India Light Electrical Industry Report: Air Conditioners, Refrigerators, Washing Machines

CONTENT
Page No. List of Tables List of Annexure Executive Summary Chapter 1 1.1 1.2 1.3 1.4 1.5 Chapter 2 2.1 2.2 2.3 2.3.1 2.3.2 2.3.3 2.3.3.1 2.3.3.2 2.3.3.3 2.3.4 2.3.4.1 2.3.5 2.3.5.1 2.3.5.2 Introduction Background Objectives of the Study Terms of Reference Methodology Limitations Light Electrical Industry: Large Home Appliances Segment Light Electrical Industry in India Growth of Durable Product Market in India Large Home Appliances Segment Preferential Government Policies India to enforce energy efficiency in climate fight Air Conditioners Types of Air Conditioners Penetration in India and Competing Countries Players and Market Share Refrigerators Players and Market Share Washing Machines Penetration of Washing Machines in India and Global Players and Market Share 7 8 10 10 12 13 14 14 14 16 18 19 21 21 1 3 3 4 6 i-v
2.3.5.3 2.3.6 2.3.7 2.8 2.9 Chapter 3 3.1 3.2 3.3 3.4 3.5 3.6 3.6.1 3.7 3.8 3.9 Chapter 4 4.1 4.2 4.2.1 4.2.2 4.2.3 4.2.4 4.3 4.3.1 4.3.2 4.3.3 4.3.4
Future Scenario Vacuum Cleaners Microwave Ovens Financial Analysis of Domestic Electrical Appliances Financial Analysis of Refrigerators and Air Conditioners Impact of WTO, FTAs and Global Economic Recession Introduction WTO and Implications for Indian Economy Impediments to the growth of Indias International Trade From the Uruguay Round to Doha Round The Doha Development Round Free Trade Agreements (FTAs) India- Thailand Free Trade Agreement Product Categories under Early Harvest Scheme India signs FTA with ASEAN Global Economic Recession Productivity Growth of Large Home Appliances Introduction Air Conditioner Key Features of the Registered Factory Sector Data and Variables Growth Air Conditioner Sector Partial and Total Factor Productivity Growth for Air Conditioner Industry Refrigerator Key Features of the Registered Factory Sector Data and Variables Growth Refrigerator Sector Partial and Total Factor Productivity Growth for Refrigerator Industry
22 23 23 25 26 27 28 29 29 30 31 32 34 35 36
38 38 38 39 40 40 43 43 44 44 45
4.4 4.4.1 4.4.2 4.4.3 4.4.4 Chapter 5 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 Chapter 6 6.1 6.2 6.3 6.3.1 6.3.2 6.3.3 6.3.4 6.4 6.4.1 6.4.2 6.4.3
Washing Machine Key Features of the Registered Factory Sector Data and Variables Growth of Washing Machine Partial and Total Factor Productivity Growth for Washing Machine Competitiveness of Large Home Appliances in India Introduction Export Trends Import Trends Export Competitiveness of Large Home Appliances Air Conditioners Refrigerator Washing Machine Vacuum Cleaners Microwave Ovens Conclusion Field Survey Findings of Large Home Appliances Profile of Light Electrical Manufacturing Units Product Category wise distribution of the manufacturing units Refrigerator General Profile of Respondents Employment Trend Domestic Market Trend Productivity and Competitiveness Air Conditioners General Profile of Respondents Employment Trend Domestic Market Trend
48 48 49 49 50
53 53 54 55 57 60 65 71 74 76
77 78 78 78 79 79 83 84 84 85 85
6.4.4 6.5 6.5.1 6.5.2 6.5.3 6.5.4 6.6 6.6.1 6.6.2 6.6.3 6.6.4 6.7 6.7.1 6.7.2 6.7.3 6.7.4 6.8 Chapter 7 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11
Productivity and Competitiveness Washing Machines General Profile of Respondents Employment Trend Domestic Market Trend Productivity and Competitiveness Vacuum Cleaners General Profile of Respondents Employment Trend Domestic Market Trend Productivity and Competitiveness Microwave Oven General Profile of Respondents Employment Trend Domestic Market Trend Productivity and Competitiveness Conclusions Summary of Diagnostic Case Studies Introduction Air Conditioner Manufacturing Unit 1: Mumbai, Maharashtra Air Conditioner Manufacturing Unit 2: Mumbai, Maharashtra Refrigerator Manufacturing Unit 3: NOIDA, Uttar Pradesh Refrigerator Manufacturing Unit 4: Aurangabad, Maharashtra Washing Machine Manufacturing Unit 5: Gurgaon, Haryana Washing Machine Manufacturing Unit 6: NOIDA, Uttar Pradesh Microwave Ovens Manufacturing Unit 7: NOIDA, Uttar Pradesh Microwave Ovens Manufacturing Unit 8: Mumbai, Maharashtra Vacuum Cleaners Manufacturing Unit 9: Mumbai, Maharashtra Vacuum Cleaners Manufacturing Unit 10: NOIDA, Uttar Pradesh
88 90 90 91 91 94 96 96 97 97 100 101 101 102 102 105 107 109 109 109 111 113 114 116 116 117 118 119 119
Chapter 8 8.1 8.2 8.3 8.4 8.5 Chapter 9 9.1 Chapter 10 10.1 10.2 10.2.1 10.3 10.4 10.5 10.6 10.6.1 10.6.2 10.6.3 10.6.4 10.6.5 Chapter 11 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 11.10 11.11 11.12
SWOT Analysis of Large Home Appliances in India Air Conditioner Refrigerator Washing Machine Vacuum Cleaner Microwave Oven Factors Constraining the Growth of the Sector Electrical Energy Generation Review Summary of Findings: Study of Major Asian Trade Partners Introduction China Lessons from Chinese Industry Thailand Malaysia Korea Energy Efficiency Standards and Labeling: International Scenario China India Thailand Malaysia Korea Conclusions and Recommendations Policy Guidelines for Skill Development and Training of Manpower Infrastructure Development Raw Material, Components & Machinery Building a Global Supply Chain Network R&D and Technology Upgradation Implementation of Quality Standards and Energy Efficiency Standards labeling programme FDI in Light Electrical Sector Policy of Disposal of e-waste Fiscal Incentives Changing character of Refrigeration Manufacturing in India Market Segmentation Quality and Price Discrimination 131 131 133 133 134 135 135 136 137 138 139 139 141 142 142 144 144 146 146 147 147 148 149 149 125 121 122 122 123 124
11.13 11.14 11.15 11.16
Customer Relationship Management Labour Relations Productivity Enhancement for Raising Profit Margins Contract manufacturing References Annexure Study Team
150 150 150 150 151 153-177 178
LIST OF TABLES
Page No 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 3.1 3.2 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 Growth drivers of Consumer durables Foreign Trade and Domestic consumption of Air ConditionersIndia Major Players / Manufacturers in India based on Market Share - Air Conditioner Foreign Trade and Domestic consumption of Refrigerators- India Major Players / Manufacturers in India based on Market Share Refrigerator Foreign Trade and Domestic consumption of Washing MachinesIndia Major Players / Manufacturers in India based on Market Share Washing Machines Foreign Trade and Domestic consumption of Vacuum CleanersIndia Major Players / Manufacturers in India based on Market Share Vacuum Cleaners Domestic Electrical Appliances (All Categories)- Financial Aggregates Refrigerators and Air Conditioners Financial Aggregates Indias Revised offer list for ASEAN under AI-FTA dated 7th Feb 2008 Year on Year Growth in Secondary Sector Characteristics of Registered Air Conditioning Industry in India Growth of Organized Air Conditioner Sector Productivity Estimates for Labour and Capital Inputs Labour, Capital and Total Factor Productivity Growth Index of Labour , Capital and Total Factor Productivity Growth Rates Characteristics of Refrigerator Sector in India Growth of Organized Refrigerator Sector Productivity Estimates for Labour and Capital Inputs Labour, Capital and Total Factor Productivity Growth Index of Labour , Capital and Total Factor Productivity Growth Rates Characteristics of Washing Machine Sector in India Growth of Organized Refrigerator Industry Productivity Estimates for Labour and Capital Inputs Labour, Capital and Total Factor Productivity Growth 10 16 16 19 19 22 22 23 23 25 26 35 37 39 40 41 42 42 44 45 45 46 47 48 49 50 51
4.15 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14 5.15 5.16 5.17 5.18 5.19 5.20 5.21 5.22 5.23 5.24 5.25 5.26
Index of Labour , Capital and Total Factor Productivity Growth Rates Segment wise Export of Home Appliances India Total Segment wise Import of Home Appliances India Total Product Segment wise Export-Import Ratio of Home Appliances Export of Other Window/Wall Types Self-contained Air Conditioning Machines Import of Other Window/Wall Types Self-contained Air Conditioning Machines Trade Ratio of Other Window/Wall Types Self-contained Air Conditioning Machines Country wise Export of Split System Air Conditioning Machines Country wise Import of Split System Air Conditioning Machines Trade Ratio of Split System Air Conditioning Machines Country wise Export of Refrigerator (Household Compressor type refrigerator) Country wise Import of Refrigerator (Household Compressor type refrigerator) Trade Ratio of Refrigerator (Household Compressor type refrigerator) Country wise Export of Refrigerator (Other Household type refrigerator) Country wise Import of Refrigerator (Other Household type refrigerator) Trade Ratio of Refrigerator (Other Household type refrigerator) Country wise Export of Other Machines, dry linen capacity <= 10kg Country wise Import of Other Machines, dry linen capacity <= 10kg Trade Ratio of Other Machines, dry linen capacity <= 10kg Country wise Export of Other Machines, with Built-in centrifugal drier of a dry linen capacity not exceeding 10kg Country wise Import of Other Machines, with Built-in centrifugal drier of a dry linen capacity not exceeding 10kg Trade Ratio of Other Machines, with Built-in centrifugal drier of a dry linen capacity not exceeding 10kg Country wise Export of fully automatic machines of dry linen capacity <=10 kg Country wise Import of fully automatic machines of dry linen capacity <=10 kg Trade Ratio of fully automatic machines of dry linen capacity <=10 kg Country wise Export of Vacuum Cleaners Country wise Import of Vacuum Cleaners
51 54 55 56 57 58 58 59 59 60 61 61 62 63 64 64 65 66 66 67 68 69 69 70 71 72 73
5.27 Trade Ratio of Vacuum Cleaners 5.28 Country wise Export of Microwave Ovens 5.29 Country wise Import of Microwave Ovens 5.30 Trade ratio of Microwave Ovens 6.1 Distribution of Manufacturing units- NPC Field Survey 6.2 Distribution of Manufacturing units- Product category wise Refrigerators 6.3 Refrigerator units surveyed: Statewise 6.4 Market share of Refrigerator 6.5 Domestic Sales to Total Sales 6.6 Local and Foreign Competition 6.7 Refrigerator Units: Import 6.8 Complete Knock Down (CKD) 6.9 Any Government Policies to help growth of Industry 6.10 Government Interface with business/private sector 6.11 Government friendly towards investor 6.12 Clearance to start manufacturing unit in India 6.13 Availability and quality of basic Infrastructure in India and Competing Countries 6.14 Taxes and other controls in India and Competing countries 6.15 Cost of production in Competing countries 6.16 Any effect of Global Financial Crisis on company Air Conditioners 6.17 Air Conditioners units surveyed: Statewise 6.18 Market share of Air Conditioners 6.19 Domestic Sales to Total Sales 6.20 Local and Foreign Competition 6.21 Import: Responses of Air Conditioners Units 6.22 Complete Knock Down (CKD) 6.23 Any Government Policies to help growth of Industry 6.24 Government Interface with business/private sector 6.25 Government friendly towards investor 6.26 Clearance to start manufacturing unit in India 6.27 Availability and quality of basic Infrastructure in India and Competing Countries 6.28 Taxes and other controls in India and Competing countries 6.29 Cost of production in Competing countries 6.30 Any effect of Global Financial Crisis on company Washing Machines 6.31 Washing Machines units surveyed: Statewise 6.32 Market share of Washing Machines 6.33 Domestic Sales to Total Sales
73 74 75 75 77 78 79 80 80 81 81 81 82 82 82 82 83 83 84 84 85 86 86 86 87 87 87 88 88 88 89 89 89 90 90 91 92
Local and Foreign Competition Import: Responses of Washing Machine Units Complete Knock Down (CKD) Any Government Policies to help growth of Industry Government Interface with business/private sector Government friendly towards investor Clearance to start manufacturing unit in India Availability and quality of basic Infrastructure in India and Competing Countries 6.42 Taxes and other controls in India and Competing countries 6.43 Cost of production in Competing countries 6.44 Any effect of Global Financial Crisis on company Vacuum Cleaners 6.45 Vacuum Cleaners units surveyed: Statewise 6.46 Market share of Vacuum Cleaners 6.47 Domestic Sales to Total Sales 6.48 Local and Foreign Competition 6.49 Import: Responses of Vacuum Cleaner 6.50 Complete Knock Down (CKD) 6.51 Any Government Policies to help growth of Industry 6.52 Government Interface with business/private sector 6.53 Government friendly towards investor 6.54 Clearance to start manufacturing unit in India 6.55 Availability and quality of basic Infrastructure in India and Competing Countries 6.56 Taxes and other controls in India and Competing countries 6.57 Cost of production in Competing countries 6.58 Any effect of Global Financial Crisis on company Microwave Oven 6.59 Microwave Oven units surveyed: Statewise 6.60 Market share of Microwave Ovens 6.61 Domestic Sales to Total Sales 6.62 Local and Foreign Competition 6.63 Import: Responses of Microwave Oven Units 6.64 Complete Knock Down (CKD) 6.65 Any Government Policies to help growth of Industry 6.66 Government Interface with business/private sector 6.67 Government friendly towards investor 6.68 Clearance to start manufacturing unit in India 6.69 Availability and quality of basic Infrastructure in India and Competing Countries 6.70 Taxes and other controls in India and Competing countries
6.34 6.35 6.36 6.37 6.38 6.39 6.40 6.41
92 93 93 93 94 94 94 94 95 95 95 96 97 97 98 98 98 99 99 99 99 100 100 101 101 101 102 103 103 104 104 104 105 105 105 105 106
6.71 6.72 9.1 9.2 9.3 9.4 9.5 9.6
Cost of production in Competing countries Any effect of Global Financial Crisis on company Electricity Generations- Target & Achievement (Jan 2009) Electricity Generations- Target & Achievement (Cumulative period April 2008 to Jan 2009) Fuel-wise components of thermal generation Hydro Energy Generation Energy content in the Reservoirs Region wise Shortfall in Generation
106 106 125 125 126 127 128 130
ANNEXURE
Page No. Annexure - 1: Survey Questionnaire Annexure -2 : Format for developing Diagnostic Case Studies Annexure 3: India-Thailand Consolidated List of Items for Early Harvest Scheme (EHS) Annexure -4: Methodology adopted for Partial and Total Factor Productivity Estimations Annexure -5: List Of Units Surveyed For The Field Study Annexure-6: Storage Position of Major Reservoirs based Projects in the Country Annexure-7 : Generation Performance of New Thermal Units during Apr.08 Jan09 Annexure-8 : Statement of shortfall in Generation (April 08-Jan 09) existing Thermal Stations vis--vis Target Annexure-9: List of Thermal Stations Achieving Higher generation than Target During April 08- Jan. 09
153 159 160 163 166 169 172 175
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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 countrys 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 MNCs 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
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that India has with South East Asian Nations (ASEAN), as Indias exports to ASEAN is worth only $16 billion, while ASEANs exports to India is to the tune of $24 billion. Indias trade with Singapore is more balanced, with Indias exports to that country worth $7 billion and imports of $8 billion. Indo-Thai Free Trade Agreement (FTA) was to the first of Indias 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.
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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
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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 PrivatePublicPartnership (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.
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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.
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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
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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--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
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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
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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--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
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(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.
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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 countrys 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
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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
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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 1015 per cent in 2007-08, driven by the growth in CTVs 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
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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.
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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.
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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 marketbased 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.
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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 airconditioner (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.
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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 playersLG, 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.
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Company
Mirc Electronics Limited Videocon International Limited LG Electronics India Limited Samsung India Electronics Limited Whirlpool of India Ltd Godrej & Boyce Mfg. Co. Ltd. Voltas Limited Electrolux Kelvinator Blue Star India Ltd Daikin Industries, Ltd.
Brands
Onida Videocon LG Samsung Whirlpool Godrej Voltas Electrolux Blue Star 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
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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 2003-04 2004-05 2005-06 2006-07 2007-08 94 205 216 180 198 253 330 473 715 914 1278 1819 0.28 0.43 0.30 0.20 0.15 0.14 2430 2920 3697 4794 6100 8403 2194 2652 3198 4060 5019 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 44.12 54.32 52.17 Total 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.
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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
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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. 2.3.4.1 Players and Market Share 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 Videocon International Limited LG Electronics India Limited Samsung India Electronics Limited Whirlpool of India Ltd Godrej & Boyce Mfg. Co. Ltd. Voltas Limited Electrolux Kelvinator Brands Videocon, Akai LG Samsung Whirlpool Godrej Voltas 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
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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 2003-04 2004-05 2005-06 2006-07 2007-08 59 84 77 115 218 347 103 94 119 74 115 111 0.58 0.89 0.65 1.56 1.89 3.12 2843 2860 3242 3559 3798 4064 2799 2850 3200 3600 3900 4300
Table 2.5: Major players/ Manufacturers in India based on Market share Refrigerator (%) Name of the Company 2002-03 2005-06 2007-08 Whirlpool of India L G Electronics India Pvt. Samsung India Electronics Pvt. 28.55 16.88 7.08 24.36 24.56 17.3 28.48 27.14 22.46
Total 52.51 66.22 78.08 Source: CMIE, Industry Market Size and Share, April 2009 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
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quite sometime. Fully automatic washing machines have been growing at 44.5 per cent and semiautomatic segment, at about 18 per cent. The entry of MNCs 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,
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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 Whirlpool of India Ltd. LG Electronics India Limited Samsung India Electronics Limited Godrej & Boyce Mfg. Co. Ltd. BPL IFB Industries Limited Hitachi Home & Life Sol. India Ltd. Haier Appliances India P. Ltd. Toshiba India Pvt. Ltd. Kenstar Kitchen Appliances Ltd. Brands Whirlpool LG Samsung Godrej BPL IFB Hitachi Haier Toshiba 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. 2.3.5.2 Players and Market Share 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)
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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 2003-04 2004-05 2005-06 2006-07 2007-08 40 39 67 87 33 35 45 46 70 108 154 232 0.87 0.84 0.96 0.80 0.22 0.15 1913 1945 2027 2261 2512 2962 1907 1937 2024 2240 2391 2765
Table 2.7 Major players/ Manufacturers in India based on Market share Washing Machines (%) Name of the Company 2002-03 2005-06 2007-08 Value Industries 50.01 47.72 38.14 L G Electronics India Pvt. 11.61 14.57 15.57 Samsung India Electronics Pvt. 6.42 10.04 12.72
Total 68.04 72.33 66.43 Source: CMIE, Industry Market Size and Share, April 2009
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.
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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 2003-04 2004-05 2005-06 2006-07 2007-08 2 3 3 3 2 6 5 5 9 10 14 28 0.33 0.55 0.31 0.31 0.11 0.22 178 174 182 197 226 216 175 172 176 190 213 194
Table 2.9: Major players/ Manufacturers in India based on Market share - Vacuum Cleaner (%) Name of the Company 2002-03 2005-06 2007-08 Eureka Forbes 61.65 64.58 68.25 Forbes & Co. 30.26 18.58
Total
61.65 94.84 86.83 Source: CMIE, Industry Market Size and Share, April 2009
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:
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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 Whirlpool of India Ltd. LG Electronics India Limited Samsung India Electronics Limited Electrolux Kelvinator Ltd. Godrej & Boyce Mfg. Co. Ltd. BPL IFB Industries Limited Hitachi Home & Life Sol. India Ltd. Haier Appliances India P. Ltd. Panasonic India Ltd. Inalsa Export Pvt. Ltd. Sanyo India Private Limited
