needs to be formulated on
priority in consultation with all the stakeholders. Once formulated, implementation of these
policies should be strictly enforced else it would be unsustainable to be competitive in the
manufacturing of products in the changing environment scenario.

Since disposal involves additional cost and environmental clearances, Ministry of Environment
and Forests and Pollution Control Bards need to undertake suitable measures for disposal of e-
waste with emphasis on the aspect of safety and sustainability.

11.9 Fiscal Incentives

Indian manufacturers are not able to compete with other competing countries due to multiple
taxes. Therefore, fiscal incentives like rationalization of tariff on raw materials and capital goods,
lowering of excise duty on components, introduction of full Value Added Tax (VAT) etc., in
conjunction with free environment to the manufacturers, speed of business, proper
communication, power supply, strong engineering and design base, adequate R&D facilities etc.,
are key to a successful and competitive electrical industry. Ministry of Finance can evolve
strategies and schemes for providing Fiscal Incentives to Light Electrical (large home
appliances) manufacturers.

As compared to Indian Government support schemes for the industry, it was reported that the
measures adopted by the competing countries like China is more supportive to local



manufacturers through various schemes such as subsidy for rural consumers for the purchase of
home appliances etc.

The interest component of loan of SMEs in setting up manufacturing plants may be fully or
partially subsidized. Plant modernization support may be extended to Indian manufacturers. In
India the rate of interest is quite high at 15% as compared to countries like US where the rate of
interest is 2-3%. It has been reported by many manufacturers that the return on capital is not
good enough in India to go for higher levels of investment in plant and machinery.

The observation made on excise duty came out to be painful for the small manufacturers since
same 8.24 percent excise duty including cess has been imposed on companies irrespective of
their turnovers. For example a company with turnover of Rs.100 crores as well as Rs.1.5 crores
pays the same rate of excise duty. Over and above this rate they have to pay 12 percent VAT
also. Thus the total excise duty becomes more than 20 percent while the customs duty is
approximately at 22 percent.

The interest rates should be made comparable to agriculture loans, so that industry can become
competitive as the loans provide by the financial institutions are quite high at 18 percent per
annum. SIDBI is offering loan for a minimum value of 40 lakhs on which they are charging
15% for construction loan and 8% for machinery loans. There is substantial scope for
compressor manufacturing in the domestic market.

Goods and Service Tax (GST) a comprehensive value added tax on services and goods is
welcome by the industry against the prevailing non-uniform taxes across the states in India.

11.10. Changing character of Refrigeration Manufacturing in India

Earlier Refrigerator industry was mainly operating at the local level not having much brand
value. However, recently the character got changed as the 90 percent manufacturing is in the
organized sector with high brand value while only 10 percent remains at the local level. The cost
difference between the branded and the local make was in the range of Rs.8000 per piece earlier
while the cost difference came down substantially. As a result of that the small manufacturers
stopped production since they are not able to produce quality products at low cost.



Another area where there is significant change in the character of production has taken place
where small manufacturers have become channel partners to major producers as ancillaries or
component manufacturers.

Since refrigerators are bulk items, currently about 80-90 percent refrigerators are manufactured
in India. It is recommended by the industry associations that different duty structures can be
introduced for different components. Many foreign manufacturers have set up their
manufacturing plants in India. Currently the domestic value addition is estimated at 80-90
percent.

11.11. Market Segmentation

In developing economies like India, manufacturers of large home products while designing and
pricing their products need to take into consideration some key determinants of demand like
existing socio-economic disparity and rural-urban divide. Market segmentation may also be done
based on purchasing power of the majority of potential customers, available infrastructure like
power supply or voltage fluctuations etc., in that particular area.

11.12. Quality & Price Discrimination

The sovereignty of consumers is quite evident through their revealed preference in favour of
economically rational decisions. The price of the products need to be competitive but not at the
cost of quality. A single low quality product is enough to spoil the reputation of a manufacturing
firm and will result in destroying the market demand for all other products of the brand in the
long run.

However, base models of an appliance with some key features may be placed on the shelves at
lower rates than the similar available products of the competing firms. This will help firm in
capturing the market sentiments of the India’s vast population. Simultaneously, to target the rich
and elite class, exclusive models/ products need to be designed with advanced technology. Such
products may be priced at high premium, as they would give the owner a sense of pride.



11.13. Customer Relationship Management

Customer Management or Customer Care is a crucial differentiator in the manufacturing
industry. Distribution network could be an excellent source of competitive advantage for a
manufacturer of large home appliance. Manufacturers need to build a good after sales service
network, along with strong brand positioning, to take care of customers. Consumer helpline
should address the complaints at the earliest.

11.14. Labour Relations

Labour policies available in the country are not conducive for manufacturing as compared to
other competing countries. Legislate flexible labour policy to enable manufacturers to restructure
labour force in response to market needs.

11.15. Productivity Enhancement for Raising Profit Margins

Manufacturers need to take special care towards efficient utilization of plant and machinery,
reduction in waste etc. It would result in raising the productivity level of the firms and lowering
the cost of production, thereby increasing the profit margins. A part of enhanced profit may be
passed to the customers through lowering of product prices. This would certainly make
indigenous products more competitive in the domestic market and reduce import substitution.

11.16. Contract Manufacturing

Indian entrepreneurs or companies may explore the opportunities of functioning as Electrical
manufacturing services (EMS) companies to larger Original Equipment Manufacturers (OEMs).
In this case, OEMs would provide Indian EMS with a full range of services like contract design,
prototyping, final system assembly, configuration, order fulfillment, and repair and after-market
services. Further, being part of OEMs, Indian EMS could be able to reap other benefits such as
research and product development, brand building, sales and marketing network of OEMs.



REFERENCES

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Annexure -1
Survey Questionnaire: Company/Manufacturing Unit

National Productivity Council is carrying out a nationwide survey of manufacturing units from Light Electrical
Manufacturing Sector on behalf of Ministry of Commerce and Industry, GoI. The objective of this survey is to
identify and understand major concerns and issues of the sector that affect productivity and export competitiveness
of the sector. The study would come out with sector specific recommendations with a view to enhance productivity
and export competitiveness of the sector.

