Sep 30, 2016: The Unnat Jyoti by Affordable LEDs for All (UJALA) scheme, an initiative by the Indian government, has really skyrocketed, and has created varied energy efficient benefits across the nation. However, the mass procurement under UJALA is now causing trouble to the LED makers.
Impact on distribution channel
Leading LED players such as Havells India, Surya Roshni and NTL Group, have urged the government to go slow on the UJALA procurement, as it is hampering their distribution channel and affecting profit margins.
Representing the Electric Lamp and Component Manufacturers Association of India (ELCOMA), the LED makers requested theunion minister for power, Piyush Goyal to reduce procurement under UJALA scheme as it is squeezing their distribution channels.
They argue that mass procurement by the government has built an artificial demand, and this has pushed the industry to decrease LED prices in India. However, if the government LED scheme continues, future distributions will not be favourable for the industry.
There is a possibility that the buyers may lose trust on companies’ distribution networks and, this will be extremely harmful for employment in the long run, according to ELCOMA.
Uncertainty about market demand
India’s LED lights production capacity has increased to about 30 million pieces per month within two years in comparison to the first 5 million pieces. Capacity utilisation has increased to around 80-90%, and government’s procurement has shot up by 50-60%.
However, the uncertain availability of regular orders is preventing companies from planning any additional increase in capacity until the market besides government procurement stabilises.
The UJALA scheme has helped to increase the production capacity in the LED lighting industry. Over 160 million LEDlamps have been distributed under the UJALA scheme until now, and out of this,more than 20 million LED lamps were supplied by Surya Roshni, according to a spokesperson from Surya Roshni.
As the price difference between commercial sales and UJALA scheme narrows, this will create stress on the manufacturing capacities for the next 6-12 months until the industry volumes grow considerably. Price difference between sales through UJALA scheme and direct retail and institutional sales is about 10-12%, and the realization difference is about 3-4%.
Nonetheless, Energy Efficiency Services (EESL), the government appointed distributor, seems to be in nomood to stop such mass procurement and distribution under the UJALA scheme.
As of September 2016, EESL has procured about 200 million LED bulbs and distributed more than 160 million LED bulbs across India. ESSL has plans to continue the scheme till March 2019. Further, it has plans to procure LED bulbs for distribution to 200 million families.