Brands Whirlpool LG Samsung Electrolux Godrej BPL IFB Hitachi Haier Panasonic Inalsa Sanyo
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Sharp India Ltd. Videocon Appliances Ltd. Kenstar Kitchen Appliances Ltd.
Sharp Videocon 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)
S. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Variables Total Income Sales Total expenses Raw material expenses Power, fuel & water charges Compensation to employees Selling & Dist. Expenses Interest paid Depreciation Forex earnings Forex spending Reserves & surplus Total borrowings Current liabilities Sundry creditors Assets Gross fixed assets Net fixed assets Investments
2000-01 2004-05 2007-08 CAGR(%) 2000-01 to 2007-08 CAGR(%) 2000-01 to 2004-05 CAGR(%) 2004-05 to 2007-08
3,051 2,985 3,236 1,497 55 196 193 244 111 88 276 302 1,745 887 553 2,279 1,519 115
4,126 3,983 4,185 2,022 58 218 254 208 151 313 324 -8 1,734 1,194 623 2,656 1,316 93
5,280 5,054 5,192 2,148 47 267 408 153 121 88 344 159 1,931 1,433 717 2,807 1,258 88
8.15 7.81 6.99 5.29 -2.22 4.52 11.29 -6.45 1.24 0.00 3.20 -8.76 1.46 7.09 3.78 3.02 -2.66 -3.75
7.84 7.48 6.64 7.81 1.34 2.70 7.11 -3.91 8.00 37.33 4.09 -0.16 7.71 3.02 3.90 -3.52 -5.17
8.57 8.26 7.45 2.04 -6.77 6.99 17.11 -9.73 -7.12 -34.49 2.02 3.65 6.27 4.80 1.86 -1.49 -1.83
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
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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)
S. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Variables Total Income Sales Total expenses Raw material expenses Compensation to employees Selling & Dist. Expenses Interest paid Depreciation Forex earnings Forex spending Reserves & surplus Total borrowings Current liabilities Sundry creditors Gross fixed assets Net fixed assets Investments Deferred tax assets Total assets/liab.
2000-01 3607 3494 3649 1742 274 395 144 103 68 317 190 1155 1036 484 1708 1229 57 98 3062
2004-05 3770 3666 3974 1994 303 421 51 90 252 536 -406 842 1021 471 1388 749 18 116 2462
2007-08 6780 6683 6581 3686 388 572 40 89 470 1186 802 517 2095 843 1529 835 24 138 3976
CAGR(%) CAGR(%) CAGR(%) 2000-01 2000-01 2004-05 to to to 2007-08 2004-05 2007-08 9.43 1.11 21.61 9.71 1.21 22.16 8.79 2.16 18.31 11.30 5.10 5.43 -16.72 -2.07 31.81 20.74 22.84 -10.85 10.58 8.25 -1.57 -5.37 -11.62 5.01 3.80 3.44 2.55 1.61 -22.86 -3.32 38.75 14.03 -7.60 -0.36 -0.68 -5.05 -11.64 -25.04 4.31 -5.31 22.73 8.59 10.76 -7.78 -0.37 23.09 30.31 -15.01 27.07 21.41 3.28 3.69 10.06 5.96 17.32
Source: Industry: Financial Aggregates & Ratios, Centre for Monitoring Indian Economy, March 2009
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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.
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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.
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3.3. Impediments to the growth of Indias 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 twothirds 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. Indias 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
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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.
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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 Indias 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 Indias exports to ASEAN is worth only $16 billion, while ASEANs 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 Indias attempts to integrate economically with Asia. Compared to this, Indias trade with Singapore is more balanced, with Indias exports to that country worth $7 billion and imports of $8 billion. Of late China is emerging as Indias largest trading partner replacing the US. Indias 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.
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Indo-Thai Free Trade Agreement (FTA) was to be the first of Indias 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--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 MekongGanga 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.
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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 Indias 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
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and the latter by reduced government revenues. However, this could be more than compensated by Indias 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 1.3.2004-28.2.2005 1.3.2005-28.2.2006 1.3.2006 Tariff reduction on applied MFN tariff rates as of 1st January 2004 50% 75% 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.
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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 countrys 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: Indias Revised offer list for ASEAN under AI-FTA dated 7th Feb 2008 Sl.No. 1 2 3 4 HS Code 841821 845012 845019 851650 Description Compression-type Refrigerators, Household Other machines, with built-in centrifugal drier of a dry linen capacity Other machines of a dry linen capacity <=10 Kg Microwave Ovens Tariffs 2007-08 10 10 10 10 Offered under NT-1 NT-1 NT-1 NT-1
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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 6.57.0 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--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.
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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
Details Manufacturing Mining Electricity Secondary Sector
Apr-Sep, Financial Year 2008 10.0 5.1 7.7 9.5
Apr-Sep, Financial Year 2009 5.2 3.9 2.6 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.
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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).
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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 Number of Factories Number of Persons Employed Gross Value Added (Constant Prices1993-94=100) Value of Output (Constant Prices 1993-94=100) Capital Stock (Constant Prices 1993-94 = 100) 1999-00 2755 109704 211119 2000-01 2589 105114 237433 2001-02 2735 110074 237772 2002-03 2720 107446 166831 2003-04 2547 101526 172768 2004-05 2919 120394 203030 2005-06 2752 117986 210588
755264
819304
962167
860943
790936
979536
1037586
360369
261838
257609
213643
166341
189707
245680
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.
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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
Indicators
Period I (1999-00 to 200203)
Period II (2002-03 to 2005-06) CAGR (%)
Period III (1999-00 to 200506)
Gross Value Added (At Constant Prices) Value of Output (At Constant Prices) No. of Factories (Nos) Persons Employed (Nos)
-7.55 4.46 -0.43 -0.69
8.07 6.42 0.39 3.17
-0.04 5.44 -0.02 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 Source: Computed from Annual Survey of Industries, CSO, Summary results of Factory Sector
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.
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Table 4.3: Productivity Estimates for Labour and Capital inputs Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Capital Productivity 0.59 0.91 0.92 0.78 1.04 1.07 0.86 Labour Productivity 192444 225881 216011 155270 170172 168638 178485 (Rs.) Capital Intensity (Capital/Labour) 328492 249099 234033 198838 163841 157572 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.
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Table 4.4: Labour, Capital and Total Factor Productivity Growth (%) Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Capital Productivity Growth -54.78 1.79 -15.40 33.01 3.04 Labour Productivity Growth -17.38 -4.37 -28.12 9.60 -0.90 Total Factor Productivity Growth --24.34 0.21 -13.52 -18.12 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 Average for the Period 5.38 4.85 4.10 2002-03 to 2005-06 Source: Computed from Annual Survey of Industries, CSO, Summary results of Factory Sector
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 Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 Capital Productivity Growth Index 100.00 154.78 156.57 141.18 174.18 177.22 Labour Productivity Growth Index 100.00 117.38 113.01 84.89 94.48 93.58 Total factor Productivity Growth Index 100.00 75.66 75.87 62.35 44.23 58.88
157.32 99.42 74.66 2005-06 Source: Computed from Annual Survey of Industries, CSO, Summary results of Factory Sector
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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.
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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 (Value in Rs. Lakhs, others in Numbers) Indicators Number of Factories Number of Persons Employed Gross Value Added (Constant Prices 1993-94=100) Value of Output (Constant Prices 1993-94=100) Capital Stock (Constant Prices 1993-94 = 100) 1999-00 651 42704 74989 2000-01 784 36986 75343 2001-02 630 30659 55443 2002-03 752 34163 54808 2003-04 662 29650 50339 2004-05 706 29524 41783 2005-06 687 32158 41835
345201
325196
264150
370151
308852
281653
262330
219618
154438
122302
170188
125475
94423
77962
4.3.2 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 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.
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Table 4.7: Growth of Organized Refrigerator Sector Period I (1999-00 to 2002-03) -9.92 2.35 4.92 -7.17 -8.15 Period II (2002-03 to 2005-06 CAGR (%) -8.61 -10.84 -2.97 -2.00 -22.91 Period III (1999-00 to 2005-06) -9.27 -4.47 0.90 -4.62 -15.85
Indicators
Gross Value Added (At Constant Prices) Value of Output (At Constant Prices) No. of Factories (Nos) Persons Employed (Nos) Capital Stock (Constant Prices 1993-94 = 100)
Note: Labour Productivity has been estimated as GVA/Number of Persons Employed Source: Computed from Annual Survey of Industries, CSO, Summary results of Factory Sector
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.
Table 4.8: Productivity Estimates for Labour and Capital inputs (Rs.) Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Capital Productivity 0.34 0.49 0.45 0.32 0.40 0.44 0.54 Labour Productivity 175602 203706 180838 160432 169776 141523 130092 Capital Intensity (Capital/labour) 514280 417557 398909 498164 423188 319818 242434
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From Table 4.8 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. 0.32 to Rs. 0.54 while labour productivity was found in the range of Rs. 130092 to Rs. 203706 during 1999-00 to 200506. Table 4.8 shows that the labour productivity increased at a slow pace in the beginning 19992000 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. Table 4.9 provides year on year growth rate estimations for capital, labour and total factor 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.
Table 4.9: Labour, Capital and Total Factor Productivity Growth Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Average for the Period 2000-01 to 2002-03 Average for the Period 2003-04 to 2005-06 Capital Productivity Growth -42.88 -7.08 -28.96 24.57 10.30 21.26 2.28 18.71 Labour Productivity Growth -16.00 -11.23 -11.28 5.82 -16.64 -8.08 -2.17 -6.30 (%) Total factor Productivity Growth --31.72 -22.59 29.47 -27.79 -23.12 -13.33 -8.28 -21.41
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 4.10. Among the three growth rates 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.
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Table 4.10: Index of Labour, Capital and Total Factor Productivity Growth Rates Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Capital Productivity Growth Index 100.00 142.88 135.80 106.84 131.41 141.71 162.98 Labour Productivity Growth Index 100.00 116.00 104.78 93.49 99.32 82.68 74.60 Total factor Productivity Growth Index 100.00 68.28 45.69 75.15 47.37 24.24 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.
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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 (Value in Rs. Lakhs, others in Numbers) Indicators Number of Factories Number of Persons Employed Gross Value Added (Constant Prices 1993-94=100) Value of Output (Constant Prices 1993-94=100) 1999-00 1526 46382 76958 2000-01 1382 33899 67718 2001-02 1283 38269 76557 2002-03 1321 116684 71115 2003-04 1310 114167 68876 2004-05 1279 46038 66811 2005-06 1298 48321 69283
344017
296064
312917
310693
295567
330839
359619
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4.4.2 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 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 Period I (1999-00 to 2002-03) Period II (2002-03 to 2005-06 CAGR (%) Gross Value Added (At Constant Prices) Value of Output (At Constant Prices) No. of Factories (Nos) Persons Employed (Nos) -2.60 -3.34 -4.69 36.00 -0.87 5.00 -0.58 -25.46 -1.74 0.74 -2.66 0.68 Period III (1999-00 to 2005-06)
Indicators
Note: Labour Productivity has been estimated as GVA/Number of Persons Employed Source: Computed from Annual Survey of Industries, CSO, Summary results of Factory Sector
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.
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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.
Table 4.13: Productivity Estimates for Labour and Capital inputs (Rs.) Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Capital Productivity 0.31 0.54 0.64 0.72 0.79 0.86 1.05 Labour Productivity 117592 124171 151335 147836 145197 127303 132934
From Table 4.13 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. 0.31 to Rs. 1.05 while labour productivity was found in the range of Rs. 117592 to Rs. 151335 during 1999-00 to 2005-06. Table 4.14 provides year on year growth rate estimations for capital, labour and total factor 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.
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Table 4.14: Labour, Capital and Total Factor Productivity Growth Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Average for the Period 2000-01 to 2002-03 Average for the Period 2003-04 to 2005-06 Capital Productivity Growth -73.14 18.43 12.65 10.40 8.56 21.81 34.74 13.59 Labour Productivity Growth -5.60 21.88 -2.31 -1.79 -12.32 4.42 8.39 -3.23 (%) Total Factor Productivity Growth --54.59 -5.34 -15.67 -9.74 -4.15 -10.25 -25.20 -8.05
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 4.15. Among the three growth rates 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 Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Capital Productivity Growth Index 100.00 173.14 191.57 204.22 214.62 223.18 244.99 Labour Productivity Growth Index 100.00 105.60 127.47 125.16 123.37 111.05 115.47 Total factor Productivity Growth Index 100.00 45.41 40.07 24.41 14.67 10.52 0.27
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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.
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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 2000National Productivity Council
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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 Year Air Conditioner 305 326 728 333 1179 2213 4901 12722 12395 8479 6643 10156 40.17 Refrigerator 706 1358 1439 1832 3117 3949 5940 8355 7660 11539 21758 34661 44.95 41.07 42.47 Washing Machine 447 359 519 616 1174 2719 2928 3089 3129 1347 1289 1783 27.26 6.16 13.39 Vacuum Cleaner 284 136 48 152 114 141 154 284 281 325 164 605 -20.40 26.93 7.12 (Rs. Lakhs) Microwave Total Oven 16 1759 16 2195 113 2847 33 2965 0 5584 12 9034 21 13943 510 24960 60 23525 1548 23237 1683 31537 21 47226 -100 33.48 2.50 35.66 34.87
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 CAGR 1996-97 to 2000-01 CAGR 2000-01 36.02 to 2007-08 CAGR 1996-97 37.52 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
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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 Year 1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 CAGR 1996-97 to 2000-01 CAGR 2000-01 to 2007-08 CAGR 1996-97 to 2007-08 Air Conditioner 558 875 1164 3448 5818 4779 5013 10027 14755 28375 44469 77351 79.69 44.72 56.57 Refrigerator 3814 5182 7579 9637 9177 10470 10314 9372 11864 7394 11540 11103 24.55 2.76 10.20 Washing Machine 622 1242 2332 3019 5467 3320 1928 2082 4496 7175 11592 16360 72.18 16.95 34.61 Vacuum Cleaner 11 36 65 350 412 296 464 513 912 1034 1423 2779 147.39 31.35 65.35 (Rs.lakhs) Microwave Total Oven 5 5010 297 7632 351 11491 1817 18271 2978 23852 2411 21276 3024 20743 3460 25454 6372 38399 11015 54993 12729 81753 14885 122478 394.01 47.71 25.84 106.92 26.33 33.72
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.
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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 200304 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 Conditioner 0.55 0.37 0.63 0.10 0.20 0.46 0.98 1.27 0.84 0.30 0.15 0.13 Refrigerator Washin g Machine 0.72 0.29 0.22 0.20 0.21 0.82 1.52 1.48 0.70 0.19 0.11 0.11 Vacuum Cleaner 25.82 3.78 0.74 0.43 0.28 0.48 0.33 0.55 0.31 0.31 0.12 0.22 Microwave Oven 3.20 0.05 0.32 0.02 0.00 0.00 0.01 0.15 0.01 0.14 0.13 0.00 Total
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
0.19 0.26 0.19 0.19 0.34 0.38 0.58 0.89 0.65 1.56 1.89 3.12
0.35 0.29 0.25 0.16 0.23 0.42 0.67 0.98 0.61 0.42 0.39 0.39
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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 Year China
2003-2004 2004-2005 2005-2006 2006-2007
Korea 1 0 234 11 1
Malaysia 2 0 1 0 8
Thailand 0 87 4 0 11
(Rs. Lakhs) Total 3 88 250 11 20
0 1 11 0
0 2007-2008 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.
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Table 5.5: Import of Other Window/Wall Types Self-contained Air Conditioning Machines H.S. Code: 84151090 Year China
2003-2004 2004-2005 2005-2006 2006-2007
Korea 1148 340 142 162 82
Malaysia 69 84 37 303 351
(Rs. Lakhs) Thailand Total 572 1940 3608 7416 8268 2437 4679 8179 15290 40059
648 2315 4392 7409
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 Conditioning Machines H.S. Code: 84151090 Year Total Export to four countries* 3 2003-2004
2004-2005 2005-2006 2006-2007
Total Import from four countries* 2437 4679 8179 15290 40059
Total Trade Ratio: Export / Import 0.0012 0.0188 0.0306 0.0007 0.0005
88 250 11
20 2007-2008 *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.
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Table 5.7: Country wise Export of Split System Air Conditioning Machines H.S. Code: 84151010 Year China
2003-2004 2004-2005 2005-2006 2006-2007
Korea 0 196 376 1 0
Malaysia 36 0 5 0 0
Thailand 17 0 53 1 0
(Rs. Lakhs) Total 53 197 435 2 0
0 1 1 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 200708. 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 H.S. Code: 84151010 Year China
2003-2004 2004-2005 2005-2006 2006-2007
Korea 247 190 244 133 212
Malaysia 6 11 37 208 487
Thailand 3564 2802 5972 8877 10954
(Rs. Lakhs) Total 4812 6615 15489 20987 28246
995 3612 9236 11769
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.
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Table 5.9: Trade Ratio (Export/ Import) of Split System Air Conditioning Machines H.S. Code: 84151010 Year Total Export to four countries* 53 2003-2004
2004-2005 2005-2006 2006-2007 2007-2008
Total Import from four countries* 4812 6615 15489 20987 28246
Total Trade Ratio: Export / Import 0.0110 0.0298 0.0281 0.0001 0.0000
197 435 2 0
*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.
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Table 5.10: Country wise Export of Refrigerator (Household Compressor type refrigerator) H.S. Code: 84182100 Year China
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
Korea 0 0 0 0 1 0 1 0 0 1 0 0
Malaysia 34 0 1 0 0 0 0 39 0 0 0 0
Thailand 0 0 0 0 0 0 179 50 148 105 87 44
(Rs. Lakhs) Total 34 0 1 0 1 0 180 103 148 151 87 44
2007-2008 Source: delhi.dgft.nic.in
0 0 0 0 0 0 0 14 0 45 0 0
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, Malaysia, and Thailand. 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) H.S. Code: 84182100 Year China
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
Korea 1487 2402 1961 6489 5053 5565 5183 3431 3120 2417 1235 1475
Malaysia 0 0 0 20 13 0 0 2 1 104 45 0
Thailand 22 164 0 366 878 1002 1695 1741 651 1001 5068 5621
(Rs. Lakhs) Total 1509 2566 1962 6886 5944 6621 6881 5476 3998 3712 6704 7745
0 0 1 11 0 54 3 302 226 190 356 649
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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 Year Total Export to four countries
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
Total Import from four countries 1509 2566 1962 6886 5944 6621 6881 5476 3998 3712 6704 7745
Total Trade Ratio: Export / Import 0.0225 0.0000 0.0005 0.0000 0.0002 0.0000 0.0262 0.0188 0.0370 0.0407 0.0130 0.0057
34 0 1 0 1 0 180 103 148 151 87
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.
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Table 5.13: Country wise Export of Refrigerator (Other Household type refrigerator) H.S. Code: 84182900 Year China
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
Korea 0 1 0 0 0 0 0 0 0 12 0 0
Malaysia 0 1 0 0 0 0 0 2 18 0 3 0
Thailand 0 0 0 0 4 12 1 0 2 0 0 0
(Rs. Lakhs) Total 0 2 0 0 4 12 1 2 20 13 3 0
0 0 0 0 0 0 0 0 0 1 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, Malaysia, and Thailand.
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.
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Table 5.14: Country wise Import of Refrigerator (Other Household type refrigerator) H.S. Code: 84182900 Year China
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
Korea 1599 1723 4466 1976 2495 2200 521 535 1498 1434 2375 1391
Malaysia 0 0 1 0 0 0 27 2 24 5 0 1
(Rs. Lakhs) Thailand Total 0 1 15 0 52 415 540 414 225 255 10 46 1601 1878 4500 1982 2555 2616 1107 1017 3517 2126 2682 1857
2 154 18 6 8 1 19 66 1770 432 297
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 Year Total Export to four countries*
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
Total Import from four countries* 1601 1878 4500 1982 2555 2616 1107 1017 3517 2126 2682 1857
0 2 0 0 4 12 1 2 20 13 3 0
*China, Korea, Thailand and Malaysia

