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Address by Mr Sunil Wadhwa, Chairman, Indian Fan Manufacturers Association at the

Seventh Annual General Meeting

at Kolkata on Monday the 24th September, 2007

Ladies and Gentlemen,

On behalf of the Indian Fan Manufacturers Association, I am delighted to welcome you to the Seventh Annual General Meeting of the Association.

Eight leading fan Companies are IFMA members. Together they represent about 60% of the Indian Fan production (the balance being made up by thousands of small scale manufacturers /assemblers). IFMA members reported production last year was 1.8 crores fans – that translates to Rs. 1800 crores approx. as against the estimated market size of Rs. 2500 crores.

Indian Fans cater to the domestic market and about 10% are exported. Both the domestic and export markets offer opportunities and challenges. Going forward, I would like to address these separately before taking up some of the activities of IFMA during the last one year.

Production of IFMA members indicate that Domestic market has shown a healthier 20% compounded average growth rate over the last three years. Domestic market grew by 21.2% last year. In the first 5 months of this year, there is a further growth of 24%. This has been possible due to: -

  • GDP growth.
  • Growth in housing / construction activity.
  • Higher disposable income and increasing spends on “durables “.
  • More villages getting electrified.
  • Implementation of uniform VAT in most of the states, which has helped the tax paying organized sector manufacturers.
  • IFMA members introducing competitively priced fans in the economy sector and offering these with manufacturers guarantee. This has taken a share from low quality unorganized sector fans.

Fan is a basic necessity in a hot country like India. With over 3 crore fans being added every year, additional energy to the extent of 2000 MW is required each year to run these fans. IFMA is actively involved with BIS and BEE to lay down minimum energy efficiency standards to which all fans sold in India will have to conform. Ceiling fan contributes 80% of the Indian fan market and IFMA believes that its members market possibly the best quality and energy efficient fans in India. Minimum energy efficiency standards will help customers to save substantially on electricity charges and will also impose discipline on some of the unorganized manufacturers making shoddy quality fans.

IFMA believes that the Indian customer is entitled to good quality fans made by its members at a reasonable price. As stated earlier while the “ average selling price “ per fan of IFMA members has come down due to various value engineering / other initiatives, certain help is required from the Government. Towards the above, IFMA has made a strong case to the Government to :-

  1. Make VAT uniform at 8%.
  2. Review the abatement rate and increase the abatement to 55% from 40% on the basis of “hard data “.

These suggestions will help the: -

  1. Customer to get a better quality fan, at a much affordable price.
  2. Government to save on energy as there will be level playing field between IFMA members and poor quality fan manufacturers who rely on tax savings to under price and sell.

On the Export front, the issues are different. India makes far better quality ceiling fans than most of the other countries that dominate the world market. Yet on Export front, for the IFMA members: -

  1. Export CAGR for the last 3 years was just 7.5% (mainly due to growth in 04-05).
  2. The exports in 2004-05 had peaked at 20.7 lacs fans and have come down to 19.20 lacs fans during 2006-07.
  3. Exports in the first five months of this financial year are stagnant.
  4. Exports are only 11% of the total production.

The problem with “Exports “is that exporting fans is not remunerative/ viable, as we do not have a level playing field with some of the other countries. Export incentives do not fully cover the refund of the “taxes paid on fans being exported” In summary the issues are: -

  1. DEBP incentives were reduced from 13 % to 5%, then again to 3% and finally to 2% in July 2006.
  2. DEPB incentives on ceiling fans were increased to 5% from Sept 06 and to 8% from April 07 after persistent representations by IFMA.
  3. There is a fit case for increasing these to a minimum of 14.5%. IFMA and its members have made necessary representations to DGFT and EEPC.
  4. There is of course the additional issue of strengthening rupee that has led to uncompetitiveness of our fans in our traditional export markets.

IFMA believes that if we can work towards maintaining reasonable price competitiveness, there is no reason why exports of Indian ceiling fans in particular cannot double in a year.

I would like to take this opportunity to thank all the Association members who have immensely contributed by pooling in their resources and information. The activities conducted by the Association through its various Sub-Committees have borne fruitful results for the benefit of fan industry.

Through the efforts of the IPR and Legal Sub-committee our Association had achieved extraordinary successes to check the menace of spurious and counterfeit products of the well-known brands. IPR agencies engaged to track the counterfeiters have conducted 17 successful raids during 2006-07. Some members have also conducted raids on their own in India, Srilanka and China and have achieved extraordinary success. All these initiatives undertaken by our Association have resulted into scare in the market place. On behalf of our Association I acknowledge the active role played by our IPR & Legal Sub-committee members for giving guidance to this important activity.

We also appreciate the efforts of our Technical Sub-committee who has represented IFMA in various meetings with BIS to develop benchmarks for review, revision and reaffirmation of quality standards. Similarly we had various meetings with the Bureau of Energy Efficiency for awarding energy efficiency ratings to our products.

Our Public Relations Sub-committee, formed during the year is reviewing various options to bring to the forefront, various issues that affect our members.

During the last one year, IFMA has only strengthened .We are sure that our united actions would help us not only to forge ahead with renewed vigor and strength to face all challenges, but also help our industry to leverage the opportunities that is being unleashed by the growth in infrastructure and housing sectors.

I am privileged to lead this Association and sincerely thank all our members for their cooperation. I would also like to record my appreciation to the Secretariat and my other colleagues without whom, the working would not have been as effective as it has been.

Your continued support is the strength of our Association.

Thank you!

Sunil Wadhwa

Kolkatta 24th September ,2007