(Please fill as per instructions given with each question.
Write codes/ values in the box provided at the right hand side)

General information
1.0 States and Union Territories Code :
(1=Andhra Pradesh, 2=Delhi, 3=Gujarat, 4=Haryana, 5=Karnataka, 6=Kerala, 7=Punjab
8=Maharashtra, 9=Rajasthan, 10=Tamil Nadu, 11=Uttar Pradesh, 12=West Bengal)

2.0 Product Category (1= Refrigerators, 2 = Air Conditioners, 3 = Washing Machines, 4 =
Micro-wave Ovens, 5=Vacuum Cleaners)

Company Related Information
3.0 Company/Manufacturing Unit specific information
Company Name & Address: ----------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------

Contact Person’s Name---------------------------------------------------------------------------

Telephone, if any: --------------------------------------------------------------------------------

e-mail address, if any:----------------------------------------------------------------------------

Website, if any:-----------------------------------------------------------------------------------

3.1 Year of Establishment
3.2 Nature of the company
(1=Public Limited, 2=Private Limited, 3=Partnership, 4=Proprietorship, 5=Government
Owned)

3.3 Did your company acquire any firm in other countries?
(1=No acquisition, 2= Full ownership, 3=less than or equal to 50% ownership, 4=more than
50% ownership)

3.3.1 Does your company have merger with any other firm in India? (1= yes, 2=No)
3.4 Does your unit have Quality Accreditations? (1= yes, 2=No)
3.4.1 If yes, please specify the name of the accreditation:
(1=ISO 9000, 2= ISO 14000, 3=ISO 27000, 4=OHSAS 18000, 5=HACCP, 6=Others,
specify)



Employment Related Information
4.0 The contractual/daily wage employees during the last ten years (1=Increased,
2=decreased, 3=No change)
4.1 What is the estimated percentage of skilled employees? (1=0-10%, 2=11-25%,
3=26-50%, 4=51% & above)
4.1.1 What is the estimated percentage of non-skilled employees? (1=0-10%, 2=11-25%,
3=26-50%, 4=51% & above)
4.2 Growth in wages/salary in the organization during the last ten years. (1=
Increased, 2= Decreased, 3=No Change)
4.3 If Increased, please specify the range of increase in wages/ salary during the last
ten years?
(1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)
4.4 If decreased, please specify the range of decrease in wages/ salary during the
last ten years?
(1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)
Domestic Market Related Information
5.0 What is the market share of your product? Please specify the range (1=1-5%, 2=6-
10%, 3=11-25%, 4=26% & above)
5.1 What is the percentage of Domestic Sales to Total Sales (1=0-10%, 2=11-25%,
3=26-50%, 4=51% & above)
5.2 Growth in the domestic demand of your products during last ten years. (1=
Increased, 2= Decreased, 3=No Change)
5.2.1 If Increased, please specify the range of increase in the domestic demand of
your products?
(1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)
5.2.2 If decreased, please specify the range of decrease in the domestic demand of
your products in the last ten years?
(1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)
5.3 Extent of competition in the domestic market from local companies? [1=Intense
(>20 players), 2=Medium (10-20 Players), 3=Low (0-10 Players), 4=No Competition]
5.3.1 Extent of competition in the domestic market from foreign companies?
[1=Intense (>20 players), 2=Medium (10-20 Players), 3=Low (0-10 Players), 4=No
Competition]
Trade Related Information
6.0 Is your organization engaged in Exports (1=Yes, 2= No)
6.0.1 If yes, what is the percentage of Export to Total Sales
(1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)
6.1 Growth in export during the last ten years. (1=Increased, 2= Decreased, 3=No
Change,)
6.1.1 Please specify the range of increase in export during the last ten years? (1=0-
10%, 2=11-25%, 3=26-50%, 4=51% & Above)
6.1.2 Please specify the range of decrease in export during the last ten years? (1=0-
10%, 2=11-25%, 3=26-50%, 4=51% & above)
6.2 Is your organization engaged in Imports? (1=Yes, 2= No)
6.2.1 If yes, what is the percentage of Import to Total Sales
(1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)
6.2.2 Please specify the type of Import?
(1=Full product, 2=Component, 3=Raw materials )
6.2.3 How much percentage of your sales belong to Complete Knock Down (CKD)
category? (1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)
6.2.4 How many percentage of your sales are Semi Knock Down (SKD) category?
(1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)



6.3 Please specify the major country from where you are importing finished products.
__________________________________________________________
6.4 Please mention your export destinations
Product Description Countries you are exporting to

6.4.1 Please mention the competitive advantage of competing Countries (1=Low Cost of
Production, 2= Capital Intensive Production, 3=Large scale operations, 4=Latest Technology, 5=better
Quality of product, 6=Other, specify
6.5 The factor (s) affecting imports (1= Import pricing Scheme,2= Import licenses,
3=Import quotas, 4=Import prohibition, 5=Quantitative safeguard measures, 6=Export
restraint arrangement,7=Non trade Barriers, 8=Any other, specify)
6.6 The factor (s) affecting exports (1=Export taxes, 2= Export quantitative restriction,
3=Certification, 4=Inspection fee, 5=State trading administration, 6=Dual pricing schemes,
6=Non trade barriers,7=Any other, specify)
Factors responsible for Competitiveness
7.0 Availability of Raw materials for production.
1=Imported, 2=Within country, 3=Within Region/State, 4=Other
7.1 Are there policies made by the government which help in growth in your
Industry? (1=Yes, 2=No)
7.2 What are the support measures taken by the government?
(1=Purchase preference policy, 2=Price preference policy, 3=others)
7.3 Has removal of Quantitative Restrictions helped your company? (1=Yes, 2=No)
7.4 What are the marketing constraints for the your Industry (Please Specify)
7.5 Are you satisfied with the Government’s interface with business/private sector?
[1=Excellent, 2=Average, 3=Poor]
7.6 Do you consider government friendly towards investor?(1=Yes,2=No)
Competitive advantage of Competing Countries
8.0 Clearance to start a manufacturing unit in India takes. (1=1-2 months, 2=3-5
months, 3=6-9 months, 4=10-12 months, 5=more than one year)
8.1 A clearance to start a manufacturing unit in competing country takes. (1=1-2
months, 2=3-5 months, 3=6-9 months, 4=10-12 months, 5=more than one year)
8.2 Availability and quality of basic infrastructure such as power, water, road, rail
etc. in India.(1=poor, 2=reasonable, 3=good, 4=excellent)
etc. in your unit.(1=poor, 2=reasonable, 3=good, 4=excellent)
etc. in competing country.(1=poor, 2=reasonable, 3=good, 4=excellent)
8.5 Taxes and other controls in India (1=low, 2=moderate, 3= high, 4=very high)
8.6 Taxes and other controls in competing countries. (1=low, 2=moderate, 3= high,
4=very high)