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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 H.S. Code: 84501900 Year China
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
Korea 0 1 0 0 17 1 1 0 3 1 1 1
Malaysia 0 0 0 0 0 16 0 0 17 0 0 1
0 0 2 0 0 0 0 426 0 0 0
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, Malaysia, and Thailand. 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.
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Table 5.17: Country wise Import of Other Machines, dry linen capacity <= 10kg H.S. Code: 84501900 Year China
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
Korea 25 43 138 6 353 61 35 42 14 61 1 1
Malaysia 0 0 0 0 1 0 0 0 3 4 3 2
Thailand 0 0 0 0 0 0 24 12 16 327 362 144
(Rs. Lakhs) Total 25 49 281 19 626 251 125 91 943 2306 2648 4721
0 6 143 13 272 190 66 37 910 1914 2282 4574
Source: delhi.dgft.nic.in 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 Year Total Export to four countries*
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
0 5 2 0 22 17 81 426 61 14 2
2 *China, Korea, Thailand and Malaysia
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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 H.S. Code: 84501200 (Rs. Lakhs) Year China Korea Malaysia Thailand Total
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 7 0 0 0 0
0 0 0 0 0 28 0 17 7 0 0 0
0 0 0 0 0 28 0 24 7 0 0 0
Source: delhi.dgft.nic.in 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 200708 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.
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Table 5.20: Country wise Import of Other Machines, with Built-in centrifugal drier of a dry linen capacity not exceeding 10kg H.S. Code: 84501200 Year China
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
Korea 93 0 0 78 69 0 0 0 0 0 0 0
Malaysia 0 0 0 0 0 0 0 0 0 0 1 0
0 0 0 0 611 0 20 49 126 324 2345 3780
Source: delhi.dgft.nic.in 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.
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Table 5.21: Trade Ratio (Export/ Import) of centrifugal drier of a dry linen capacity not exceeding 10kg H.S. Code: 84501200 Year
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
Other
Machines,
with
Built-in
2007-2008 *China, Korea, Thailand and Malaysia
Total Export to four countries* 0 0 0 0 0 28 0 24 7 0 0 0
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 H.S. Code: 84501100 (Rs. Lakhs) Year
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
China 0 0 9 0 0 0 0 0 0 0 0 4
Korea 0 0 0 0 0 0 1 0 1 1 0 15
Malaysia 0 0 0 0 0 0 0 0 0 7 0 0
Thailand 0 0 0 0 27 67 76 98 177 0 0 0
Total 0 0 9 0 27 67 77 98 178 8 0 19
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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 H.S. Code: 84501100 Year
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
(Rs. Lakhs) Korea 212 791 1098 1826 1829 1033 574 312 537 184 105 218 Malaysia 0 0 0 0 0 0 0 2 3 3 0 0 Thailand 0 0 0 0 0 0 156 525 221 71 412 478 Total 212 959 1689 2527 2926 1933 856 1119 2400 3046 4580 5549
China 0 168 591 701 1097 900 126 280 1639 2788 4063
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.
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Table 5.24:Trade Ratio (Export/ Import) of fully automatic machines of dry linen capacity <=10 kg H.S. Code: 84501100 Year
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
Total Export to four countries* 0 0 9 0 27 67 77 98 178 8 0 19
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.
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Table 5.25: Country wise Export of Vacuum Cleaners H.S. Code: 85091000 Year
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
(Rs. Lakhs) Korea 0 0 0 0 6 0 0 0 0 0 0 0 Malaysia 0 0 0 0 0 0 0 2 6 12 4 2 Thailand 54 0 0 0 0 0 4 1 1 1 0 116 Total 54 23 0 0 6 0 4 26 8 28 4 119
China 0 23 0 0 0 0 0 23 1 15 0
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.
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Table 5.26: Country wise Import of Vacuum Cleaners H.S. Code: 85091000 Year China
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
Korea 0 0 0 0 46 98 107 31 76 5 59 90
Malaysia 0 0 0 0 1 2 3 5 2 7 10 75
0 0 2 6 47 50 115 332 634 792 926
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 200708. 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 Year 1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 Total Export to four countries* 54 23 0 0 6 0 4 26 8 28 4 119 Total Import from four countries* 0 0 2 6 94 150 225 368 712 804 995 1433 Total Trade Ratio: Export / Import 0.0000 0.0000 0.0000 0.0000 0.0638 0.0000 0.0178 0.0707 0.0112 0.0348 0.0040 0.0830
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5.9. Microwave Ovens
The country wise exports of microwave ovens has been shown in Table 5.28 for the year 199697 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 200203. There were no exports reported to China and Thailand during all the years.
Table 5.28: Country wise Export of Microwave Ovens H.S. Code: 85165000 Year China
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
Korea 0 0 0 0 0 1 1 0 0 0 0 0
Malaysia 0 0 0 0 0 1 1 1 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0
Source: delhi.dgft.nic.in 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.
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Table 5.29: Country wise Import of Microwave Ovens H.S. Code: 85165000 Year China
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
Korea 0 269 337 1152 1524 836 124 172 73 12 21 44
Malaysia 0 0 0 0 0 63 156 0 342 770 734 969
0 0 1 207 767 552 1893 2736 3815 6619 8054 9929
Source: delhi.dgft.nic.in 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 200708. 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 Year Total Export to four countries*
1996-1997
0 0 1997-1998 0 1998-1999 0 1999-2000 0 2000-2001 2 2001-2002 2 2002-2003 1 2003-2004 0 2004-2005 0 2005-2006 0 2006-2007 0 2007-2008 *China, Korea, Thailand and Malaysia
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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.
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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. 1 2 3 4 5 6 7 8 Total States Andhra Pradesh Delhi/NCR Haryana Karnataka Maharashtra Tamil Nadu Uttar Pradesh West Bengal No. of Units 7 24 2 10 12 8 2 5 70 Percentage 10.00 34.29 2.86 14.29 17.14 11.43 2.86 7.14 100
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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 1 2 3 4 5 Total Product Refrigerator Air Conditioner Washing Machine Vacuum Cleaner Microwave Oven No. of Units 16 19 11 14 10 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%
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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 Andhra Pradesh Delhi Haryana Karnataka Maharashtra Tamil Nadu Total No. of Units 3 6 1 2 2 2 16 Percent 18.8 37.5 6.3 12.5 12.5 12.5 100
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).
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Table 6.4: Market share of Refrigerator Response 0-10% 11-25% 51% & above Percent 76.9 7.7 15.4
Table 6.5: Proportion of Domestic Sales to Total Sales Response 0-10% 11-25% 26-50% 51% & above Percent 6.3 12.5 6.3 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.
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Table 6.6: Local and Foreign Competition Response Low Intense Medium Local (%) Foreign (%) 25.0 75.0 20.0 40.0 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 Yes No Percent 44.4 55.6
Table: 6.8: Complete Knock Down (CKD)
Response 0-10% 11-25% 51% & above
Percent 30.0 20.0 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).
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Table: 6.9: Government Policies & Growth of Industry Response Yes No Percent 50.0 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 Average Poor Percent 66.7 33.3
Table: 6.11: Government friendly towards investor Response Yes No Percent 57.1 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 3-5 months 6-9 months 10-12 months more than one year Percent 66.7 6.7 20.0 6.7
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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 Poor Reasonable Good Excellent India (%) 33.3 60.0 6.7 Competing Countries (%) 7.7 15.4 69.2 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 Low Moderate High Very High India 25.0 68.8 6.3 Competing Countries 58.3 41.7 -
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).
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Table: 6.15: Cost of Production In Competing Countries Responses of Refrigerator Units Response Low Moderate High Percent 53.8 38.5 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 Yes No 6.4. AIR CONDITIONERS 6.4.1. General Profile of Respondents This section analyzes the finding of the field survey conducted at different manufacturing locations in India. The field survey includes 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. Percent 46.7 53.3
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Table 6.17: Air-Conditioners units surveyed: Statewise States Andhra Pradesh Delhi Haryana Karnataka Maharashtra Tamil Nadu West Bengal Total Frequency 1 6 1 3 4 1 3 19 Percent 5.3 31.6 5.3 15.8 21.1 5.3 15.8 100.0
There is hardly any merger and acquisitions reported among the surveyed units. More than 72% of the units are having quality accreditations of which 70% of them are having ISO 9000. 6.4.2. Employment Trend 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. 6.4.3. Domestic Market Trend 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).
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Table 6.18: Market Share of Air Conditioners Response 0-10% 11-25% 51% & above Percent 72.2 22.2 5.6
Table 6.19: Proportion of Domestic Sales to Total Sales Response 11-25% 26-50% 51% & above Percent 15.8 10.5 73.7
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 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). Table 6.20: Local and Foreign Competition Response Intense Medium Low Local 22.2 61.1 16.7 Foreign 58.8 29.4 11.8
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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 Yes No Percent 30.8 69.2
Table: 6.22: Complete Knock Down (CKD) Response 0-10% 11-25% 51% & above Percent 42.9 14.3 42.9
However, semi-knocked down firm was reported in the range of 0-10% by more than 85% manufacturing units. Low cost of production in India is considered to be a favorable environment in the age of 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 Yes No Percent 55.6 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 3National Productivity Council
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5months (41% surveyed) in India as compared to 1-2 months in competing countries (Table 6.26). Table: 6.24: Government Interface with business/private sector Response Excellent Average Poor Percent 5.6 72.2 22.2
Table: 6.25: Government friendly towards investor Response Yes No Percent 60 40
Table: 6.26: Clearance to start manufacturing unit in India

