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Government Engagements - Indian Fan Manufactures Association

Government
Engagements

Government
Engagements

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:

Deferment of Star labelling requirements

  • Act as a catalyst in enhancing growth & evolution of Fan Industry
  • Part of IFMA Executive Council & Policy Decision Group
  • Enhanced Market Outreach
  • Relationship & Network
  • Policy Advocacy Support – B2G
Supply Side Issues Demand Side Issues
  • Research & Development - Stalled
  • Testing & Approval of New Products - Stalled
  • Supply Chain & Productivity - Disruption & losses due to Covid-19 pandemic
  • Workforce - Uncertainty caused due to Covid-19 pandemic
  • Unsold inventory - Piled up stocks due to closure of shops in lockdown
  • Retail - Restricted due to closure of shops in lockdown
  • Total Consumer Demand - All time low
  • Implication for the ‘common man’ - Cost burden
  • Economic slowdown - Slower Recovery
  • Public Health Implication - Heat Wave across India
  • Public Awareness Programme - Lack of acceptability by consumers

Inclusion of all sweeps for ceiling fan, Air delivery and service value proposals

Star Labelling Requirements which become mandatory from 1st Jan 2022 cover sweep sizes of fans as stated in India Standard (IS) 374:2019 covers, 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 labeling norms.
IFMA suggestions are as follows:

1. Substitute the following for the existing entries:

The Recommended standard sizes of ceiling fans shall be 600,750,900,1050,1200,1300, 1400 and 1500 mm.

2. Insertion the following at the end – (Page 5, clause 15.1, Para 1):

Before starting the Tests, the fan & 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.

3. Substitute the following for the existing entries – Performance Value of Fans (Clause 15.1 and 15.2):

Sl. No Fan size(mm) Air Delivery (m 3/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

Regulating imports from China, HSN code Reclassifications, BCD reduction

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 such as in Research and Development (R&D), raw material procurement & inventory management of existing products have already slowed down. As per industry estimates, loss of capacity utilization of 60-70% across all manufacturing facilities due to the above reasons, loss of 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 of this common man’s product.

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 for this common man’s product, 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 sophistication required for mass scale commercially viable production of fans.

Relaxation of GST Rates for Electrical Fans to 5% – CBIC, GST Council

IFMA has been requesting the CBIC and the GST council for inclusion of GST rate reduction on fans, a common-person product, from current 18% to 5% as an agenda item for discussion in the said GST Council meeting.

IFMA’s request rests on 5 key pillars:

Public health standpoint Demand side challenges Supply side challenges Energy efficiency standpoint Atmanirbhar Bharat
  • Fans act as an ancillary medical device, playing an important role in mitigating COVID-19 by improving ventilation
  • The Ministry of Health and Family Welfare recognizes use of air supply fans to help improve thermal comfort and maintain good ventilation
  • As per the Centre for Disease Control, US also, fans can decrease the risk of Covid-19 transmission indoors
  • Fan industry as per industry estimates is facing a demand loss of 35% of annual sales
  • With the income levels shrinking or reducing to nil in some cases, any support that can be passed on in the form of GST rate reduction, will be a big relief to the consumer
  • The adverse impact of high GST rates of fans at 18% is impacting the industry and the supply chain, i.e. all our vendors, distributors, channel partners, and of course the end-consumer
  • Input cost for production of fans has escalated by 15-20% given the impact of second wave
  • Reduction in GST rate can provide working capital cushion to invest in capacity expansion
  • Fan industry is working towards effective implementation of BEE Star Labelling Requirements which become mandatory from 1st Jan 2022.
  • Compliance with energy efficiency norms has a cost implication of ~25-30% on the price of fan
  • Reduction in GST rate provide much-needed working capital cushion to invest in capacity expansion and energy-efficient technology
  • Can add to Govt’s revenue and reducing overall carbon footprint as per Paris Agreement 2015
  • Fans industry is one of the most highly indigenized industry having close to ~80% market penetration, touching lives of 100 crore citizens of India
  • Manufacturing capacity in the country today is ~100% localized for ceiling fans.
  • Manufacturing is almost 90% of all the fans sold in India are ‘Made-in-India
  • GST Rate reduction will boost overall sales and market penetration of fans
  • Will promote GST compliance and plug any instances of tax evasion, boosting the overall revenue collection for the Govt

IFMA Pre-Budget Memorandum 2021-22

With a hope that the Union Budget 2020-21 will be a picture-perfect occasion to make a re-assessment and give a further booster shot the economy, IFMA made suggestions to address some immediate challenges at hand – such as GST on fans, reduction in BCD, incentivizing fan manufacturing to stimulate exports.

