EXPLAINED: What will be impact of government’s decision to ban AC import

Earlier this week, the government had banned import of air conditioners in order to boost domestic production. In a notification issued by the Director-General of Foreign Trade (DGFT) on Thursday, split system and others ACs with refrigerants have been moved from "free" to "prohibited" category. The notification states that only the import of air conditioners with refrigerants is prohibited.

The decision is expected to have serious impact on small fly-by-night operators and Chinese firms which launch their products during peak summer season and disrupt market. On the other hand, it will also help local manufacturers. 

According to Blue Star Managing Director B Thiagarajan, the ban would have a minimal impact of the domestic companies. The intent of the government was to put a curb on duty-free import of airconditioner units from FTA countries such as Thailand, Malaysia and Vietnam. 

"Earlier, if you are importing a fully built AC through countries such as Thailand, Malaysia and Vietnam, then the duty is zero and if you import without refrigerant, then you have to pay full duty," he said.

Several Chinese companies which were setting up factories in countries such as Thailand, Malaysia and Vietnam in order to bring products to India directly under FTAs, will be affected by the government's move, he added.

"Under the FTAs, finished products like ACs attract zero duty but the components have to pass through an inverted duty structure. Now after notifying that gas-filled units are banned what that means is you can now import it as a component only. Therefore the zero per cent duty route is now no longer available," he added.

Speaking on the similar lines, Anil Rai Gupta, CMD, Havells India said that the decision of prohibiting AC imports is in line with the Government’s Aatmanirbhar Bharat vision. 

“We believe the companies who have invested in their own manufacturing facility will be well placed to benefit from it. Lloyd air conditioners are now being manufactured in-house at our new state of-the-art plant developed with an investment of around 400 crores, which is amongst the most integrated and modern facilities in Asia. Owing to the belief in the Make in India vision, we have been investing substantially both in terms of manufacturing scale and workforce across all our products segments and portfolio,” Gupta said.