Go slow on energy efficiency rating change: Durable firms

Consumer electronics and appliance manufacturers are seeking a longer tenure of four years for Bureau of Energy Efficiency (BEE) Star Rating Label change for compressor-based products like room air conditioners (RAC) and refrigerators.

The label upgrade introduced 2016 onwards involves a table change every two years wherein five-star rated air conditioners and refrigerators are replaced by new energy efficiency rated units. As a result, inventory of such products in the pre rate change period automatically becomes a four-star product, a four-star becomes three-star and so on.

Speaking to DNA, Kamal Nandi, business head and executive vice-president, Godrej Appliances and president of Consumer Electronics and Appliances Manufacturers Association (CEAMA), said, “We have now achieved a pretty decent level of energy efficiency in both refrigerators and air conditioners. Products introduced in the recent past are comparable to some of the best in the world. So there is no need to really speed this or put it on a fast track now,” said Nandi, adding that representations have already been made by CEAMA on this matter.

So far two cycles of label change (2016 and 2018) have happened and the next one is due in January 2020. However, air conditioner and refrigerator manufacturers said a lot of cost is involved in the switchover of products to the next table (BEE Star Rating Label change). Besides, there are challenges in not only implementing the changes but also in managing the inventory resulting from this exercise.

“Now that we have reached a certain level, give the industry some time and base it (the table change) on the sale (of such products). When you are tightening the standard by one star, wherein five- becomes four-star, four- becomes three-star, one needs to take note of what is really happening to the higher star-rated segments. Are they selling equally well or there is a decline in the growth rate or for that matter sales are going down altogether,” said the president of the apex industry body.

According to CEAMA study, a report has been presented to the ministry as well, in the case of refrigerators, specifically frost-free, there is no sale of five-star rated products. In direct-cool refrigerators, the sale of five-star units is de-growing by 24-25%. Same is the case in the air conditioner segment wherein the five-star segment is significantly de-growing.

“I think, when we are tightening, we are not keeping a track of whether consumers are actually upgrading to the next higher level. And with five-star products being unaffordable if consumers are not upgrading and are going back to a lower star label due to pricing reasons, then the whole purpose of tightening the table is lost. That's what our representations to the government is all about and supported by all the data points,” said Nandi.

While there is a consensus between the government, ministry and the industry on the points being discussed, the industry body was hopeful that the regulator will re-look / revisit the tenure. However, the government has already issued a communication for refrigerator products denying the manufacturers an extended tenure.

“A little over a month ago, a gazette notification was issued on the table change (two year tenure) for refrigerators starting January 2020. This is going to be a very difficult scenario for the industry because there are challenges in selling a five- or even a four-star rated product today because the prices are already high. With this label change, I think even the four-star rated products will stop selling. And what will typically sell is the one-, two- and three-star rated products,” said Nandi.

While CEAMA has been pushing for a four-year tenure with the government/ ministry/ regulator, there has been some discussions on a three-year tenure. However, no written communication to this effect has been received as yet. CEAMA and industry representatives are scheduled to meet with the ministry of power on September 17, to take up the matter all over again.