Policy Advocacy
While IFMA members are committed towards preserving the environment and promoting energy efficiency and welcome the noble intent of BEE in mandating the star labelling requirements, however in the current COVID-19 situation, industry is reeling under tremendous economic pressure.
IFMA’s concerns raised before BEE included:
Engagement 01 — BEE
The case placed before the Bureau of Energy Efficiency rested on the pressure being felt on both sides of the market.
Engagement 02 — BEE
IFMA’s proposals on sweep sizes, air delivery and service value. Star Labelling Requirements which become mandatory from 1st January 2022 cover sweep sizes of fans as stated in Indian Standard (IS) 374:2019 — namely 900 mm, 1050 mm, 1200 mm, 1400 mm and 1500 mm. Since there are other sweep sizes prevalent in the market, IFMA has been engaging with BEE for the inclusion of these sweep sizes for effective compliance with the star labelling norms.
The recommended standard sizes of ceiling fans shall be 600, 750, 900, 1050, 1200, 1300, 1400 and 1500 mm.
Before starting the tests, the fan and its attachment are adjusted in accordance with the manufacturer's instructions for normal operation. Any controls shall be set for maximum continuous air flow unless the manufacturer's instruction states otherwise. Any other functions such as luminaries and remote-control mechanism shall be turned off.
| Sl. No. | Fan size (mm) | Air delivery (m³/m/W) | Service value |
|---|---|---|---|
| 1 | 600 | 100 | 1.5 |
| 2 | 750 | 115 | 2.1 |
| 3 | 900 | 130 | 3.1 |
| 4 | 1050 | 150 | 3.1 |
| 5 | 1200 | 210 | 4.0 |
| 6 | 1300 | 215 | 4.0 |
| 7 | 1400 | 245 | 4.1 |
| 8 | 1500 | 270 | 4.3 |
Engagement 03 — DPIIT
IFMA has been engaging with the Department for Promotion of Industry and Internal Trade on regulations on the import of goods from China and its effect on the fan industry.
IFMA highlighted the hardships faced by the industry — research and development, raw material procurement and inventory management of existing products have already slowed down. As per industry estimates, there was a loss of capacity utilisation of 60–70% across all manufacturing facilities due to the above reasons, along with the loss of the peak season.
Any barriers to trade or restriction on any category for imports by the way of a ban or imposition of prohibitory tariffs/duties may be detrimental to both demand and supply.
IFMA and the fan industry support the government's push for ‘Make in India’ through boosting domestic manufacturing capabilities; imposing high tariffs in the form of BCD hikes to promote domestic capabilities may prove to be counterproductive for the entire existing value chain.
Since Basic Customs Duty was increased in February 2020, which already led to an increase in consumer prices by ~15+%, it was requested to bring back the BCD to previous levels and give the industry time to scale up production.
Scaling up operations domestically is an industry-level intention; however, instantaneously curbing imports would lead to domestic demand not being fulfilled for this common man's product. To build the requisite capacity to meet the demand, the industry will require a time frame of at least ~2–3 years to scale up operations with the support of the government on developing a comprehensive ecosystem and the sophistication required for mass-scale, commercially viable production of fans.
Engagement 04 — CBIC & GST Council
IFMA has been requesting the CBIC and the GST Council for the inclusion of a GST rate reduction on fans — a common-person product — from the current 18% to 5% as an agenda item for discussion in the said GST Council meeting.
IFMA’s request rests on 5 key pillars:
Engagement 05 — Ministry of Finance
With a hope that the Union Budget would be an occasion to make a re-assessment and give a further booster shot to the economy, IFMA made suggestions to address some immediate challenges at hand — such as GST on fans, reduction in BCD, and incentivising fan manufacturing to stimulate exports.
Lower the GST tax slab for fans to 5%.
Fans are an essential commodity of mass importance and are highly penetrated in every household in India and in the commercial sector, hence GST rates for fans should be reduced to 5%. Fans have been widely recognised as a cost-effective way to not only provide thermal comfort but also improve air circulation, which has been established as a key intervention to prevent COVID-19 as per many international studies. Lowering the GST rate to 5% would immensely help the industry spur demand in an economy already struggling with the burden of the pandemic. Compliance with star labelling requirements will have cost implications, and a reduction in the GST rate will provide a much-needed working capital cushion for manufacturers to invest in capacity expansion and energy efficiency.
The GST rate on supply of testing services on BEE star-rated appliances by NABL-accredited laboratories should be reduced to a concessional 5% — the present rate on testing and analysis services under scientific and other technical services is 18%. For fans, customs duty was hiked from 10% to 20% for all categories including table, ceiling and pedestal fans in Union Budget 2020-21; BCD for table, pedestal, blowers and portable fans should be brought back to 10%.
A reduction in the GST rate would have an impact on revenue only to the extent of the rate reduction for organisations whose outward supply is exempted under GST; for others it would have nil impact, as outward tax charged is available as input tax credit. BCD was increased in February 2020, leading to an increase in consumer prices by ~15+%, and should be brought back to previous levels. For fans covered under HSN codes 84145110, 84145130 and 84145190, the requirement in India is 12 million fans a year, of which only about 27% is met by domestic production. Fans being imported are of high quality, go through stringent quality control and comply with the best international and national quality standards. To build the requisite capacity, the industry will require at least ~2–3 years to scale up operations, and as such BCD should be brought back to 10%. It is essential to reduce basic customs duty on parts used in manufacturing key components such as induction/BLDC motors and PCBs, which currently range from 7.5–10%. This will reduce overall input cost, allowing Indian manufacturers to be far more competitive, and the government should consider measures to reduce the cost of making these components domestically by waiving duty on the inputs imported to make them.
Government should introduce incentives and subsidies for fan manufacturers to produce energy-efficient products and promote R&D. The weighted deduction on R&D expenditure of 200% should be restored.
Given the government's focus on sustainability and Atmanirbhar Bharat, sector-specific incentives and subsidies for the production of innovative, energy-efficient fans will help the industry create an entire ecosystem that promotes competitiveness and scalability. The Finance Act, 2016, with a view to phasing out the weighted deduction under section 35(2AB), restricted the allowability of expenditure on in-house research and development to 150% from 200% with effect from 1 April 2017 to 31 March 2020, and to 100% from 2020-21 onwards. Withdrawal of the weighted deduction in respect of scientific research expenditure will put a dent in the Make in India initiative of the government. It is therefore critical that the earlier weighted deduction of 200% on R&D expenditure be restored.
Engagement 06 — MHA & State Governments
Fans are widely recognised as a cost-effective way to provide thermal comfort and as such they are a common man's protection against the heatwave, which poses a challenge to public health at large, especially in a tropical country like India.
IFMA urged the Ministry of Home Affairs and various State governments to allow the opening of shops for electrical fans during the lockdown. As government continued to battle and balance health and economic activity, IFMA presented certain innovative solutions for assisting the government and industry to fight the COVID battle, which included:
Fans should be allowed to be sold in green, red and orange districts — without the distinction of essential and non-essential — through both online and offline channels.
Expand the essentials to include electrical appliances — including the most critical summer product, the electric fan.
A no-pass directive to be issued.