8.7 Cost of production in India. (1=low, 2=moderate, 3=high, 4=very high)
8.8 Cost of production in competing country. (1=low, 2=moderate, 3=high, 4=very high)
Marketing Strategy & Distribution Channel
9.0 What is the type of Distribution channel (Please Specify)
(1=Wholesale, 2= Retail, 3=others)
9.1 What are the incentives to wholesale distributors (Please Specify)
(1=Credit, 2=Commission)
9.2 What are the incentives to Retailers (Please Specify)
(1=Credit, 2=Commission)
9.3 How are you giving after sales service to buyers
(1=Direct, 2=Franchise, 3=Sales Representatives)
9.4 How many years of warranty for the product?
(1=0-2, 2=2-5, 3=5-10, 4=above 10)
9.6 Which are the main states your products are sold (Please Specify)
Global Financial Crisis
10.0 Did your company get affected during the global financial crisis? (1=Yes, 2=No)
10.0.1 If yes, (Please Specify).
__________________________________________________________

10.1 Whether the exports from your company decreased due to the global financial
crisis? (1= yes, 2= No)
__________________________________________________________

10.2 Do you expect fall in domestic business and export in the coming years? (1= yes,
2= No)
___________________________________________________________

10.3 Have you evolved any strategy to counter global financial crisis? (1= yes, 2= No)
10.3.1 Please explain your current business strategy.
___________________________________________________________

10.4 Do you think better Corporate governance can improve the effectiveness of the
business? (1= yes, 2= No)
10.4.1 If yes, Please Explain __________________________________________________
General Question
11.0 What are your strategies/suggestions to improve Productivity and
Competitiveness of your Industry? (Please mention a few)
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
_________________________________________________________________________



11.1 Policy Interventions urgently required for enhancing productivity and
competitiveness of your sector.
(Please mention five)

1.

2.

3.

4.

5.

11.2 Any other comments: (Please specify)
___________________________________________________________________________
___________________________________________________________________________

12.0 Data on production and other related variables during last ten years.
Sr. No. Years Sales Value Production Cost (Rs. Export (Rs. Import (Rs.
(Rs. Lakhs) Lakhs) Lakhs) Lakhs
1 1998-99

2 1999-00

3 2000-01

4 2001-02

5 2002-03

6 2003-04

7 2004-05

8 2005-06

9 2006-07

10 2007-08

11 2008-09



12.1 Data on production and other related variables during last ten years.
Sr. No. Years Employees/ Wages/ Capital
workers Salaries Investment
(Number) (Rs. Lakhs) (Book Value) (Rs. Lakhs)
1 1998-99

2 1999-00

3 2000-01

4 2001-02

5 2002-03

6 2003-04

7 2004-05

8 2005-06

9 2006-07

10 2007-08

11 2008-09

Thank you

Name of the Official/Investigator: -----------------------------------------------

Signature : ---------------------------------------------------------

Place of Survey : ----------------------Date: ----------------------------



Annexure- 2

Format for developing Diagnostic Case Studies
• Name of the manufacturing unit:
• Address:
• Company background
• Present status of the company
• Products
• Objective of the company
• Human Resource Management(management, employees, incentive system etc)
• Business model used-marketing strategy (market share, channels of distribution, pricing.
sales, service, brand loyalty)
• Analyzing past and present strategies adopted by the unit to face opening up of trade
under WTO and its impact.
• Productivity model
• Financial valuations(finance and accounting ability to raise short term as well as long
term capital, accounting practices, tax planning ,cost band barrier to entry)
• Factor productivity/factor ratios
• External influence
• Competitive analyses(forces driving competition, gaining competitive advantage, generic
competitive strategies such as overall cost leadership, product differentiation, focus on
product segment or market segment, etc)
• SWOT analyses
• Manufacturing scenario during the last 10 years



Annexure-3
India-Thailand Consolidated List of Items for Early Harvest Scheme (EHS)

S. No. H.S. Code DESCRIPTIONS
1 080450 EX. FRESH MANGOSTEENS, MANGOES
2 080610 FRESH GRAPES
3 080810 APPLES
4 081060 EX. FRESH DURIANS
5 081090 EX. FRESH RAMBUTANS, LONGANS,
POMEGRANATES
6 100110 DURUM WHEAT
7 100190 OTHER WHEAT AND MESLIN
8 160411 SALMON, WHOLE OR IN PIECES BUT NOT MINCED,
PREPARED OR PRESERVED
9 160413 SARDINES, SARDENELLA AND BRISLING OR SPRATS,
WHOLE OR IN PIECES BUT NOT MINCED, PREPARED
OR PRESERVED
10 160415 MACKERAL WHOLE OR IN PIECES BUT NOT MINCED,
PREPARED OR PRESERVED
11 160510 CRAB PREPARED OR PRESERVED
12 250100 SALT (INCL TABLE SALT & DENATRD SALT) & PURE
SODIM CHLRDE W/N AQS SOLN SEA WTR
13 261000 CHROMIUM ORES & CONCENTRATES
14 281119 OTHER INORGANIC ACIDS
15 281820 OTHER ALUMINIUM OXIDE
16 281830 ALUMINIUM HYDROXIDE
17 291739 OTHR ARMTC PLYCRBOXYLC ACIDS THR
ANHYDRDS HALIDES PEROXIDES PEROXYACDS &
THR DRVTVS
18 390210 POLYPROPYLENE, IN PRIMARY FORMS
19 390690 OTHER ACRYLIC POLYMERS IN PRIMARY FORMS.
20 390710 POLYACETALS IN PRIMARY FORMS.
21 390730 EPOXIDE RESINS IN PRIMARY FORMS.
22 390740 POLYCARBONATES IN PRIMARY FORMS.
23 390760 POLYETHYLENE TEREPHTHALATE IN PRIMARY
FORMS.
24 390799 SATURATED POLYALLYL ESTERS AND OTHER
SATURATED POL
25 390810 POLYAMIDE-6,-11,-12,-6,6,-6,9,-6,10 OR -6,12,IN
PRIMARY FORMS
26 390890 OTHER POLYAMIDES IN PRIMARY FORMS.
27 390950 POLYURETHANES IN PRIMARY FORMS.
28 391990 OTHER SELF-ADHESIVE PLATES, SHEETS, FILM, FOIL,
TAPE, STRIP AND OTHER FLAT SHAPES OF PLASTICS
29 441219 OTHR PLYWD COMSSTNG ONLY SHTS OF WOOD OF



