Industry Players Call For Tariffs To Boost Local Consumer Durables Manufacturing

Consumer durables component makers must be protected with tariff or non-tariff barriers to enable vendors to invest in the ecosystem to make localisation in India successful, industry players said on Monday.

Original equipment manufacturers will also have to invest in developing the supplier ecosystem for the domestic industry to reduce cost and be globally competitive, said participants at the CII Consumer Electronics & Durables Summit 2024.

"We have to have protection or some barriers for the vendors to really get confidence to invest. So tariff barrier is something very critical," Godrej Appliances Business Head & Executive Vice President Kamal Nandi said speaking at the summit.

Citing an example of compressors for refrigerators, he said, "With a capacity of 18 million in the country, we still import refrigerator compressors when the market is only 14 million."

He further said, "In spite of having capacity we're not utilising capacity and we are talking about indigenisation. So, we will have to build in barriers, we will have to build in tariff barriers or non-tariff barriers to ensure that the vendors who come in this ecosystem get the confidence of investing in manufacturing and being part of the ecosystem."

The cost of manufacturing those components is higher than what can be sourced from China, he said, adding it is one of the big challenges that the industry is facing.

Carrier Airconditioning & Refrigeration Ltd Managing Director, Sundaresan Narayanan stressed the importance of scale while localising components in India. "Anytime that we are trying to localise or have local manufacturing of a highly technical product like a compressor, which is the heart of the air conditioning system it is important that we get scale and I'm confident that India is at an inflexion point where we are going to see the scale coming up very fast," he added.

At this point in time from an economies of scale standpoint, it actually doesn't add up, Narayanan said.

Compared with China, which has a "manufacturing capacity of more than ten times that of China", he said, "That is what helps them to actually build those kind of components locally and then not just for their domestic consumption, but actually for outside external world as well."

LG Electronics India Pvt Ltd Vice President Atul Khanna agreed that while reducing import burden is necessary, economy of scale is important to drive this otherwise there would be a lot of cost competency issues and challenges that manufacturers in India will face.

Nandi also asserted that the original equipment manufacturers will have to play a larger role in building the vendor ecosystem in India and take responsibility for it.