According to study by McKinsey at the behest of the Refrigeration and Airconditioning Manufacturers’ Association (RAMA), an affiliate of the Confederation of Indian Industry (CII), the growth rate of the air conditioner industry, which is currently 20 per cent, could zoom to almost 50 per cent with sales of more than Rs 11,000 crore by 2007.
Slated for release shortly, the study confirms that the fast growth witnessed by the industry, especially residential air conditioning demand will not only sustain itself, but further accelerate in the years to come.
With volumes of almost 5 million units in 2007, the large size of the domestic market will drive export competitiveness and will increase exports to more than Rs 700 crore from the current negligible levels. Outlining its demanding agenda for the industry, the McKinsey report has recommended reductions in the price and running cost of aircons, increased penetration of aircons into second tier towns and increased relevance of aircons to household users.
Addressing issues on tax rationalisation — long standing with the industry at large — the report recommends rationalisation of excise duty with immediate effect, to 16 per cent, the introduction of state VAT as a replacement to complex cascading sales tax, reduction in import duty to a peak rate of 20 per cent and 10 per cent for all goods by 2004, and reduction of total indirect taxes to a single VAT of 15 per cent. RAMA has advocated hat excise duty be rationalised for room aircons from 32 per cent to 16 per cent by March 2003.