The PLI scheme for AC Manufacturing increases local value addition from 20% to 60%

India’s manufacturing sector plays a key role in boosting the country’s economy and building self-reliance. To strengthen this, especially in air conditioners (ACs) and LED lights, the Union Cabinet approved the Production-Linked Incentive (PLI) Scheme in April 2021. With a budget of ?6238 crore, the scheme was slated to be implemented from FY21 to FY29. It aims to boost local production, reduce imports, and make India a strong player in global markets. I would like to shed some light on how the PLI has significantly improved the AC manufacturing industry by increasing local production, creating jobs, and supporting economic growth.

Local Value Addition on the Rise

In 2019, only 20% of the materials used in making ACs came from within India. Today, this figure has jumped to 60%, with a target of reaching 80% by 2029. This progress has been possible due to careful planning and execution of the PLI scheme, which helped develop a full range of AC components locally. The Federation of Indian Chambers of Commerce & Industry (FICCI) Electronics and White Goods Manufacturing Committee, which I lead, has worked closely with the government to achieve this. The journey has been supported by the Government every step of the way through the SCALE Committee under the guidance and leadership of Shri Piyush Goyal, Union Minister of Commerce and Industry.

Industry Growth and Reduced Import Dependence

The AC market in India has grown rapidly, doubling from 7 million units in 2019 to 14 million units today. Earlier, we relied heavily on imported compressors, but local production capacity has risen from 1 million to nearly 8 million units. We’ve also increased production of heat exchangers, cross-flow fans, and controller PCBAs, reducing our reliance on foreign suppliers.

Job Creation Drives Economic Gains

Manufacturing ACs has become a major source of employment, creating about 12,000 jobs for every million units produced. This shows how important the AC industry is for job growth and the overall economy.

Increased Industry Participation

The third round of applications for the PLI scheme closed in October 2024, receiving 38 applications and a total committed investment of ?4,121 crore. Out of these, 21 applicants proposed investing ?3,679 crore in AC component production, focusing on items like copper tubes, aluminium stock, compressors, heat exchangers, motors, control assemblies, and more.

Importantly, 43% of the applicants are small and medium enterprises (MSMEs), highlighting growing confidence among smaller businesses to join the AC manufacturing ecosystem. This participation strengthens supply chains and ensures inclusive growth.

Collaboration and Ecosystem Development

The PLI scheme has brought together raw material suppliers, component makers, and finished goods manufacturers, from big multinational corporations to small businesses. This collaboration has helped the industry overcome challenges and created a well-connected and efficient manufacturing network that fosters innovation.

Future Prospects

India’s manufacturing sector is set for a bright future. The PLI scheme has boosted domestic production and made Indian products more competitive globally in terms of technology and price. Continued investments and supportive policies will make India a preferred destination for global manufacturing.

The success of the PLI scheme for ACs demonstrates our vision and commitment to becoming a global manufacturing leader. By building on this momentum, we will drive economic growth, create millions of jobs, and strengthen India’s position in the international market.