THIKNESS OF EACH SHEET NT EXCD 6 MM
30 710310 PRECIOUS STONES (OTHER THAN DIAMONDS) AND
SEMIPRECIOSSTONES, UNWORKED OR SIMPLY
SAWN OR ROUGHLY SHAPED
31 710490 OTHER SYNTHETIC OR RECONSTRUCTED PRECIOUS
OR SEMIPRECIOUS STONES
32 710510 DUST AND POWDER OF DIAMONDS
33 711319 ARTICLES OF JEWELLERY AND PARTS THEREOF, OF
OTHER PRECIUOS METAL, WHETHER OR NOT
PLATED OR CLAD WITH PRECIUOS METAL
34 720150 ALLOY PIG IRON: SPIEGELEISEN
35 720711 PRDCTS CONTNG BY WT<0.25% CRBN,OF RCTNGLR
(INCL SQR)CRS-SCTN;WDTH<TWICE THE THCKNS
36 720719 OTHR PRDCTS CONTNG BY WT<0.25% OF CARBON
37 722619 FLT-ROLD PRDCTS OF SILICON ELECTRICL STL OTHR
THN GRAINORIENTED
38 722990 OTHER WIRE
39 730792 THREADED ELBOWS, BENDS AND SLEEVES OF IRON
OR STEEL
40 732020 HELICAL SPRINGS, OF IRON OR STEEL
41 732690 OTHER ARTICLES OF IRON OR STEEL WIRE, NOT
FORGED
42 760110 ALUMINUM, NOT ALLOYED
43 760120 ALUMINUM ALLOYS
44 840490 PARTS OF THE ITEMS OF 840410 & 840420
45 840991 PARTS SUITABLE FOR USE SOLELY OR PRINCIPALLY
WITH SPARKIGNITION INTERNAL COMBUSTION
PISTON ENGINES
46 841360 OTHER ROTARY POSITIVE DISPLACEMENT PUMPS
47 841381 OTHER PUMPS
48 841451 TABLE,FLOOR,WALL,WINDOW,CEILING/ROOF
FANS,WTH SLFCNTND ELCTRC MOTOR OF
OUTPT<=125 W
49 841459 OTHER FANS
50 841490 PRTS OF AIR/VACUM PUMPS,CMPRSSRS & FANS
51 841510 WINDOW/WALL TYPES SELF-CONTAINED AIR
CONDITIONING MACHINES
52 841821 COMPRESSION-TYPE REFRIGERATORS, HOUSEHOLD
53 841990 PRTS OF MCHNRY,PLNT/LBRTRY EQMPMNT ETC OF
THE ITEMS OF HDG 8419
54 842199 OTHR PARTS OF FLTRNG/PURFYNG MCHNRY
55 842390 WEIGHNG MCHN WEIGHTS & PRTS OF THE MCHNRY
56 842549 JACKS, HOISTS, OF A KIND USED FOR RAISING
VEHICLES
57 843221 DISC HARROWS



58 843780 OTHER MACHNRY FOR CLNG,SRTNG/GRADNG SEEDS
59 844820 PRTS & ACCSSRS OF MCHNS OF HDG. NO.8444/OF
THEIR AUXLRY MCHNRY
60 844833 SPINDLES,SPINDLE FLYERS,SPINNING RINGS AND
RING TRAVELLERS
61 847141 OTHR DGITL AUTOMATIC DATA PROCESNG MACHNS
COMPRISNG IN SAMEHOUSNG A CENTRLPROCESNG
UNIT & INPUT & OUTPUT UNIT,WH/NOT COMBIND
62 847190 OTHER
63 847290 OTHR OFFICE MACHINES
64 847751 MCHNRY FR MOULDNG/RETREADNG PNEUMTC
TYPES OR FR MOULDNG/OTHRWSE FORMNG INNR
TUBES
65 847989 OTHR MCHN &MCHNCL APPLNCS OF HDG 8479
66 847990 PARTS OF MACHINES OF HDG 8479
67 848079 OTHR MOULDS FOR RUBBER/PLASTICS
68 848180 OTHER APPLIANCES FOR PIPES, BOILER SHELLS,
TANKS, VATS OR THE LIKE
69 848210 BALL BEARINGS
70 848350 FLYWHEELS AND PULLEYS, INCLUDING PULLEY
BLOCKS
71 850431 OTHR TRNSFRMRS HVNG A PWR HNDLNG CAPACITY
NOT EXCDNG1 KVA
72 851220 OTHER LIGHTING OR VISUAL SIGNALLING
EQUIPMENT
73 851711 LINE TELPHON SET WTH CORDLESS HAND SETS.
74 851790 PARTS OF TELEPHONIC/TELEGRAPHIC APPARATUS
75 852390 OTHER PREPARED UNRECORDED MEDIA
76 852812 RECEPTN APARTS FOR TV ETC COLOUR
77 852910 AERIALS & AERIALS REFLECTORS OF ALL KINDS
PRTS SUITABLE FR USE THEREWTH
78 853400 PRINTED CIRCUITS
79 854011 CATHODE-RAY TV PICTURE TUBES, INCLUDING
VIDEO MONITORCATHODE- RAY TUBES-COLOUR
80 870840 GEAR BOXES
81 903289 OTHR ATMTC RGLTNG/CNTRLNG
INSTRMNTS&APPRTS
82 903290 PARTS AND ACCESSORIES OF INSTRMNTS OF 9032
83 910211 WRST-WTCHS,ELECTRLY OPERATED,W/N
INCRPRTNG STOPWTCH FCLTY WITH MCHNCL
DISPLAY ONLY
84 940190 PARTS OF SEATS, WHETHER OR NOT CONVERTIBLE
INTO BEDS



Annexure - 4
Methodology Adopted for Partial and Total Factor Productivity Estimations