Response 3-5 months 6-9 months 10-12 months more than one year Percent 41.2 11.8 29.4 17.6
6.4.4. Productivity and Competitiveness 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 faster pace (Table 6.27). has been helping the industries to grow at smoother and
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Table: 6.27: Avalability and quality of basic Infrastructure in India and Competing Countries Response Poor Reasonable Good Excellent India 11.1 66.7 11.1 11.1 Competing Countries 6.7 13.3 60.0 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 Response Low Moderate High Very High India 36.8 42.1 21.1 Competing Countries 81.3 12.5 6.3 -
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 Low Moderate High Percent 75.0 12.5 12.5
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Global financial crisis according to 22.2% units didnt 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 Yes No Percent 77.8 22.2
6.5. WASHING MACHINES 6.5.1. General Profile of the Respondents This section analyzes the finding of the field survey conducted at different manufacturing 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 States Andhra Pradesh Delhi Karnataka Maharashtra Tamil Nadu West Bengal Total Frequency 2 3 2 2 1 1 11 Percent 18.2 27.3 18.2 18.2 9.1 9.1 100.0
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There is hardly any merger and acquisitions reported among the surveyed units. More than 46% of the units are having quality accreditations of which 60% of them are having ISO 9000. 6.5.2. Employment Trend 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. 6.5.3. Domestic Market Trend 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 0-10% 11-25% 51% & above Percent 63.6 18.2 18.2
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Table 6.33: Proportion of Domestic Sales to Total Sales Response 11-25% 26-50% 51% & above Percent 9.1 36.4 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). Table 6.34: Local and Foreign Competition Response Intense Medium No Competition Local 63.6 36.4 Foreign 50 40 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 case of import, about 75% units reported that the import is in the form of completely knocked down (CKD) firm for more than 51% imports (Table 6.36).
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Table: 6.35: Import: Responses of Washing Machine Units Response Yes No Percent 22.2 77.8
Table: 6.36: Complete Knock Down (CKD) Response 0-10% 51% & above Percent 25 75
However, semi-knocked down firm was reported in the range of 0-10% by more than 50% manufacturing units. Low cost of production in India is considered to be a favorable environment in the age of competitiveness. More than 33% of manufacturing units supported the claim. More than 60% of 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 Yes No Percent 60 40
According to 77.8 % registered units, the Government interface with the business is satisfactory (Table 6.38). Moreover, 60% units believed that Government is friendly towards the investors (Table 6.39). But investors complain that to start a unit in India normally it takes around 35months (45% surveyed) in India as compared to 1-2 months in competing countries (Table 6.40).
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Table: 6.38: Government Interface with business/private sector Response Average Poor Percent 77.8 22.2
Table: 6.39: Government friendly towards investor Response Yes No Percent 60 40
Table: 6.40: Clearance to start manufacturing unit in India Response 1-2 months 3-5 months 6-9 months 10-12 months more than one year 6.5.4. Productivity and Competitiveness Infrastructure in India is considered to be in terrible conditions. 88% 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 88% units felt that the infrastructure in competing countries is excellent and faster pace (Table 6.41) Table: 6.41: Avalability and quality of basic Infrastructure in India and Competing Countries: Response Poor Reasonable Good India 11.1 77.8 11.1 Competing Countries 11.1 44.4 44.4
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Percent 9.1 45.5 9.1 18.2 18.2
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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 72% of the units believed that the tax rates to be high and complex as compared to 75% units considered that taxes in competing countries are low and procedures related to taxes are uniform and simple (Table 6.42). Table: 6.42: Taxes and other controls in India and Competing Countries Response Low Moderate High Very High India 27.3 54.5 18.2 Competing Countries 25.0 50.0 25.0 -
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). Table: 6.43: Cost of Production In Competing Countries Response Low Moderate High Percent 44.4 22.2 33.3
Global financial crisis according to 45.5% units didnt effect on their business. Exports and fall in domestic demand for the product is hardly affected by the global economic crisis (Table 6.44).
Table: 6.44: Effect of Global Financial Crisis on company Response Yes No Percent 54.5 45.5
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6.6. VACUUM CLEANERS 6.6.1. General Profile of the Respondents This section analyzes the finding of the field survey conducted at different manufacturing locations in India. The field survey includes 14 major manufacturers of Vacuum Cleaners 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 14 manufacturing units have been considered (Table 6.45) for detailed interview using structured questionnaire (Annexure 1). The 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 States Delhi Karnataka Maharashtra Tamil Nadu West Bengal Total Frequency 3 2 3 5 1 14 Percent 21.4 14.3 21.4 35.7 7.1 100.0
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.
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6.6.2. Employment Trend 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. 6.6.3. Domestic Market Trend 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 0-10% 11-25% 26-50% 51% & above Percent 35.7 28.6 21.4 14.3
Table 6.47: Proportion of Domestic Sales to Total Sales Response 0-10% 11-25% 26-50% 51% & above Percent 14.3 28.6 7.1 50
Most of the manufacturing units (79%) reported an increase in domestic demand of the product. For 58% of the units, the domestic demand increase was in the range of 11-25%.
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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). Table 6.48: Local and Foreign Competition Response Intense Medium Low No Competition Local 28.6 50.0 21.4 Foreign 35.8 50.0 7.1 7.1
Among units surveyed, only 58% units reported that they are exporting to other countries. However, 75% units reported that they are importing from other countries (Table 6.49). In the case of import, about 39% units reported that the import is in the form of completely knocked down (CKD) firm for more than 51% imports (Table 6.50). Table: 6.49: Import: Responses of Vacuum Cleaner Response Yes No Percent 75.0 25.0
However, semi-knocked down firm was reported in the range of 0-10% by more than 54.5% manufacturing units.
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Low cost of production in India is considered to be a favorable environment in the age of competitiveness. More than 67% of manufacturing units supported the claim. More than 62% of 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 Yes No Percent 61.5 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 (Table 6.53). But investors complain that to start a unit in India normally it takes around 35months (46% surveyed) in India as compared to 1-2 months in competing countries (Table 6.54). Table: 6.52: Government Interface with business/private sector Response Average Poor Percent 76.9 23.1
Table: 6.53: Government friendly towards Investor Response Yes No Percent 76.9 23.1
Table: 6.54: Clearance to start manufacturing unit in India Response 1-2 months 3-5 months 6-9 months 10-12 months Percent 27.3 45.5 18.2 9.1
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6.6.4. Productivity and Competitiveness Infrastructure in India is considered to be in terrible conditions. 85% 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 83% units felt that the infrastructure in competing countries is excellent and has been helping the industries to grow at smoother and faster pace (Table 6.55).
Table: 6.55: Avalability and quality of basic Infrastructure in India and Competing Countries Response Reasonable Good Excellent Percent 84.6 15.4 Competing Countries 16.7 50.0 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). Table: 6.56: Taxes and other controls in India and Competing Countries Response Low Moderate High Very High India 42.9 42.9 14.3 Competing Countries 46.2 35.8 -
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).
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Table: 6.57: Cost of Production In Competing Countries Response Low Moderate High Percent 41.7 33.3 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). Table: 6.58: Effect of Global Financial Crisis on company Response Yes No 6.7. MICROWAVE OVEN 6.7.1. General Profile of the Respondents This section analyzes the finding of the field survey conducted at different manufacturing locations in India. The field survey includes 10 major manufacturers of microwave ovens 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 10 manufacturing units have been covered (Table 6.59) for detailed interview using structured questionnaire (Annexure 1). The 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 States Andhra Pradesh Delhi Karnataka Maharashtra West Bengal Total Frequency 1 6 1 1 1 10 Percent 10 60 10 10 10 100.0 Percent 58.3 41.7
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There is hardly any merger and acquisitions reported among the surveyed units. More than 60% of the units are having quality accreditations of which 50% of them are having ISO 9000. 6.7.2. Employment Trend 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. 6.7.3. Domestic Market Trend 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 0-10% 11-25% 26-50% Percent 33.3 33.3 33.3
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Table 6.61: Proportion of Domestic Sales to Total Sales: Microwave Oven Response 0-10% 11-25% 26-50% 51% & above Percent 20.0 20.0 10.0 50.0
Most of the manufacturing units (80%) reported an increase in domestic demand of the product. For 50% 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 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). Table 6.62: Local and Foreign Competition Response Intense Medium Low No Competition Local 30 40 20 10 Foreign 50.0 20.0 20.0 10.0
Among units surveyed, only 22% units reported that they are exporting to other countries. However, 50% units reported that they are importing from other countries (Table 6.63). In the case of import, about 50% units reported that the import is in the form of completely knocked down (CKD) firm for more than 51% imports (Table 6.64).
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Table: 6.63: Import: Responses of Microwave Oven Units Response Yes No Percent 50.0 50.0
However, semi-knocked down firm was reported in the range of 0-10% by more than 75% manufacturing units. Low cost of production in India is considered to be a favorable environment in the age of competitiveness. More than 40% of manufacturing units supported the claim. More than 89% of 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 Yes No Percent 11.1 88.9
According to 72% registered units, the Government interface with the business is satisfactory (Table 6.66). Moreover, 29% units believed that Government is friendly towards the investors (Table 6.67). But investors complain that to start a unit in India normally it takes around 35months (50% surveyed) in India as compared to 1-2 months in competing countries (Table 6.68).
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Table: 6.66: Government Interface with business/private sector Response Average Poor Percent 71.4 28.6
Table: 6.67: Government friendly towards investor Response Yes No Percent 28.6 71.4
Table: 6.68: Clearance to start manufacturing unit in India Response 1-2 months 3-5 months 6-9 months more than one year Percent 25.0 50.0 12.5 12.5
6.7.4. Productivity and Competitiveness 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). Table: 6.69: Avalability and quality of basic Infrastructure in India and Competing Countries: Response Poor Reasonable Good Excellent India 22.2 44.4 33.3 Competing Countries 25.0 37.5 25.0 12.5
India manufacturers lack competitiveness due to the multiplicity of taxes and are considered to
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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 6.70). Table: 6.70: Taxes and other controls in India and Competing Countries Response Low Moderate High Very High Percent 36.8 42.1 21.1 Competing Countries 81.3 12.5 6.3 -
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). Table: 6.71: Cost of Production In Competing Countries Response Low Moderate Percent 25.0 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 Yes No Percent 50.0 50.0
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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
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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.
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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 Refrigerators Washing Machines Microwave Ovens Vacuum Cleaners
Manufacturing Unit 1 , Mumbai , Maharashtra Manufacturing Unit 2, Mumbai, Maharashtra Manufacturing Unit 3 , NOIDA, Uttar Pradesh Manufacturing Unit 4, Aurangabad , Maharashtra Manufacturing Unit 5,Gurgaon, Haryana Manufacturing Unit 6, NOIDA, Uttar Pradesh Manufacturing Unit 7 , NOIDA, Uttar Pradesh Manufacturing Unit 8, Mumbai, Maharashtra 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 Indias 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
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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 Companys 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 Companys 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.
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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.
7.3. Manufacturing Unit 2: Mumbai, Maharashtra Product Category: Air Conditioner This company was set up in 1954 in Bombay. In the 1960s, it started manufacturing airconditioning 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). Companys strength lies in the design and manufacture of industrial equipment, management and execution of air conditioning and public works projects sourcing,
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installation and servicing of technology-based systems, representation of global technology leaders and serving diverse industrial sectors and applications. Companys 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 Companys decision to pursue MEP as a provider of integrated customized solutions was timely. The Companys 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 Companys 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 Companys 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.
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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.
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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 Indias IT advantage The company has awarded a contract to develop IT solutions. The project involves development and support for ERP,SCM, CRM and ITenabled 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 Indias first world class Color Television. Today, the company is Indias 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.
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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 Companys 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.
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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 7.7. Manufacturing Unit 6: NOIDA, Uttar Pradesh 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
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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. 7.8. Manufacturing Unit 7: NOIDA, Uttar Pradesh Product Category: Microwave Ovens This company, a subsidiary of the overseas unit has been operating in India since 1995.
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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 worlds 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.
7.9. Manufacturing Unit 8: Mumbai, Maharashtra 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
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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. 7.10. Manufacturing Unit 9: Mumbai, Maharashtra 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 7.11. Manufacturing Unit 10: NOIDA, Uttar Pradesh 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
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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.
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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
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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 Changing dynamics due to increasing FDI inflows Easy availability of finance has stimulated consumers to buy durables. Safeguard against use of Dangerous electrical appliances
Threats Seasonal demand Availability of power Fiscal Policy including taxes & duties International policies on environment Waste Disposal amongst the most critical
8.3. Washing Machine

