AC retail sales may not meet target

The retail segment of the air-conditioning industry has grown by 10-12 per cent in the first four months of the year (April-July 2003-04).

Since these four months are the peak months in terms of sales, the industry is not likely to meet its target of 25 per cent growth of the segment for the financial year, according to industry sources.

Factors like the 20-day long truckers strike which paralysed the industry in April, the peak time for A-C sales, and a mild summer in May in the northern parts of the country - which accounts for 45 per cent of the industry's sales - negated the excise relief brought by the Union budget according to industry sources.

"About 17-18 per cent of the season's sales take place in April. The industry was hoping to recover its volumes in May which did not happen because of the not-so-hot summer in the North. Also the net reduction in excise duty has been only to the tune of 3.6 per cent of the MRP, which is quite small," K D Virmani, general manager, Voltas Ltd, said.

Salil Kapoor, head, air-conditioner division, LG Electronics India Pvt Ltd, said: "An 8 per cent reduction in the excise duty, from 32 per cent to 24 in the budget was a very small decrease. The government at the same time reduced the abatement from 40 per cent to 35. Although we have met our targets, the principal reason for the sales not happening for several players in the industry was that the weather was not conducive."

The excise duty cut together with the fall in abatement - the proportion of the MRP on which the excise duty is not applicable - has affected the price of A-Cs only marginally.

The two countervailing effects have led to a reduction in the price of a one tonne room A-C unit by only Rs 500, according to industry sources.