Productivity can be measured in terms of both partial and total factor productivity methods. Most
commonly used partial productivity measures are Labour Productivity and Capital Productivity
estimations. The partial productivities are measured as a ratio of Gross Value Added per worker
or per unit of capital invested.
The partial productivity methodology is based on the premise ‘ceteris paribus’ that only two
factor inputs used in the production process such as labour and capital. Details regarding the data
construction and estimation procedures are given as below.
A. Labour Productivity
• Labour input is considered as the total number of persons engaged in the production
process. The data has been compiled from Annual Survey of Industries Summary results for
Factory Sector data base for various years. The Gross Value Added data has been first deflated
by the whole sale price index for the sports goods. The formula for calculating the labour
productivity can be given as follows:

Labour Productivity (LP) =
[ ((Gross Value Added/Price Index) x 100)
Number of Persons Engaged ]
Labour Productivity Growth

• Once the labour productivity has been calculated, we can estimate annual labour
productivity growth using the growth rate estimation formula :

[
Labour Productivity ═ Labour Productivity t – Labour productivity t-1
] × 100
Growth Labour Productivity t-1

Labour Productivity Growth Index:
To understand the trends in Labour Productivity Growth, we can construct year to year growth
rates as an index of Labour Productivity Growth Rate. Initial value of the series is considered
equal to 100 and the subsequent years Labour Productivity Growth Rates are added to it
cumulatively. This will provide us an index of Labour Productivity Growth for the sports goods
sector for the years starting from 1995-96 to 2005-06.



Capital Productivity
Since capital investment is given as the book value in the ASI data, we have to estimate the
capital stock in operation for every year. The Capital stock estimation follows the procedure
given below.

• Capital Stock Estimation

To calculate capital stock we have used Perpetual Inventory Method. Capital stock has been
estimated from the book value of Gross Fixed Capital compiled from the ASI Database.

• Fixed capital data from ASI for the sports goods sector taken for the years 1995-2006.
• The book value of fixed capital at 1995-96 is multiplied by Gross net ratio of capital for
getting initial year capital stock.
• Incremental capital during the year 1996-97 at constant prices (deflated with the
machinery and machine tools prices at 1993-94 prices) is added to the initial year capital
stock of 1995-96 for getting the capital stock for 1996-97at constant prices.

Incremental capital = ((Fixed capital 1996-97 - Fixed capital 1995-96)
To calculate the capital productivity we have divided Gross Value Added at constant prices by
the estimated fixed capital. The formula used to calculate the capital productivity is as follows:

Capital Productivity=
[ (Gross Value Added at constant prices)
Capital stock at constant prices ]
Capital Productivity Growth

Capital Productivity Growth Rate =
[ ]
Capital Productivity t - Capital Productivity t-1 x 100
Capital Productivity t-1



Capital Productivity Growth Index
As in the case of Labour Productivity Growth Index, Capital Productivity Growth Index is also
constructed on a scale 100.

Gross Value Added Growth Rate =
[ GVAt – GVA t-1
GVA t-1
] x 100

B. Total-Factor Productivity Growth (TFPG)

Total Factor productivity Growth has been estimated using the Divisia index method. Here, it is
considered that Total Factor Productivity Growth is the result of technical progress. Technical
progress or TFPG is estimated as a residue of the difference between output growth rates and
input growth rates.
o o
TFPG= GVA – [WL x Labour Productivity Growth + WK x Capital Productivity Growth]
Where
WL + WK = 1
and
WL = Wage Share in Total Cost
WK= Capital Share in Total Cost

Total-Factor Productivity Growth Index

As in the case of Labour and capital productivity, Total Factor Productivity Growth Index can
also be constructed with base 100 for the initial year and adding the subsequent growth rates
cumulatively.



Annexure -5

LIST OF UNITS SURVEYED FOR THE FIELD STUDY

Refrigerator
1. Muskan Equipments Company , New Delhi
2. Bharat Refrigeration Mfg. Co. , New Delhi
3. R.K.Rerigerators, New Delhi
4. Royal refrigeration works, New Delhi
5. Alpine Refrigeration Co. , Bangalore
6. Krishna Agro Industries Corporation , Chennai
7. V Priya Electronics , Hyderabad
8. Shaheen Electrical Engineering Co., Hyderabad
9. Vandana Refrigeration, Hyderabad
10. Ambience Industries, Bangalore
11. Santha Engineering , Chennai
12. Pole Star Coils (P) Ltd , Mumbai
13. Fidvi Refrigeration Industries ,Mumbai
14. Frigoglass india pvt Ltd , Haryana
15. Hindustan Refrigeration Stores , Uttar Pradesh
16. Airtech Cooling Process (Pvt) Ltd , New Delhi

Air Conditioners
1. Lloyd Electric & Engineering Ltd , New Delhi
2. Adcon Services, New Delhi
3. Oasis Appliances , Haryana
4. CAS Engineers Pvt. Ltd , New Delhi
5. K.M.Tooling Solutions , New Delhi
6. Coolvin HVAC Systems Pvt Ltd
7. Air Blow System , Mumbai
8. Ajanta Engineering Works , Bangalore
9. Kool Nest Pvt Ltd. , Bangalore
10. Himigiri Airconditioning Co. Pvt Ltd , Kolkatta
11. Sidwal Refrigeration , New Delhi
12. Arwa Machine Tools , Mumbai
13. Indo Western Refrigeration Pvt Ltd , Mumbai



14. Marshal Cooling Corporation , Kolkatta
15. Temp AIR , Kolkatta
16. Frizair , Hyderabad
17. Thermoplast Industries , Mumbai
18. Everest Aircon , New Delhi
19. Systematics Engineering , Chennai

Washing Machine
1. Maharaja Appliances Ltd , New Delhi
2. Mega Engineering Works , Andhra Pradesh
3. R.N. Engineering , Bangalore
4. Oskar International , New Delhi
5. Innomation , Hyderabad
6. Stefab India Limited, Kolkatta
7. Super Fab India, Uttar Pradesh
8. Ramsons , Bangalore
9. Vihar Engineering, Mumbai
10. R.M.Engineering , Mumbai
11. Aster Technologies Pvt ltd, Uttar Pradesh

Microwave Oven
1. Aution Instruments & Controls Pvt. Ltd. , New Delhi
2. Remson Appliance Pvt. Ltd., New Delhi
3. GEM Empire Home Appliances Ltd, New Delhi
4. Shiva Appliances, Kolkatta
5. Lords Enterprises (India), New Delhi
6. Cata Appliances Ltd, New Delhi
7. Sri Saibaba , Hyderabad
8. Bajaj Electricals Ltd, Mumbai
9. Enerzi Microwave Systems Pvt Ltd, Bangalore
10. Mahto Kitchen Care, New Delhi