The recommendations are detailed as under:

Category Recommendation Rationale
GST on Fans
Lower the GST tax slabs for fans to 5%
  • Fans are an essential commodity of mass importance and are highly penetrated in every household in India and the commercial sector, hence GST rates for fans should be reduced to 5%.
  • Fans have been widely recognized 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% on fans would immensely help the industry to spur demand in the economy which is already struggling with the economic burden brought upon by the COVID-19 pandemic.
  • Compliance with the star labeling 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.
Reduction in BCD

GST rate on supply of testing services on BEE star rated appliances by NABL accredited laboratories should be reduced to concessional 5%. Present GST rate on testing and analysis services falling under scientific and other technical services is charged at 18%. For fans, the customs duty had been hiked to 20 percent from 10 percent for all categories including table fans, ceiling fans, and pedestal fans in Union Budget 2020-21.Reduction in BCD for table, pedestal, blowers, and portable fans should be brought back to 10%.
  • Reduction in GST rate would have an impact on revenue to the extent of reduction in the tax rate for organizations whose outward supply is exempted under GST. For others, it would have Nil impact on revenue to the Government as outward tax charged is available as an input tax credit.
  • BCD was increased in February 2020, leading to an increase in consumer prices by ~15+%. We request GOI that the BCD should be brought back to previous levels. For Fans covered under the HSN codes (84145110, 84145130, 84145190), the requirement in India is 12 million fans in a year of which only about 27% requirement is met by domestic production.
  • The Fans imported being imported are of high quality and go through stringent quality control measures and checkpoints and comply with the best international and national Quality Standards. To build the requisite capacity to meet the demand for this common man’s product, the industry will require a time frame of at least ~ 2-3 years to scale up operations and as such BCD should be brought back to 10%.
It is essential for the government to reduce basic customs duty on parts used in the manufacturing of key components such as induction/BLDC Motors and PCB which currently range from 7.5 -10 percent.
  • For realizing Make in India’s vision, it is essential to reduce basic customs duty on parts used in the manufacturing of key components such as BLDC/Induction Motors and PCBs. This will reduce overall input cost, allowing Indian manufacturers to be far more competitive.
  • The government should consider initiating measures to reduce the input cost to make these components domestically by waiving duty on the inputs imported to make the components.
Incentivize Fan Manufacturing
Govt. should introduce incentives and subsidies for fan manufacturers/industry to produce energy-efficient products, promotion of R&D Weighted Deduction on R&D expenses of 200 percent on R&D expenditure should be restored.
  • Given Govt.’s focus on sustainability and ‘Atmanirbhar’ Bharat, giving sector-specific incentives and subsidies for the production of innovative/energy-efficient fans will help the industry to create an entire ecosystem that promotes competitiveness and scalability.
  • The Finance Act, 2016, with a view to phasing out weighted deduction under section 35(2AB) of the Act, restricted the allowability of expenditure incurred on scientific research (other than expenditure in the nature of cost of any land or building) on in-house research and development facility to 150% from 200% with effect from April 1, 2017, to March 31, 2020, and to 100% from 2020-21 onwards. Withdrawal of weighted deduction in respect of scientific research expenditure will put a dent to the ‘Make in India’ initiative of the Government.
  • It is therefore critical that an earlier weighted deduction of 200 percent on R&D expenditure be restored.

Opening of shops for electrical fans during lockdown

Fans are widely recognized 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 for the Opening of shops for electrical fans during the lockdown.

As Government continues 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/ orange districts (without the distinction of essential and non – essentials) through both online and offline channels
Expand the essentials to include electrical appliances including the most critical summer product – electric fans
NO PASS DIRECTV to be issued
Fans should be allowed to be sold in green/ red/ orange districts (without the distinction of essential and non – essentials) through both online and offline channels
  • The SoPs for the opening of establishments are already there for offline shops, eCommerce companies are already observing very stringent health and hygiene measures and this channel must also be leveraged to be able to meet the demands of the customers.
  • Limiting red zones for only essentials especially through online sales does not allow us to serve the largest demand zones for our products
Expand the essentials to include electrical appliances including the most critical summer product – electric fans
  • Since shops of non-essentials cannot open in CZ, we request allowing e-commerce companies to deliver at the perimeter /edge/ predesignated spots or at the doorstep without making any contact whatsoever with the customer (through 100% contactless prepaid orders and delivery), within the permitted delivery time window. We understand that this model of delivery at the edge of the CZ is already successfully operating in some cities like Mumbai, Delhi, and Hyderabad.
NO PASS DIRECTV to be issued
  • Traditional curfew passes issued against individual names are not feasible. Companies are unable to utilize these passes fully owing to high absenteeism (for various reasons). Individuals may report to work for a day or two and then absent themselves leading to wastage of passes, whereas the local authorities obviously see the large number of passes issued to a company.

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