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SEP 29 2016

LED lights makers ask govt to go slow on Ujala procurement

  • Economic Times, ET Bureau / Hyderabad
  • Created: Thu 29th SEP 2016

With the procurement under the Unnat Jyoti by Affordable LEDs for All (UJALA) scheme squeezing their captive distribution channels, the LED light manufacturers have asked the government to go slow on the same.

Represented by the Electric Lamp and Component Manufacturers Association of India (Elcoma), players like Havells India, Surya Roshni and NTL Group, among others recently approached union minister for power Piyush Goyal requesting the government to reduce procurement under the scheme as the same is impacting their distribution channel and affecting margins.

Moreover, while the government's Ujala scheme of distributing LED bulbs at affordable rates has led to capacity expansion by LED light manufacturing companies, the industry is now feeling the pinch.

With price disparity between the scheme and commercial sales narrowing, players say, the same is likely to create stress on the manufacturing capacities for the next 6-12 months till the industry volumes grow significantly. However, government appointed distributor Energy Efficiency Services (EESL) is in no mood to stop procurement and distribution under the scheme.

"Government has done a good job by Ujala and now it is time to move out for them otherwise it will affect the marketing and distribution eco system that has been setup by the industry if the government continues distributing LED bulbs," said Sunil Sikka, president Havells India and president of Electric Lamp and Component Manufacturers Association of India (Elcoma).

Sikka said, "Bulk procurement by the government has created an artificial demand which has helped the industry reduce LED prices in India. Prices would decrease without government support also but it will take time. However, future distributions will not be good for the industry if the scheme continues as buyers may lose faith on companies' distribution networks and in a long way it is harmful for employment."

During past two years India's LED lights production capacity has increased to about 30 million pieces a month as against the initial five million pieces. Capacity utilisation has shot up to around 80-90 per cent while out of total production, government's procurement is around 50-60 per cent.

However, due to uncertain availability of regular orders which cannot be projected in case of tendering process, companies are not planning for any further increase in capacity till the market other than government procurement stabilises.

"The Ujala scheme has given a boost to the production capacity in the LED Lighting industry. Our production capacity has also increased. More than 160 million lamps have been distributed under this scheme so far and out of this more than 20 million lamps were supplied by Surya Roshni," said Raju Bista, managing director of Surya Roshni Limited.

Out of its total production, Surya Roshni is supplying about 30 per cent to the Ujala scheme. Due to government supplies and an increase in market share, the company's production capacity has increased to 4 million pieces per month in last two years.

"The capacity utilization at our plants has shown significant increase with the EESL procurement since past few months, but all these capacities will be under tremendous stress now," Arun Gupta, managing director of NTL Group, which increased its production from one million pieces to five million pieces during last one year.

"Since price difference is narrowing down quite fast. This will definitely create heavy stress on the manufacturing capacities for 6-12 months till the industry volumes grow significantly. The industry is already in a situation where the overall capacity appears to be in excess of the demand. The industry will have to find out more avenues and different markets in other geographies to feed the capacities," said Gupta. Price difference between sales through the Ujala scheme and direct retail and institutional sales is about 10-12 per cent while realization difference is about 3-4 per cent.

However, EESL will continue procurements and has no plans to stop or reduce the same under the scheme in near future. Saurabh Kumar, managing director of EESL said, "We do not have any plan to stop procurement of LED bulbs. So far we have not received such demand from the companies and even government also did not direct us on it."

EESL has till date procured about 200 million LED bulbs and distributed over 160 million bulbs till the September. As on date EESL is planning to continue the scheme till March 2019 and aims to procure bulbs for distribution to the 200 million families. As of now the government has distributed LED bulbs to the 40 million families.

Let there be light:

* Government procurement 50-60% of total production

* Capacity utilisation around 80-90%

* LED manufacturers increased capacity by 3 to 5 times

* EESL has procured about 200 million bulbs so far

* Government distributes over 160 million bulbs as on September 2016

* Bulk procurement by government helps industry reduce prices

* Price difference between Ujala scheme and direct retail and institutional sales is about 10-12%

* About 15-20% price reduction across all LED product segments in retail

Tags

DIRECT TOTAL Captive Roshni Powertech Ltd Energy United States Energy Efficiency Power India CAPTIVE

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