Vacuum Cleaners
1. Inventa Cleantec Pvt. Ltd., Uttar Pradesh
2. Secure Net Appliances Pvt. Ltd. , New Delhi
3. Sam System & Services , Bangalore
4. Charnock Equipments Pvt Ltd, Bangalore
5. Innovative Cleaning Systems Pvt Ltd, Mumbai
6. Soma Specialites Pvt Ltd , Mumbai
7. Shivam Cleaning Product Pvt Ltd, New Delhi
8. Mitsoni Appliances , New Delhi
9. Altomech , Coimbatore
10. Roots Multiclean Ltd, Coimbatore
11. Cleantek, Coimbatore
12. Prime Power Products , Chennai
13. Jaipan Industries Limited , Mumbai
14. Dynavac India Private Limited, Coimbatore



Annexure -6
Storage Position of Major Reservoirs based Projects in the Country

S. Reservoir Installed Full Minimum Effective Annual Energy Present Energy % Energy Reservoir Energy % Energy
Capacity Reservoir Draw Capacity Design Content at Reservoir Content at Content Level on the Content on Content
No. Level Down Energy F.R.L. Level Present w.e.to same day (29.01.2008) w.e.to
Level Potential (29.01.2009) Level Content at Last Year Content at
FRL FRL
(29.01.2009) (29.01.2009) 29.01.2008) (29.01.2008)

MW M M MCM MU MU M MU (5) M MU (%)