Strengths
Changing dynamics due to increasing FDI inflows Generation of Employment
Weaknesses Weak Component base
Need to regularly update technology Stagnation of research & development activities in the development process of the sector
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Opportunities More Energy conservation technologies needs to be included Easy availability of finance has stimulated consumers to buy durables.
Easier to enter global market Threats Waste Disposal amongst the most critical Availability of power International policies on environment 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 Changing dynamics due to increasing FDI inflows Safeguard against use of Dangerous electrical appliances Easy availability of finance has stimulated consumers to buy durables.
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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 Waste Disposal amongst the most critical 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 Weak Component base 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 Easy availability of finance has stimulated consumers to buy durables. Inadequate user awareness of microwave cooking Threats Waste Disposal amongst the most critical Availability of power International policies on environment The focus of customers is shifting on energy efficient appliances. Providing such appliances at competitive price is a challenge.
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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)
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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
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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.
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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 years 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 years level has gone 5% below the last year level by the end of month. The reasons for low growth rate during the current year (April08 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 NLCs 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.
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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 Jan09. Poor quality of coal. During monsoon, supply of wet coal caused operational problems resulting in partial loading of the generating machines.
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Table 9.6: Shortfall in Generation S.No. Category Shortfall in Generation - Reasons 1. Lacking performance of some of the new Thermal power Stations commissioned during the year 2006-07 and 2007-08 (enclosed at Annexure 7) 2. Long duration of forced outages, unscheduled and extended planned maintenance of some thermal stations and coal shortage (enclosed at Annexure 8) 3. Delay in commissioning of units during the year 2008-09 4. Shortfall due to gas availability i) Central Sector ii) Others 5. Shortfall due to non availability of nuclear fuel 6. Hydro generation poor hydrology Total shortfall due to above reasons (a) Generation where targets were exceeded 1. Import above target from Hydro stations in Bhutan 2. Generation above target from existing thermal stations i) Stations achieving more than target and operating above 90% PLF (enclosed at Annexure 9) ii) Others Energy generation due to above (b) Net shortfall in generation (a) (b) Energy (MU) 14631
17020*
14895
6436 854 3264 4887 59217 372
11635
1885 13892 45325
*Out of this 9718 MU reported due to shortage of coal during April 08- Dec.08 so far.
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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 Chinas 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 Chinas manufacturing sector. Shanghai area is considered one of the most robust manufacturing centers for electronics and automotive parts.
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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, Chinas 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 Chinas 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
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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 firms 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
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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, Thailands 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 Thailands 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 Malaysias 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
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RM795.4 million (4.5%). Electrical & electronic products, valued at RM98.7 billion, remained as Malaysias 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. Malaysias top ten exports destinations were the Republic of Singapore, the United States of America, and the Peoples 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 Malaysias total exports during the period of January - June 2009. The top ten import sources of Malaysia were the Peoples 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 Malaysias 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
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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 Peoples 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) b) c) d) e) Promote energy saving of the whole society Increase the efficiency of energy utilization Protect and improve the environment Promote the overall and sustainable development of the society. 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 Chinas 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.
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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 Chinas energy conservation efforts are as follows:
(i) (ii) (iii) (iv) (v) (vi)
New measure for the government to control the market under the conditions of market economy; To eliminate the products with high energy consumption from the market. To mitigate the supply and demand contradiction of energy , and ensure sustainable development of the economy; To meet the requirements of international trade, and it is the technical tie of the activities of international market economy; To improve the environmental protection; 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),
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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 Indias 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 ft (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 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.
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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 types 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
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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
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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 rivals 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.
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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 PrivatePublicPartnership (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
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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,
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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.
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The one liner by Onida Owners Pride and Neighbours Envy is a good example to understand consumers 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.
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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
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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 ewaste 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
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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.
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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 Indias 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.
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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.
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REFERENCES
www.google.com www.bing.com http://www.ventureoutsource.com/contract-manufacturing/outsourcing-offshoring/chinamanufacturing/credit-sapped-economy-creates-struggle-for-chinese-manufacture
http://www.cci.in/pdf/surveys_reports/consumer-durables-sector.pdf http://www.eepcindia.org/bulletin/b20090309/OMI1011.pdf http://www.planetark.com/enviro-news/item/54054 http://www.business-standard.com/india/search_news.php?search=%20refrigerator&select=keyword http://www.ibef.org/artdisplay.aspx?cat_id=611&art_id=23158 http://www.eclac.org/comercio/noticias/paginas/4/34634/Hong_Korean_Case.pdf http://www0.un.org/esa/sustdev/csd/casestudies/energy_korea.pdf http://www.cheric.org/PDF/AC/AC11/AC11-2-0590.pdf http://www.cepal.org/comercio/noticias/paginas/7/29947/The_Korean_Case-Version_I.pdf www.kita.org www.kemco.or.kr http://www.google.co.in/url?sa=t&source=web&ct=res&cd=42&url=http%3A%2F%2Fwww.kelley.iu.ed u%2Frugman%2FPapers-books%2FWeb%2520Papers%2FMNEsandPubPolinKorea-ABM.doc&ei=wrSSv_bEZiG6APGwYXmCg&rct=j&q=preferential+policy+domestic+home+appliances+in+korea&usg= AFQjCNG1sGCWkZ2B9lJVSsoOgwNMBtbDjQ http://nice.erina.or.jp/en/pdf/session_a/A-YOO.pdf http://www.miti.gov.my/cms/documentstorage/com.tms.cms.document.Document_f5d37201-c0a815737cd87cd85b78aa34/MITI%20WEEKLY%20BULLETIN%20(Vol.%2042)%2028%20April%202009.pdf http://tariff.customs.gov.my/ http://www.asiapacificpartnership.org/pdf/BATF/2nd_market_transformation/Korea_APP%202ndMTwor kshop.pdf
http://www.indianmba.com/Faculty_Column/FC218/fc218.html http://www.wto.org/english/tratop_e/tpr_e/tp195_e.htm http://www.wto.org/english/news_e/sppl_e/sppl98_e.htm www.onida.com www.godrej.com

