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Address by Mr. Sunil Wadhwa, Chairman, Indian Fan Manufacturers Association

Eighth Annual General Meeting 18th September 2008 at Kolkata

Ladies and Gentlemen,

On behalf of the Indian Fan Manufacturers Association, I wish you all a warm welcome to the Eighth Annual General Meeting of the Association.

As you might well be aware, IFMA comprises of members from the eight leading fan manufacturers in the country. That’s a consolidated representation of around 60% of India’s fan production; the balance being accounted for by a large number of small units at the local level. During the financial year 2007-2008, IFMA members achieved a production figure of 20.8 million fans, which translates to a growth of 15.9% over the previous year. The track record for IFMA members for the last five years is presented in the table below:

Year % age Growth
  Production Export
2002-03 12.30 (-) 7.50
2003-04 14.10 48.00
2004-05 25.50 35.30
2005-06 9.10 (-) 14.2
2006-07 19.60 7.50
2007-08 15.86 (-) 0.92
CAGR 16.7% 12.9 %

Over the last financial year, IFMA has been actively involved in a number of strategy initiatives. It is our belief that policy interventions by way of quality, efficiency and commercial trade practices can go a long way in growing the fan industry to match its potential. Some of these key initiatives include:

  1. With the Bureau of Indian Standards (BIS): working on revised quality standards

    IFMA has been actively involved with BIS to review and upgrade the quality standards of fans in the Indian market. We worked from the ground level up, by assessing customer needs, and then framing these expectations into technical standards. This was a demanding exercise and was handled with complete confidence by our technical committee.

    IFMA was an active participant during the BIS meetings, which were held on 14.09.2007, 17.04.2008 and 19.08.2008. Over the coming years, BIS standards are expected to become the minimum qualifying norm for all fans sold in the Indian market.

  2. With the Bureau of Energy Efficiency (BEE): power savings through improved efficiency

    In order to make Indian fans more energy efficient, IFMA has been working to formulate appropriate guidelines for the Star-rating programme initiated by BEE. The programme calls for establishing efficiency standards and test procedures for various fan categories. The 1200 mm ceiling fan has been taken as the start point, owing to its predominant popularity – 80% of all fans sold in the country are ceiling fans; of these, 75% are in the 1200 mm sweep segment.

    IFMA’s participation in the BEE meetings of 06.08.2007 and 08.07.2008 has been instrumental in building awareness and creating a common platform for dialogue between all stakeholders. BEE’s proposed standards would be voluntary for the first few months and mandatory thereafter. The proposal calls to upgrade service values from 2.7 to 3.2. A higher service value translates to a better quality fan. It needs to be mentioned here that, at present, the majority of fans sold in India have values that dip below 2.5. Implementing this proposal will in itself result in a saving of approximately 30,000 MW of electricity during the next five years.

  3. With the Ministry of Commerce and Industry: Policy recommendations for industry growth

    On the commercial side, some basic issues which are hurting the growth of the industry are listed below:

      a) High rate of VAT for essential items like electric fans for the common man

    b) High incidence of excise duty

    c) Low abatement rate for levying excise duty

    d) Low export incentives (DEPB rate)

    e) Procedural problems for the refund of 4 % additional customs duty

    A detailed presentation was made on the above issues to the Secretary and senior officials of the Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry. This has been well received. Follow-up action has also been initiated by IFMA in close consultation with the Director, DIPP. Individual representations to address each of these concerns have been detailed along with recommendations. The same have been forwarded by DIPP to the Ministry for consideration. These policy initiatives can be expected to bring considerable relief to IFMA members, and thereby grow the production base.

  4. Exports: setting our sights to achieve our potential

    IFMA is of the firm belief that ceiling fans manufactured in India can match the quality standards of the best in the world. This confidence does not however get reflected in the numbers. For the past four years, fan exports from India have stagnated. On an average, India exports 2 million fans per annum, a mere 10% of our production. We need to only take a sideward glance at how our neighbour is faring. Fan exports from China are a 100 times our overseas sales figure!

    India’s fan exports have the capability to double with each year, if only IFMA members are provided with a level playing field. DEPB incentives are meant to ‘offset the taxes that are paid end-to-end in the domestic production cycle’. If only this principle was adhered to, our pricing structure would get a competitive edge. With this objective in mind, IFMA has made a strong representation to EEPC and DGFT to increase the DEPB incentive to minimum level of 14.3%. As against this, the current DEPB incentives are:

      a) 8% on 1200 mm sweep ceiling fans, up to a maximum of Rs.48/- per fan

    b) Nil incentive on 600 mm and 1300 mm sweep ceiling fans

    c) 5% on table, pedestal and wall fans

    d) Nil incentive on exhaust fans e) Nil incentive on fan components

    There is a huge opportunity to grow our fan exports manifold. A review of the DEPB incentive would serve as a catalyst to spur exports, and IFMA’s efforts have been to spearhead action in this direction.

  5. IPR: Pooling of resources to kerb Infringements

    IPR infringements are a serious concern. Reputations take much time and effort to get established. We owe it to our brands and to our customers to fight the menace of imitational products. This calls for collaborative efforts. IFMA has attempted to pool the individual resources of its members and to work in concert with enforcement agencies, in India and overseas. In the last financial year, 12 raids were conducted which led to the seizure of 874 contraband fans. We hope to step up this effort in the current year.

The Road ahead

The Indian fan industry has grown 15.9% in the last year, registering a CAGR of 16.7% over the last five years. Going forward, growth rates might well taper to more moderate levels; it had slowed down to 11% over the last four months. Despite this sobering outlook, IFMA would do well to focus on structural issues that deserve our attention. There are many such areas where the cooperation of our members is sought, and this would include:

  • Developing the export market activities include:

      i. Compiling data on target markets

    ii. Market development activities

  • Creating a common pool of ‘best manufacturing practices’ from within the member community

  • Improving and extending the reach of customer service. This could include sharing of service facilities in smaller tier-II/III cities

  • A concerted effort to push for tax reforms – a review of excise, VAT and DEPB rates

I have been privileged to be a part of and to lead this Association. My sincere thanks go out to all members for their cooperation. I would also like to extend my warm thanks to all the Sub-committees that have worked so hard throughout the year to achieve the dreams of the industry. Your valuable contributions are very much appreciated and I can sincerely say that IFMA’s development work would not have been possible without your active participation.

Thank you!

Sunil Wadhwa
18th September 2008