Northern Region

1 Bhakra 1325 513.59 445.62 4604.97 5282 1728.8 493.61 875.09 50.62 485.15 615.67 35.61

2 Pong 396 426.72 384.05 3974.43 1123 1084 4111.71 487.2 44.54 397.96 160.24 14.78

3 Ranjit Sagar 600 527.91 487.91 1196.16 1507 390.3 500.28 104.04 3.00 498.19 83.64 21.43

4 R.P. Sagar 172 352.81 343.81 1326.7 459 175.66 345.03 20.38 11.60 352.08 154.89 88.18

5 Rihand 300 268.22 252.98 1740.66 920 860.5 259.08 256 29.75 257.49 178.88 20.79

6 Ram Ganga 195 366 323 757.09 164 480.8 349.39 207.96 43.26 354.98 282.38 58.73

7 Tehri 1000 829.79 740.04 1287.37 309 1291.49 800.36 670.11 51.89 829.79 1286.6 99.62

Total (N Region) 3991 9764 6011.55 2620.8 43.60 2762.3 45.95



Western Region

8 Sardar Sarovar 1450 138.68 110.84 519.57 5469 1817.55 119.66 304.8 16.77 121.72 410.66 22.59

9 Ukai 305 105.16 82.3 1063.08 1080 813.08 101.39 555.76 68.35 101.72 540.3 66.45

10 Gandhi Sagar 115 399.9 381 925.11 420.48 725 384.9 60.68 8.37 390.62 210.62 29.05

11 Indira Sagar 1000 262.14 243.24 281.34 2628 1316.123 250.31 267.96 20.36 249.06 233.74 17.76

12 Bhira 150 606.03 590.09 429.43 790 618.8 601.59 417.23 67.43 601.49 412.94 66.73

13 Koyna 1960 667.91 609.6 1511.6 3130 3126.1 654.86 2702.6 86.45 651.25 2299.41 73.56

Total (W Region) 4980 13517.48 6416.68 4308.93 51.20 4107.67 48.80

Southern Region

14 Machkund 114.75 835.2 513.59 346.2 670 551.6 835.09 398.33 72.21 837.48 516.05 93.56

15 Nagarjuna 810 179.83 150.88 2257.43 2237 1398.13 159.75 304.14 21.75 160.72 342.53 24.50
Sagar

16 Srisallam 1670 269.75 243.84 265.99 4300 1391.84 266.06 999.73 71.83 266.7 1061.52 76.27

17 Almatti 290 59.62 505.97 1442.58 483 175.35 513.72 42.23 24.09 513.93 47.22 26.93

18 Katinadi Supa 1220 563.88 513.52 19168.68 542 2885 538.99 1020.95 35.39 549.92 1707.3 59.18

19 Sharavathy 1006.2 564.43 522.73 1329.83 5564 4557.03 546.16 2319.08 60.89 548.91 2949.12 64.72

20 Idamalayar 75 169 114.99 308.85 380 254.45 147.37 114.15 44.86 154.41 154.63 60.77

21 Idukki 780 732.35 694.94 283.18 2396 2146.32 715.55 939.55 43.77 723.49 1452.47 67.67

22 Madupatty 2 1599.38 1554.48 30.04 6.4 77.4 1597.25 64.6 83.46 1597.25 68.83 68.93

23 Sabarigiri 300 981.46 908.3 265.07 1338 764 974.8 646.95 84.68 974.8 563.38 73.74

24 Kundah Group 555 1315 1270 1157 742 58.43 1157 91.10



25 Mathura 240 240.79 211.23 410.53 790 204 233.07 36.44 17.86 233.07 107 52.45

26 Periyar 7202.95 46.33 33.53 80.27 409 216 37.61 7.24 3.35 37.61 53.57 24.80

Total (S Region) 20432.4 15891.12 7635.41 48.06 10180.59 64.06

Eastern Region

27 Balimela 510 462.08 438.91 149.23 1183 897.75 455 193.52 21.56 455 524.41 58.41

28 Hirakud 331.5 192.02 179.83 1316.28 1174 372.28 189.05 184.09 49.45 189.05 213.11 57.24

29 Indravati 600 641.84 625 130.67 1962 1213.13 635.56 291.19 24.00 635.54 303.54 25.02

30 Rengali 250 123.44 109.72 1565.1 525 275 115.68 107.11 38.95 115.68 74.32 27.03

31 Upper Kolab 320 857.78 843.78 84.09 832 540 852.59 192.88 35.72 862.59 256.94 47.58

Total (E Region) 2011.5 5676 3298.16 965.79 29.37 1372.32 41.61

North Eastern

32 Loktak 105 768.5 766.01 450 339 768 121.59 35.87 768 129.02 38.06

Total (NE Region) 105 450 339 121.59 35.87 129.02 38.06

Total (All India) 18290.45 49839.88 33956.48 15656.52 46.1 18551.9 54.62



Annexure -7
Generation Performance of New Thermal Units during Apr. ’08- Jan ‘09

SR. NAME OF UNIT CAPACITY Syncronization date COD Generation during Apr-Dec Remarks
NO. STATIONS NO. (MW) DATE 2008-09
Planned Actual Target Actual Shortfall
(A) THERMAL
Units Commissioned during year : 2006-07
1 KAHALGAON 5 300 31.3.07 1.8.08 3067 1847 1220 Piping etc.
STPS
2 MEJIA TPS 5 350 30.3.07 29.2.08 1470 816 654 Problem in new
3 GIRAL 1 125 28.2.07 March 09 412 335 77 Frequent checking in second
LIGNITE 3 pass of boiler
4 PARICHHA 4 210 28.12.06 1.12.07 1250 911 339 The unit was running on
TPS Extn. partial load due to non
completion of
5 NEW PARLI 1 250 16.02.07 1.11.07 1682 834 748 Unscheduled
TOTAL 1335 7781 4743 3038
UNITS COMMISSIONED DURING YESR : 2007-08
1 SIPAT STPS 4 50 27.5.07 20.06.08 3076 2968 108 Delay in COD as unit was
resynchronized on 06.05.06
after
2 KAHALGAON 6 500 16.3.08 31.12.08 2559 372 2187 Non-readiness of burkers,
STPS feeders
3 MERA TPS 6 250 1.10.07 24.9.08 1470 698 772 COD delayed due to delay in
supply and erection by
BHEL
4 GHTP II 3 250 3.1.08 1548 1053 495 COD delayed due to delay in
supply and erection by
BHEL.
5 YAMUNA 1 300 13.11.07 16.10.08 1826 1439 387 Delay in COD is forced
NAGAR TPP outage
6 YAMUNA 2 300 29.3.08 24.06.08 1826 1266 560 Delay in stabilization
NAGAR TPP
7 SANJAY 5 500 18.6.07 27.06.08 2944 2161 783 Delay in COD due to non- of
GANDHI TPS cost handling plant
8 PARAS EXP 1 250 31.5.07 31.03.08 1582 773 809 Pre beater structure damage
9 RAYALSEEMA 4 210 20.11.07 20.11.07 1394 1367 27



TPS
10 BELLARY TPP 1 500 3.12.07 Feb.2009 2839 721 2118 Non-reachgness of cost
handling plant
11 SANTALDIH 5 250 7.11.07 Feb.2009 1495 222 1273 Non readiness of
TPP DM,WT,plants, coal oils etc.
12 SAGARDIGHI 1 300 21.12.07 1.9.08 1665 949 716 Delay in COD due to turbine
TPP rectification works
13 BAKRESHWAR 4 210 23.12.07 31.10.08 1230 377 853 Completed in oct 06
14 DUR GAPUR 7 300 24.11.07 30.04.08 1637 1132 505 Forced outage
TPS EXTN.
TOTAL 4620 27091 15498 11593

Units expected / commissioned during year : 2008-09
1 SIPAT 5 500 JUNE08 13.8.08 1.1.09 1509 401 1108 DELAY IN COD due to non
readiness of CHP & coal
feeding
2 SIPAT 1 660 AUG 08 MARCH 10 800 0 800 Delay in synchronisation
3 KAHALGAON 7 500 MAY 08 MAY’09 1654 0 1654 Delay in synchronisation
STPS
4 CHANDRAPURA 7 250 APR 08 APR’09 992 0 992 Delay in synchronization
TPS due to slow erection &
supply of equip
5 CHANDRAPURA 8 250 AUG 08 JULY’09 407 0 407 Delay in synchronisation
TPS
6 BHILLAI 2 0 JUNE 08 MARCH’09 656 0 656 Nonreadiness of
IMPORT CHP,AHPEFO systems etc
7 GHTP II 4 250 APR 08 31.7.08 28.11.08 1012 362 650 Delay in synchronization/
COD
8 CHABRA TPS 1 250 SEP 08 APR 09 415 0 415 Delay in synchronization/
COD
9 CHABRA TPS 2 250 DEC 08 139 0 139 Delay in synchronization
10 GIRAL LIGNITE 2 125 MAY 08 MARCH’09 290 0 290 Delay in synchronization
due to items deliary and
rectification
11 SURATGARH 6 250 OCT 08 200 0 200 Delay in synchronization/
TPP COD
12 KUTCH 4 75 MAR 08 22.10.08 FEB’09 399 0 399 Synchronization on oil in
LIGNITE EXT. dec’08



13 AMARKANTAK 5 210 FEB 08 15.6.08 MARCH’09 1038 0 1038 Non-readiness of cost
TPS handling plant and ash
handling plant
14 TROMBAY TPS 8 250 AUG 08 MARCH’09 621 0 621 Delay in synchronization
15 SURAT LIGNITE 3 125 SEP 08 160 0 160 Delay in synchronization
EXT.
16 LANCO 1 300 MAR08 230 0 230 Delay in synchronization
AMARKANTAK
PATHADI TPS
17 SAGARDIGHI 2 300 MAR 08 20.7.08 4.11.08 1425 604 821 Cost shortage
TPP
18 BARKESHWAR 5 210 MAY 08 MARCH’09 1030 0 1030 Non readiness of ash
handling plant
19 VIJAYVADA 4 500 DEC 08 JUNE’09 515 515 Delay in synchronization
TPP
TOTAL 5255 13492 1367 12125



Annexure – 8
Statement of Shortfall in Generation (April 08-Jan.09) Existing Thermal Stations vis-à-vis
Target