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www.voltas.com www.moneycontrol.com www.rediff.com www.videocon.com www.yahoo.com dipp.nic.in commerce.nic.in dgft.delhi.nic.in
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Survey Questionnaire: Company/Manufacturing Unit
Annexure -1
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 Persons Name--------------------------------------------------------------------------Telephone, if any: -------------------------------------------------------------------------------e-mail address, if any:---------------------------------------------------------------------------Website, if any:-----------------------------------------------------------------------------------
3.1 3.2
Year of Establishment 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 3.4 3.4.1
Does your company have merger with any other firm in India? (1= yes, 2=No) Does your unit have Quality Accreditations? (1= yes, 2=No) 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)
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Employment Related Information 4.0 4.1 4.1.1 4.2 4.3 4.4 The contractual/daily wage employees during the last ten years (1=Increased, What is the estimated percentage of skilled employees? (1=0-10%, 2=11-25%, What is the estimated percentage of non-skilled employees? (1=0-10%, 2=11-25%,
3=26-50%, 4=51% & above) 3=26-50%, 4=51% & above) 2=decreased, 3=No change)
Growth in wages/salary in the organization during the last ten years. (1= If Increased, please specify the range of increase in wages/ salary during the last ten years?
Increased, 2= Decreased, 3=No Change)
(1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above) (1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)
If decreased, please specify the range of decrease in wages/ salary during the last ten years? Domestic Market Related Information
5.0 5.1 5.2 5.2.1 5.2.2 5.3 5.3.1
What is the market share of your product? Please specify the range (1=1-5%, 2=6What is the percentage of Domestic Sales to Total Sales (1=0-10%, 2=11-25%,
3=26-50%, 4=51% & above) 10%, 3=11-25%, 4=26% & above)
Growth in the domestic demand of your products during last ten years. (1=
Increased, 2= Decreased, 3=No Change)
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) (1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)
If decreased, please specify the range of decrease in the domestic demand of your products in the last ten years?
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] Extent of competition in the domestic market from foreign companies? Trade Related Information
[1=Intense (>20 players), 2=Medium (10-20 Players), 3=Low (0-10 Players), 4=No Competition]
6.0 6.0.1 6.1 6.1.1 6.1.2 6.2 6.2.1 6.2.2 6.2.3 6.2.4
Is your organization engaged in Exports (1=Yes, 2= No) If yes, what is the percentage of Export to Total Sales
(1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above) Growth in export during the last ten years. (1=Increased, 2= Decreased, 3=No Change,) Please specify the range of increase in export during the last ten years? (1=010%, 2=11-25%, 3=26-50%, 4=51% & Above) Please specify the range of decrease in export during the last ten years? (1=010%, 2=11-25%, 3=26-50%, 4=51% & above) Is your organization engaged in Imports? (1=Yes, 2= No)
If yes, what is the percentage of Import to Total Sales

(1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)
Please specify the type of Import?
(1=Full product, 2=Component, 3=Raw materials )
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) How many percentage of your sales are Semi Knock Down (SKD) category?
(1=0-10%, 2=11-25%, 3=26-50%, 4=51% & above)
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6.3 6.4
__________________________________________________________
Please specify the major country from where you are importing finished products. Please mention your export destinations Product Description
Countries you are exporting to
6.4.1 6.5 6.6
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 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) 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 Availability of Raw materials for production.
1=Imported, 2=Within country, 3=Within Region/State, 4=Other
7.0 7.1 7.2 7.3 7.4 7.5 7.6
Are there policies made by the government which help in growth in your Industry? (1=Yes, 2=No) What are the support measures taken by the government? Has removal of Quantitative Restrictions helped your company? (1=Yes, 2=No) What are the marketing constraints for the your Industry (Please Specify) Are you satisfied with the Governments interface with business/private sector?
(1=Purchase preference policy, 2=Price preference policy, 3=others)
[1=Excellent, 2=Average, 3=Poor]
Do you consider government friendly towards investor?(1=Yes,2=No) Competitive advantage of Competing Countries
8.0 8.1 8.2 8.3 8.4 8.5 8.6
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)
A clearance to start a manufacturing unit in competing country takes. (1=1-2 Availability and quality of basic infrastructure such as power, water, road, rail etc. in India.(1=poor, 2=reasonable, 3=good, 4=excellent) Availability and quality of basic infrastructure such as power, water, road, rail etc. in your unit.(1=poor, 2=reasonable, 3=good, 4=excellent) Availability and quality of basic infrastructure such as power, water, road, rail etc. in competing country.(1=poor, 2=reasonable, 3=good, 4=excellent) Taxes and other controls in India (1=low, 2=moderate, 3= high, 4=very high) Taxes and other controls in competing countries. (1=low, 2=moderate, 3= high,
months, 2=3-5 months, 3=6-9 months, 4=10-12 months, 5=more than one year)
4=very high)
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8.7 8.8 Cost of production in India. (1=low, 2=moderate, 3=high, 4=very high) Cost of production in competing country. (1=low, 2=moderate, 3=high, 4=very high) Marketing Strategy & Distribution Channel 9.0 9.1 9.2 9.3 9.4 9.6 What is the type of Distribution channel (Please Specify)
(1=Wholesale, 2= Retail, 3=others) (1=Credit, 2=Commission) (1=Credit, 2=Commission)
What are the incentives to wholesale distributors (Please Specify) What are the incentives to Retailers (Please Specify) How are you giving after sales service to buyers How many years of warranty for the product? Which are the main states your products are sold (Please Specify) Global Financial Crisis
(1=Direct, 2=Franchise, 3=Sales Representatives)

