Sunil Sikka, ELCOMA, ET RealEstate

June 24, 2023

NEW DELHI: Sunil Sikka, advisor, Electric Lamp and Component Manufacturers (ELCOMA) says we must keep some artificial or physical barriers to ensure that indigenous industry develops and start making lighting components. He thinks only then our export worthiness would improve and as an industry we will be able to do better.

In conversation with Ankit Sharma of ETRealty, Sikka said that unless something is very capital-intensive like LED-chip which cannot be made in India leaving that 15 percent, rest 85 percent of the content should be Indian. He says the lighting industry is already working out how certain components which we are importing from China, can be made in India. Edited excerpts:

How has Indian lighting industry transformed over the years?

Almost for hundred years there has been no innovation and the GLS ruled the roost and then came the fluorescent lamps, which was on the gas discharge principle.

Next in succession was compact fluorescent lamp (CFL). In India, CFL came by turn of the century and they became popular in the first decade of the new century.

So between 2000 to 2010, the CFL started replacing GLS to a certain extent. For two reasons- one that the efficiency was five times higher than the GLS ordinary lamp besides the life expectancy was at least six to seven times higher.

India has been a power deficient country for a number of years. But mother of all destruction took place when the LED technology came in. The two aspects because now we were changing from conventional lighting to electronic lighting. And electronic lighting means here, it was a completely different domain in terms of manufacturing, in terms of applications.

I think in the year 2013, it was known that with the inherent advantages of LED over conventional lighting and CFL, the future belongs to LED. It was written on the walls but how soon would it take place was a question mark.

In most of the manufactured items as the scale goes up, the cost comes down. So, in the year 2014, an ordinary LED lamp of 10 watt was costing close to Rs 300-320 and today the same lamp is being sold in the market for Rs 60-70.

As the quality kept going up, the prices kept coming down. The best part is that the lighting industry very pro-actively worked towards this transition. They never took this disruption as a disadvantage but used it as an opportunity and a challenge and the lighting industry got expanded.

Today, the lighting industry is close to Rs 20,000 crore. And in terms of quantity, it’s been growing at 20-30% but because of the price disruption, the prices have been coming down so it doesn’t seem to have grown but actually in terms of quantity, it has been growing consistently.

The future of lighting is LEDs that goes without saying for all the three reasons- one,it is most efficient; two, it has lots of convenience in terms of changing the color temperature, the dimmablities available along this lamp and in terms of cost of manufacturing is the least.

Already conventional lighting has been replaced with LEDs for almost 90 percent and in another 2-3 years time, it will not be an exaggeration to say that hundred percent lighting would be LEDs.

Did government play a crucial role in accelerating the acceptance of LED products?

Government has been very proactive in case of this disruption. When in 2014 when the lamp was costing Rs 300. It was very difficult to convince a normal consumer to convert his CFL to LEDs. And that time the manufacturers were very slow in terms of making the change.

But as soon as they created a platform called EESL, which started buying huge quantities, so they generated an artificial demand and distributed all across the country. So that scheme really worked in terms of accelerating the transition.

Do you think increased lifecycle of LED products will adversely impact the lighting industry?

The demand of lighting comes from replacement demand and new construction. Now what happens is that you have a point that replacement demand is going to reduce but fortunately for us we are in India, which is a developing country and we have so many new projects, infrastructure and new housing is coming in the next 10 years. The demand of new construction is going to increase with every year.

So while there is a point that replacement would come down but the new construction would compensate the loss.

How can LED products reach rural India?

As I said that from Rs 300 the price of LED lamp has come down to Rs 40-50. But even now if you look at GLS lamp, it is still 5x. Now for a poor man to afford five times the cost of an ordinary lamp shall be difficult. So unless the government comes with a subsidising that cost it shall be very difficult to reach the poorest of the poor.

So I think this factor of ‘five’ continues to be there. So unless someone finances or gives subsidy, so either way the government can reach to the last mind otherwise it can be very difficult. I think the cost of LED lamp has already come to the bottom and unless there is some further innovation in terms of technology going beyond Rs 40 as a cost is going to be difficult.

So I would say that we can work out some scheme for poorest of poor in terms of subsidy. Of course, the industry may not be able to take that burden. But if the government is willing to do it. Most of the lighting which is used in street lighting, that are being changed from the conventional to the LEDs and you may know that almost one crore streetlights have already been replaced.