UTILITY/STATION CAPACITY TARGET ACTUAL SHORTFALL REMARKS
MW MU MU MU

NTPC
FARAKKA STPS 1600 9716 8777 939 Coal shortage
TALCHER STPS 3000 19577 18201 1376 Coal shortage
KAHALGAON 1-4 840 5372 5060 312 Coal shortage
DVC
BOKARO B 630 3350 2846 54 Extended planned
maintenance of unit-2
DURGAPUR 340 1834 1509 325 Forced outages & coal
shortage
MEJIA 1-4 840 5242 4649 593 Forced outages & coal
shortage
NLC
NEYVELI ST-I 600 3127 2784 343 Shortage of lignite
NEYVELI ST-II 1470 7886 7091 795 Shortage of lignite
VPGCL
MUZAFFARPUR 220 454 130 324 Stabilization problem
after refurbishment etc.
HPGC
FARIDABAD EXT. 180 598 409 189 Forced Outage
PANIPAT 1360 8205 7852 353 Delay in restoration of
unit-1 after R&M
works
UPRVUNL
OBRA 1362 4874 4360 514 Delay in restoration of
unit 1&2 after R&M
works, Unscheduled
RLA of unit 9
PARICHHA 1-3 430 2062 1653 409 Forced outages due to
turbine vibration
problems & coal
shortage
CSEB
KORBA-II 200 1312 1179 133 Forced outages
GMDCL
AKRIMOTA LIGNITE 250 1076 859 217 Unscheduled planned
maintenance of unit - 2
GSECL
UKAI 850 4229 3956 273 Delay in stabilization
of unit1 after R&M
works Unscheduled
R& M works of unit2
SIKKA REP 240 1321 1159 162 Forced outages
MPPGCL
AMARKANTAK EXT. 240 1039 830 209 Forced outages
SANJAY GANDHI 1-4 840 4684 4246 438 Coal shortage



SATPURA 1142 6485 6046 439 Forced outages & coal
shortage
MAHAGENCO
CHANDARAPUR 2340 13505 12364 1141 Partial loading due to
poor coal quality
BHUSAWAL 475 2740 2515 225 Forced outages
KORADI 1040 5568 4877 691 Long duration forced
outage of unit 4 due to
turbine vibration
trouble
NASIK 880 4840 4539 301 Unscheduled capital
mtc. Of unit-1
PARLI 670 4100 3271 829 Unscheduled capital
maintenance of unit-3
and partial loading due
to coal quality problem
APGENCO
KOTHAGUDEM 680 4694 3647 1047 Partial loading of all
units due to coal stock
being critical
KOTHAGUDEM NEW 500 3310 2983 327 Extended planned
maintenance & forced
outage of unit 2
TNEB
ENNORE 450 1995 1665 330 Partial loading of all
units due to coal stock
being critical
METTUR 840 5520 5308 212 Unscheduled &
extended planned
maintenance of unit 2
TUTICORIN 050 6805 6462 343
BSES
BARAUNI 320 484 33 451 Stabilization problem
of unit 6 after R&M
works
JSEB
PATRATU 840 1236 830 406 Delay in restoration of
unit 4 after R7M works
and forced outage of
unit 6
WBPDC
KOLAGHAT 1260 6765 5638 1127 Coal shortage & forced
outage of units 4&6
BAKRESHWAR 630 570 4427 743
TOTAL 28609 159175 142155 17020



Annexure – 9
List of Thermal Stations Achieving Higher Generation Than Target During April 08 –
Jan.09

Sl. Station Ownership Capacity Programme Actual Excess
No. Achievement
(MW) (MU) (MU) (MU)

1 RAMAGUNDEM STPS CENTRAL 2600 16484 17870 1386
2 KORBA STPS CENTRAL 2100 13404 14645 1241
3 VINDHYACHAL STLPS CENTRAL 3260 21000 21947 947
4 RIHAND STPS CENTRAL 2000 13282 14102 820
5 SIMMADRI CENTRAL 1000 6344 7086 742
6 GANDHI NAGAR TPS STATE 870 4238 4859 621
7 DADRI (NCTPP) CENTRAL 840 5503 6084 581
8 KOTA TPS STATE 1045 6707 7192 485
9 KORBA-WEST TPS STATE 840 4750 5227 477
10 ROPAR TPS STATE 1260 7640 8096 456
11 GND TPS (BHATINDA) STATE 440 2076 2429 353
12 TALCHER (OLD) TPS CENTRAL 470 2746 3084 338
13 OP JINDAL TPS PVT 1000 4725 5034 309
14 SINGRAULI STPS CENTRAQL 2000 12854 13143 289
15 TENUGHAT TPS STATE 420 1480 1735 255
16 UNCHAHAR TPS CENTRAL 1050 6866 7088 222
17 GH TPS (LEH.MOH.) STATE 420 2740 2944 204
18 NEYVELI (EXT) TPS CENTRAL 420 2329 2525 196
19 KORBA EAST V STATE 500 2825 3016 19
20 DAHANU TPS PVT 500 3492 3682 190
21 WANAKBORI TPS STATE 1470 8911 9100 189
22 TORR POWER SAB PVT 330 2219 2403 184
23 KHAPARKHEDA TPS-II STATE 840 5185 5338 153
24 BADARPUR TPS CENTRAL 705 440 4562 152
25 TANDA TPS CENTRAL 440 2673 2810 137
26 PANKI TPS STATE 210 962 1089 127
27 RAICHUR TPS STATE 1470 8492 8574 82
28 ITTAGARH TPS PVT 240 1557 1624 67
29 BANDEL TPS STATE 450 2000 2065 65
30 SOUTHER REPL TPS PVT 135 877 937 60
31 BUDGE BUDGE TPS PVT 500 3630 3673 43
32 RAJGHAT TPS STATE 135 708 735 27
33 ANPARA TPS STATE 1630 9780 9804 24
34 TORR POWER AEC PVT 60 405 420 15
35 KORBA – III STATE 240 1474 1381 7
TOTAL 31890 194668 206303 11635



STUDY TEAM
PROJECT ADVISORS 1. Shri. N.C. Vasudevan, IAS
Director General

2. Shri. O.P. Joshi
Deputy Director General

3. Shri. V.K. Soni
OSD (Economic Services & Admin.)

STUDY/CORE TEAM

Team Leader: Shri. Brijesh Kumar IAS (Rtd)
Former Secretary Department of Information
Technology, Government of India

Project Director: Dr. K. P. Sunny
Group Head (Economic Services)

Dr. Jacob John
External Consultant: Former UNIDO National Expert

Team Members: 1. Dr. Rajat Sharma
Deputy Director (Economic Services)

2. Mr. Deepak Gupta
Assistant Director (Economic Services)

3. Mr. Mukesh Prakash
Assistant Director (Economic Services)

4. Mr. Prashant Varshney
Research Associate

5. Mr. Sanjay Kumar
Project Assistant

Field Survey: NPC Consultants/Research Associates/ Project
Assistants/Indian Council for Market Research,
Planman Consulting (ICMR)


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