(1=0-2, 2=2-5, 3=5-10, 4=above 10)
10.0 10.0.1
Did your company get affected during the global financial crisis? (1=Yes, 2=No) If yes, (Please Specify).
__________________________________________________________
10.1 10.1.1
Whether the exports from your company decreased due to the global financial crisis? (1= yes, 2= No) If yes, (Please Specify).
__________________________________________________________
10.2 10.2.1
Do you expect fall in domestic business and export in the coming years? (1= yes, If yes, (Please Specify).
___________________________________________________________ 2= No)
10.3 10.3.1
Have you evolved any strategy to counter global financial crisis? (1= yes, 2= No) Please explain your current business strategy.
___________________________________________________________
10.4 10.4.1
Do you think better Corporate governance can improve the effectiveness of the business? (1= yes, 2= No) 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)
___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ _________________________________________________________________________
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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.
1 2 3 4 5 6 7 8 9 10 11
Years
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Sales Value (Rs. Lakhs)
Production Cost (Rs. Lakhs)
Export (Rs. Lakhs)
Import (Rs. Lakhs
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12.1 Data on production and other related variables during last ten years. Sr. No. Years Employees/ workers (Number)
1 2 3 4 5 6 7 8 9 10 11 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Wages/ Salaries (Rs. Lakhs)
Capital Investment (Book Value) (Rs. Lakhs)
Thank you
Name of the Official/Investigator: -----------------------------------------------
Signature
: ---------------------------------------------------------
Place of Survey
: ----------------------Date: ----------------------------
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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
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Annexure-3
India-Thailand Consolidated List of Items for Early Harvest Scheme (EHS) S. No. 1 2 3 4 5 6 7 8 9 H.S. Code 080450 080610 080810 081060 081090 100110 100190 160411 160413 DESCRIPTIONS EX. FRESH MANGOSTEENS, MANGOES FRESH GRAPES APPLES EX. FRESH DURIANS EX. FRESH RAMBUTANS, LONGANS, POMEGRANATES DURUM WHEAT OTHER WHEAT AND MESLIN SALMON, WHOLE OR IN PIECES BUT NOT MINCED, PREPARED OR PRESERVED SARDINES, SARDENELLA AND BRISLING OR SPRATS, WHOLE OR IN PIECES BUT NOT MINCED, PREPARED OR PRESERVED MACKERAL WHOLE OR IN PIECES BUT NOT MINCED, PREPARED OR PRESERVED CRAB PREPARED OR PRESERVED SALT (INCL TABLE SALT & DENATRD SALT) & PURE SODIM CHLRDE W/N AQS SOLN SEA WTR CHROMIUM ORES & CONCENTRATES OTHER INORGANIC ACIDS OTHER ALUMINIUM OXIDE ALUMINIUM HYDROXIDE OTHR ARMTC PLYCRBOXYLC ACIDS THR ANHYDRDS HALIDES PEROXIDES PEROXYACDS & THR DRVTVS POLYPROPYLENE, IN PRIMARY FORMS OTHER ACRYLIC POLYMERS IN PRIMARY FORMS. POLYACETALS IN PRIMARY FORMS. EPOXIDE RESINS IN PRIMARY FORMS. POLYCARBONATES IN PRIMARY FORMS. POLYETHYLENE TEREPHTHALATE IN PRIMARY FORMS. SATURATED POLYALLYL ESTERS AND OTHER SATURATED POL POLYAMIDE-6,-11,-12,-6,6,-6,9,-6,10 OR -6,12,IN PRIMARY FORMS OTHER POLYAMIDES IN PRIMARY FORMS. POLYURETHANES IN PRIMARY FORMS. OTHER SELF-ADHESIVE PLATES, SHEETS, FILM, FOIL, TAPE, STRIP AND OTHER FLAT SHAPES OF PLASTICS OTHR PLYWD COMSSTNG ONLY SHTS OF WOOD OF
160
10 11 12 13 14 15 16 17
160415 160510 250100 261000 281119 281820 281830 291739
18 19 20 21 22 23 24 25 26 27 28 29
390210 390690 390710 390730 390740 390760 390799 390810 390890 390950 391990 441219
Final Report
30
710310
31 32 33
710490 710510 711319
34 35 36 37 38 39 40 41 42 43 44 45
720150 720711 720719 722619 722990 730792 732020 732690 760110 760120 840490 840991
46 47 48
841360 841381 841451
49 50 51 52 53 54 55 56 57
841459 841490 841510 841821 841990 842199 842390 842549 843221
THIKNESS OF EACH SHEET NT EXCD 6 MM PRECIOUS STONES (OTHER THAN DIAMONDS) AND SEMIPRECIOSSTONES, UNWORKED OR SIMPLY SAWN OR ROUGHLY SHAPED OTHER SYNTHETIC OR RECONSTRUCTED PRECIOUS OR SEMIPRECIOUS STONES DUST AND POWDER OF DIAMONDS ARTICLES OF JEWELLERY AND PARTS THEREOF, OF OTHER PRECIUOS METAL, WHETHER OR NOT PLATED OR CLAD WITH PRECIUOS METAL ALLOY PIG IRON: SPIEGELEISEN PRDCTS CONTNG BY WT<0.25% CRBN,OF RCTNGLR (INCL SQR)CRS-SCTN;WDTH<TWICE THE THCKNS OTHR PRDCTS CONTNG BY WT<0.25% OF CARBON FLT-ROLD PRDCTS OF SILICON ELECTRICL STL OTHR THN GRAINORIENTED OTHER WIRE THREADED ELBOWS, BENDS AND SLEEVES OF IRON OR STEEL HELICAL SPRINGS, OF IRON OR STEEL OTHER ARTICLES OF IRON OR STEEL WIRE, NOT FORGED ALUMINUM, NOT ALLOYED ALUMINUM ALLOYS PARTS OF THE ITEMS OF 840410 & 840420 PARTS SUITABLE FOR USE SOLELY OR PRINCIPALLY WITH SPARKIGNITION INTERNAL COMBUSTION PISTON ENGINES OTHER ROTARY POSITIVE DISPLACEMENT PUMPS OTHER PUMPS TABLE,FLOOR,WALL,WINDOW,CEILING/ROOF FANS,WTH SLFCNTND ELCTRC MOTOR OF OUTPT<=125 W OTHER FANS PRTS OF AIR/VACUM PUMPS,CMPRSSRS & FANS WINDOW/WALL TYPES SELF-CONTAINED AIR CONDITIONING MACHINES COMPRESSION-TYPE REFRIGERATORS, HOUSEHOLD PRTS OF MCHNRY,PLNT/LBRTRY EQMPMNT ETC OF THE ITEMS OF HDG 8419 OTHR PARTS OF FLTRNG/PURFYNG MCHNRY WEIGHNG MCHN WEIGHTS & PRTS OF THE MCHNRY JACKS, HOISTS, OF A KIND USED FOR RAISING VEHICLES DISC HARROWS
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58 59 60 61
843780 844820 844833 847141
62 63 64
847190 847290 847751
65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83
847989 847990 848079 848180 848210 848350 850431 851220 851711 851790 852390 852812 852910 853400 854011 870840 903289 903290 910211
84
940190
OTHER MACHNRY FOR CLNG,SRTNG/GRADNG SEEDS PRTS & ACCSSRS OF MCHNS OF HDG. NO.8444/OF THEIR AUXLRY MCHNRY SPINDLES,SPINDLE FLYERS,SPINNING RINGS AND RING TRAVELLERS OTHR DGITL AUTOMATIC DATA PROCESNG MACHNS COMPRISNG IN SAMEHOUSNG A CENTRLPROCESNG UNIT & INPUT & OUTPUT UNIT,WH/NOT COMBIND OTHER OTHR OFFICE MACHINES MCHNRY FR MOULDNG/RETREADNG PNEUMTC TYPES OR FR MOULDNG/OTHRWSE FORMNG INNR TUBES OTHR MCHN &MCHNCL APPLNCS OF HDG 8479 PARTS OF MACHINES OF HDG 8479 OTHR MOULDS FOR RUBBER/PLASTICS OTHER APPLIANCES FOR PIPES, BOILER SHELLS, TANKS, VATS OR THE LIKE BALL BEARINGS FLYWHEELS AND PULLEYS, INCLUDING PULLEY BLOCKS OTHR TRNSFRMRS HVNG A PWR HNDLNG CAPACITY NOT EXCDNG1 KVA OTHER LIGHTING OR VISUAL SIGNALLING EQUIPMENT LINE TELPHON SET WTH CORDLESS HAND SETS. PARTS OF TELEPHONIC/TELEGRAPHIC APPARATUS OTHER PREPARED UNRECORDED MEDIA RECEPTN APARTS FOR TV ETC COLOUR AERIALS & AERIALS REFLECTORS OF ALL KINDS PRTS SUITABLE FR USE THEREWTH PRINTED CIRCUITS CATHODE-RAY TV PICTURE TUBES, INCLUDING VIDEO MONITORCATHODE- RAY TUBES-COLOUR GEAR BOXES OTHR ATMTC RGLTNG/CNTRLNG INSTRMNTS&APPRTS PARTS AND ACCESSORIES OF INSTRMNTS OF 9032 WRST-WTCHS,ELECTRLY OPERATED,W/N INCRPRTNG STOPWTCH FCLTY WITH MCHNCL DISPLAY ONLY PARTS OF SEATS, WHETHER OR NOT CONVERTIBLE INTO BEDS
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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) = 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 Growth Labour Productivity t Labour productivity t-1 Labour Productivity t-1
((Gross Value Added/Price Index) x 100) Number of Persons Engaged
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.
100
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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
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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.
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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
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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
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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
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Annexure -6
Storage Position of Major Reservoirs based Projects in the Country
S. No.
Reservoir
Installed Full Minimum Capacity Reservoir Draw Level Down Level
Effective Capacity
Annual Design Energy Potential
Energy Content at F.R.L.
Present Reservoir Level (29.01.2009)
% Energy Reservoir Energy % Energy Content Level on the Content on Content w.e.to same day (29.01.2008) w.e.to Content at Last Year Content at FRL FRL (29.01.2009) (29.01.2009) 29.01.2008) (29.01.2008)
Energy Content at Present Level
MW Northern Region 1 2 3 4 5 6 7 Bhakra Pong Ranjit Sagar R.P. Sagar Rihand Ram Ganga Tehri 1325 396 600 172 300 195 1000 3991
MCM
MU
MU
MU
(5)
MU
(%)
513.59 426.72 527.91 352.81 268.22 366 829.79
445.62 384.05 487.91 343.81 252.98 323 740.04
4604.97 3974.43 1196.16 1326.7 1740.66 757.09 1287.37
5282 1123 1507 459 920 164 309 9764
1728.8 1084 390.3 175.66 860.5 480.8 1291.49 6011.55
493.61 4111.71 500.28 345.03 259.08 349.39 800.36
875.09 487.2 104.04 20.38 256 207.96 670.11 2620.8
50.62 44.54 3.00 11.60 29.75 43.26 51.89 43.60
485.15 397.96 498.19 352.08 257.49 354.98 829.79
615.67 160.24 83.64 154.89 178.88 282.38 1286.6 2762.3
35.61 14.78 21.43 88.18 20.79 58.73 99.62 45.95
Total (N Region)
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Western Region 8 9 10 11 12 13 Sardar Sarovar Ukai Gandhi Sagar Indira Sagar Bhira Koyna 1450 305 115 1000 150 1960 4980 138.68 105.16 399.9 262.14 606.03 667.91 110.84 82.3 381 243.24 590.09 609.6 519.57 1063.08 925.11 281.34 429.43 1511.6 5469 1080 420.48 2628 790 3130 13517.48 1817.55 813.08 725 1316.123 618.8 3126.1 6416.68 119.66 101.39 384.9 250.31 601.59 654.86 304.8 555.76 60.68 267.96 417.23 2702.6 4308.93 16.77 68.35 8.37 20.36 67.43 86.45 51.20 121.72 101.72 390.62 249.06 601.49 651.25 410.66 540.3 210.62 233.74 412.94 2299.41 4107.67 22.59 66.45 29.05 17.76 66.73 73.56 48.80
Total (W Region) Southern Region 14 15 Machkund Nagarjuna Sagar Srisallam Almatti Katinadi Supa Sharavathy Idamalayar Idukki Madupatty Sabarigiri Kundah Group
114.75 810
835.2 179.83
513.59 150.88
346.2 2257.43
670 2237
551.6 1398.13
835.09 159.75
398.33 304.14
72.21 21.75
837.48 160.72
516.05 342.53
93.56 24.50
16 17 18 19 20 21 22 23 24
1670 290 1220 1006.2 75 780 2 300 555
269.75 59.62 563.88 564.43 169 732.35 1599.38 981.46
243.84 505.97 513.52 522.73 114.99 694.94 1554.48 908.3
265.99 1442.58 19168.68 1329.83 308.85 283.18 30.04 265.07
4300 483 542 5564 380 2396 6.4 1338 1315
1391.84 175.35 2885 4557.03 254.45 2146.32 77.4 764 1270
266.06 513.72 538.99 546.16 147.37 715.55 1597.25 974.8 1157
999.73 42.23 1020.95 2319.08 114.15 939.55 64.6 646.95 742
71.83 24.09 35.39 60.89 44.86 43.77 83.46 84.68 58.43
266.7 513.93 549.92 548.91 154.41 723.49 1597.25 974.8
1061.52 47.22 1707.3 2949.12 154.63 1452.47 68.83 563.38 1157
76.27 26.93 59.18 64.72 60.77 67.67 68.93 73.74 91.10
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25 26 Mathura Periyar 240 7202.95 240.79 46.33 211.23 33.53 410.53 80.27 790 409 20432.4 204 216 15891.12 233.07 37.61 36.44 7.24 7635.41 17.86 3.35 48.06 233.07 37.61 107 53.57 10180.59 52.45 24.80 64.06
Total (S Region) Eastern Region 27 28 29 30 31 Balimela Hirakud Indravati Rengali Upper Kolab 510 331.5 600 250 320 2011.5 462.08 192.02 641.84 123.44 857.78 438.91 179.83 625 109.72 843.78 149.23 1316.28 130.67 1565.1 84.09
1183 1174 1962 525 832 5676
897.75 372.28 1213.13 275 540 3298.16
455 189.05 635.56 115.68 852.59
193.52 184.09 291.19 107.11 192.88 965.79
21.56 49.45 24.00 38.95 35.72 29.37
455 189.05 635.54 115.68 862.59
524.41 213.11 303.54 74.32 256.94 1372.32
58.41 57.24 25.02 27.03 47.58 41.61
Total (E Region) North Eastern 32 Loktak
105 105 18290.45
768.5
766.01
450 450 49839.88
339 339 33956.48
768
121.59 121.59 15656.52
35.87 35.87 46.1
768
129.02 129.02 18551.9
38.06 38.06 54.62
Total (NE Region) Total (All India)
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Annexure -7
Generation Performance of New Thermal Units during Apr. 08- Jan 09
SR. NO. NAME OF STATIONS UNIT NO. CAPACITY (MW) Syncronization date Planned (A) THERMAL Units Commissioned during year : 2006-07 1 KAHALGAON 5 300 STPS 2 MEJIA TPS 5 350 3 GIRAL 1 125 LIGNITE 3 4 PARICHHA 4 210 TPS Extn. 5 NEW PARLI 1 250 TOTAL 1335 UNITS COMMISSIONED DURING YESR : 2007-08 1 SIPAT STPS 4 50 Actual COD DATE Generation during Apr-Dec 2008-09 Target Actual Shortfall Remarks
31.3.07 30.3.07 28.2.07 28.12.06
1.8.08 29.2.08 March 09 1.12.07
3067 1470 412 1250
1847 816 335 911
1220 654 77 339
Piping etc. Problem in new Frequent checking in second pass of boiler The unit was running on partial load due to non completion of Unscheduled
16.02.07
1.11.07
1682 7781 3076
834 4743 2968
748 3038 108
27.5.07
20.06.08
2 3
KAHALGAON STPS MERA TPS
6 6
500 250
16.3.08 1.10.07
31.12.08 24.9.08
2559 1470
372 698
2187 772
GHTP II
250
3.1.08
1548
1053
495
5 6 7 8 9
YAMUNA NAGAR TPP YAMUNA NAGAR TPP SANJAY GANDHI TPS PARAS EXP RAYALSEEMA
1 2 5 1 4
300 300 500 250 210
13.11.07 29.3.08 18.6.07 31.5.07 20.11.07
16.10.08 24.06.08 27.06.08 31.03.08 20.11.07
1826 1826 2944 1582 1394
1439 1266 2161 773 1367
387 560 783 809 27
Delay in COD as unit was resynchronized on 06.05.06 after Non-readiness of burkers, feeders COD delayed due to delay in supply and erection by BHEL COD delayed due to delay in supply and erection by BHEL. Delay in COD is forced outage Delay in stabilization Delay in COD due to non- of cost handling plant Pre beater structure damage
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10 11 12 13 14 TPS BELLARY TPP SANTALDIH TPP SAGARDIGHI TPP BAKRESHWAR DUR GAPUR TPS EXTN. TOTAL 1 5 1 4 7 500 250 300 210 300 4620 3.12.07 7.11.07 21.12.07 23.12.07 24.11.07 Feb.2009 Feb.2009 1.9.08 31.10.08 30.04.08 2839 1495 1665 1230 1637 27091 721 222 949 377 1132 15498 2118 1273 716 853 505 11593 Non-reachgness of cost handling plant Non readiness of DM,WT,plants, coal oils etc. Delay in COD due to turbine rectification works Completed in oct 06 Forced outage
Units expected / commissioned during year : 2008-09 1 SIPAT 5 500
JUNE08
13.8.08
1.1.09
1509
401
1108
2 3 4
SIPAT KAHALGAON STPS CHANDRAPURA TPS CHANDRAPURA TPS BHILLAI IMPORT GHTP II CHABRA TPS CHABRA TPS GIRAL LIGNITE
1 7 7
660 500 250
AUG 08 MAY 08 APR 08
MARCH 10 MAY09 APR09
800 1654 992
0 0 0
800 1654 992
DELAY IN COD due to non readiness of CHP & coal feeding Delay in synchronisation Delay in synchronisation Delay in synchronization due to slow erection & supply of equip Delay in synchronisation Nonreadiness of CHP,AHPEFO systems etc Delay in synchronization/ COD Delay in synchronization/ COD Delay in synchronization Delay in synchronization due to items deliary and rectification Delay in synchronization/ COD Synchronization on oil in dec08 173
5 6 7 8 9 10
8 2 4 1 2 2
250 0 250 250 250 125
AUG 08 JUNE 08 APR 08 SEP 08 DEC 08 MAY 08 31.7.08
JULY09 MARCH09 28.11.08 APR 09
407 656 1012 415 139 290
0 0 362 0 0 0
407 656 650 415 139 290
MARCH09
11 12
SURATGARH TPP KUTCH LIGNITE EXT.
6 4
250 75
OCT 08 MAR 08 22.10.08 FEB09
200 399
0 0
200 399
Final Report
13 AMARKANTAK TPS TROMBAY TPS SURAT LIGNITE EXT. LANCO AMARKANTAK PATHADI TPS SAGARDIGHI TPP BARKESHWAR VIJAYVADA TPP TOTAL 5 210 FEB 08 15.6.08 MARCH09 1038 0 1038 Non-readiness of cost handling plant and ash handling plant Delay in synchronization Delay in synchronization Delay in synchronization
14 15 16
8 3 1
250 125 300
AUG 08 SEP 08 MAR08
MARCH09
621 160 230
0 0 0
621 160 230
17 18 19
2 5 4
300 210 500 5255
MAR 08 MAY 08 DEC 08
20.7.08
4.11.08 MARCH09 JUNE09
1425 1030 515 13492
604 0
821 1030 515
Cost shortage Non readiness of ash handling plant Delay in synchronization
1367
12125
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Annexure 8
Statement of Shortfall in Generation (April 08-Jan.09) Existing Thermal Stations vis--vis Target
UTILITY/STATION CAPACITY TARGET ACTUAL SHORTFALL REMARKS MW MU MU MU
NTPC FARAKKA STPS TALCHER STPS KAHALGAON 1-4 DVC BOKARO B DURGAPUR MEJIA 1-4 NLC NEYVELI ST-I NEYVELI ST-II VPGCL MUZAFFARPUR HPGC FARIDABAD EXT. PANIPAT
1600 3000 840 630 340 840
9716 19577 5372 3350 1834 5242
8777 18201 5060 2846 1509 4649
939 1376 312 54 325 593
Coal shortage Coal shortage Coal shortage Extended planned maintenance of unit-2 Forced outages & coal shortage Forced outages & coal shortage Shortage of lignite Shortage of lignite Stabilization problem after refurbishment etc. Forced Outage Delay in restoration of unit-1 after R&M works Delay in restoration of unit 1&2 after R&M works, Unscheduled RLA of unit 9 Forced outages due to turbine vibration problems & coal shortage Forced outages Unscheduled planned maintenance of unit - 2 Delay in stabilization of unit1 after R&M works Unscheduled R& M works of unit2 Forced outages Forced outages Coal shortage 175
600 1470 220
3127 7886 454
2784 7091 130
343 795 324
180 1360
598 8205
409 7852
189 353
UPRVUNL OBRA
1362
4874
4360
514
PARICHHA 1-3
430
2062
1653
409
CSEB KORBA-II GMDCL AKRIMOTA LIGNITE GSECL UKAI
200 250
1312 1076
1179 859
133 217
850
4229
3956
273
SIKKA REP MPPGCL AMARKANTAK EXT. SANJAY GANDHI 1-4
240 240 840
1321 1039 4684
1159 830 4246
162 209 438
Final Report
SATPURA MAHAGENCO CHANDARAPUR BHUSAWAL KORADI 1142 6485 6046 439 Forced outages & coal shortage Partial loading due to poor coal quality Forced outages Long duration forced outage of unit 4 due to turbine vibration trouble Unscheduled capital mtc. Of unit-1 Unscheduled capital maintenance of unit-3 and partial loading due to coal quality problem Partial loading of all units due to coal stock being critical Extended planned maintenance & forced outage of unit 2 Partial loading of all units due to coal stock being critical Unscheduled & extended planned maintenance of unit 2
2340 475 1040
13505 2740 5568
12364 2515 4877
1141 225 691
NASIK PARLI
880 670
4840 4100
4539 3271
301 829
APGENCO KOTHAGUDEM
680
4694
3647
1047
KOTHAGUDEM NEW
500
3310
2983
327
TNEB ENNORE
450
1995
1665
330
METTUR
840
5520
5308
212
TUTICORIN BSES BARAUNI
050 320
6805 484
6462 33
343 451 Stabilization problem of unit 6 after R&M works Delay in restoration of unit 4 after R7M works and forced outage of unit 6 Coal shortage & forced outage of units 4&6
JSEB PATRATU
840
1236
830
406
WBPDC KOLAGHAT BAKRESHWAR TOTAL
1260 630 28609
6765 570 159175
5638 4427 142155
1127 743 17020
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Annexure 9
List of Thermal Stations Achieving Higher Generation Than Target During April 08 Jan.09
Sl. No. Station Ownership Capacity (MW)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 RAMAGUNDEM STPS KORBA STPS VINDHYACHAL STLPS RIHAND STPS SIMMADRI GANDHI NAGAR TPS DADRI (NCTPP) KOTA TPS KORBA-WEST TPS ROPAR TPS GND TPS (BHATINDA) TALCHER (OLD) TPS OP JINDAL TPS SINGRAULI STPS TENUGHAT TPS UNCHAHAR TPS GH TPS (LEH.MOH.) NEYVELI (EXT) TPS KORBA EAST V DAHANU TPS WANAKBORI TPS TORR POWER SAB KHAPARKHEDA TPS-II BADARPUR TPS TANDA TPS PANKI TPS RAICHUR TPS ITTAGARH TPS BANDEL TPS SOUTHER REPL TPS BUDGE BUDGE TPS RAJGHAT TPS ANPARA TPS TORR POWER AEC KORBA III TOTAL CENTRAL CENTRAL CENTRAL CENTRAL CENTRAL STATE CENTRAL STATE STATE STATE STATE CENTRAL PVT CENTRAQL STATE CENTRAL STATE CENTRAL STATE PVT STATE PVT STATE CENTRAL CENTRAL STATE STATE PVT STATE PVT PVT STATE STATE PVT STATE 2600 2100 3260 2000 1000 870 840 1045 840 1260 440 470 1000 2000 420 1050 420 420 500 500 1470 330 840 705 440 210 1470 240 450 135 500 135 1630 60 240 31890
Programme (MU)
16484 13404 21000 13282 6344 4238 5503 6707 4750 7640 2076 2746 4725 12854 1480 6866 2740 2329 2825 3492 8911 2219 5185 440 2673 962 8492 1557 2000 877 3630 708 9780 405 1474 194668
Actual (MU)
17870 14645 21947 14102 7086 4859 6084 7192 5227 8096 2429 3084 5034 13143 1735 7088 2944 2525 3016 3682 9100 2403 5338 4562 2810 1089 8574 1624 2065 937 3673 735 9804 420 1381 206303
Excess Achievement (MU)

1386 1241 947 820 742 621 581 485 477 456 353 338 309 289 255 222 204 196 19 190 189 184 153 152 137 127 82 67 65 60 43 27 24 15 7 11635
177
Final Report
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 Dr. K. P. Sunny Group Head (Economic Services) Dr. Jacob John Former UNIDO National Expert 1. 2. 3. 4. 5. Dr. Rajat Sharma Deputy Director (Economic Services) Mr. Deepak Gupta Assistant Director (Economic Services) Mr. Mukesh Prakash Assistant Director (Economic Services) Mr. Prashant Varshney Research Associate Mr. Sanjay Kumar Project Assistant
Project Director:
External Consultant: Team Members:
Field Survey:
NPC Consultants/Research Associates/ Project Assistants/Indian Council for Market Research, Planman Consulting (ICMR)
178

India Light Electrical Industry Report: Air Conditioners, Refrigerators, Washing Machines

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India Light Electrical Industry Report: Air Conditioners, Refrigerators, Washing Machines

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CONTENT

11.13 11.14 11.15 11.16

150 150 150 150 151 153-177 178

6.34 6.35 6.36 6.37 6.38 6.39 6.40 6.41

6.71 6.72 9.1 9.2 9.3 9.4 9.5 9.6

106 106 125 125 126 127 128 130

153 159 160 163 166 169 172 175

Productivity and Competitiveness of Light Electrical Industry in India

Productivity and Competitiveness of Light Electrical Industry in India

National Productivity Council

Productivity and Competitiveness of Light Electrical Industry in India

Productivity and Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

National Productivity Council

Productivity & Competitiveness of Light Electrical Industry in India

CHAPTER 2 LIGHT ELECTRICAL INDUSTRY: LARGE HOME APPLIANCES SEGMENT

Productivity & Competitiveness of Light Electrical Industry in India

Source: Ministry of Information and Technology, Government of India

Productivity & Competitiveness of Light Electrical Industry in India

Source: Intelligence Unit, The Economist

National Productivity Council

Productivity & Competitiveness of Light Electrical Industry in India

Large Home Appliances Segment

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

National Productivity Council

Productivity & Competitiveness of Light Electrical Industry in India

National Productivity Council

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

Market Segment, AC India, 2006

Unorganised type Organised 0 20 40 60 80 100

per cent Windows Split

National Productivity Council

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

National Productivity Council

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

National Productivity Council

Productivity & Competitiveness of Light Electrical Industry in India

2.3.6. Vacuum Cleaners

Productivity & Competitiveness of Light Electrical Industry in India

Productivity & Competitiveness of Light Electrical Industry in India

Sharp Videocon Kenstar

National Productivity Council

Productivity & Competitiveness of Light Electrical Industry in India

National Productivity Council

Productivity & Competitiveness of Light Electrical Industry in India

CHAPTER 3 IMPACT OF WTO, FTAs AND GLOBAL ECONOMIC RECESSION

National Productivity Council

Productivity & Competitiveness of Light Electrical Industry in India

National Productivity Council

Productivity & Competitiveness of Light Electrical Industry in India