Domestic lighting for the poor, in any case, constitutes a very small percentage of the total requirement of electricity in India. This 17% of electricity goes in domestic lighting and out of that 17%, with the use of LED, it may have already come back to 12- 13%.

So, I think there is no need at this point in time to reach to that last mile and I think maybe after five years we may again relook whether the GLS should continue or should be stopped for manufacturing.

What is the future of Indian lighting industry?

There are a number of models which have come up in energy service company (ESCO) space and in this the cost of the finance in the initial capital purchase is borne by a consortium of banks, the installer and the user and a part of money, which is saved in terms of energy cost is then paid back by the actual user to this consortium.

So that model is also working very nicely and since this hasn’t gone all over but you know wherever in municipal boards or through EESL, they have financed the whole thing and they are paying back in terms of certain percentage of the savings. This is working wonders.

So it’s just a matter of time as I say that the entire lighting space is going to be a hundred percent dominated by LEDs in all possible ways and means. I think we are among the very few countries in the world which are now our penetration in terms of street lighting, domestic lighting has reached while most of the developed nations also have not reached this kind of figure so far.

It’s almost like we could not provide landlines in telephony and then the cell phones came and it grew to the entire population. So similarly, in LEDs we have leapfrogged without really giving any subsidy. So the government has so far been against a subsidization of cost. So they have made the process of purchase more transparent.

Industry has geared up in making lamps at a lowest possible price and using the Indian components as far as possible. At least 55% of the lamp which is being made is with Indian components as of today. So, for the cost considerations we are still looking at China for certain important and vital components in this. So I think gradually we feel that once we have the proper demand and which already we have reached, now is the time that the indigenisation program should be enhanced further.

So instead of 55% why can’t we look at 75% or 80% and this the government can make it mandatory that it should have this much of Indian component under the make in India program. So, this will help India to not only make it a highest percentage of indigenous material and we could also then look at the possibility of exporting this lamp for other markets in other countries as well.

Do you think Indian lighting industry needs cluster development?

Let’s put it this way that now we are already six years into LEDs. If this was thought of earlier then by design we would have followed it, making a cluster which China has used very successfully. But you see what’s happened is that we had an existing lighting industry and then they were new Electronic Manufacturing Services (EMS) player.

So today you see the industry comprises of the old multinationals and domestic companies which were into lighting and they had their infrastructure in terms of factories, offices, labour or all the incentives that they were getting. So most of the companies change from GLS, CFL and all other conventional lighting to LEDs in the same space. So making them, sell what they have and then get into cluster is far too difficult.

So all those companies who are for 50-100 years in India in the space of lighting, they converted their existing infrastructure into LEDs. So they put the new assembly lines for the same. If you are starting something afresh and in a planned manner if you have a place dedicated for a particular industry, it does work cost-effective. But when you have this kind of demographics and this kind of infrastructure, it gets difficult to bring people at one place.

So I think it’s far too late for the industry to consolidate into different hubs or different places. So let it continue the way it is. Since we have already reached a certain scale it can survive it and still be cost-effective.

Can Indian lighting industry compete at international level?

We are competing to only one country and that’s China and it dominates the entire world. Earlier certain technologies were IP protected but then it came out of it, most of the new innovations have come out of it.

Today the Chinese rule the roost in terms of lighting. They export more than USD 30 billion worth of LEDs alone. So what happens is that India could take his place as number two in terms of the export because today there are certain drawbacks in China in terms of tariffs which are being used or being put on China.

So if we had a manufacturing capability and surplus available to make a product in competitive prices against China. We have a labour cost, demographic Advantage. We have skilled people and we have entrepreneurs.So we have all the four ingredients to make world-class product.

Today if LED lamps can be produced at the same price or a lower price in terms of labor cost this export worthiness would be there and we shall be able to explore but China has a lot of subsidy in terms of export which our country doesn’t believe in. So that is the biggest disadvantage. So today if they get 14% subsidies for exporting out of their country. They also have a huge domestic market which has given them the advantage of scale. But then they have lots of export subsidies available.

If we collectively work towards some way, either we make it so cheap that even after giving the subsidy the price difference is not there. But for export worthiness your content should be much higher.

We are working out how certain components which we are importing from China, can they be made in India? Some are very capital intensive. For example, we cannot make a chip in India now so that’s one part where you leave it on, import company content. But the balance things, be it the optics, drivers, housing etc., all those other items, why can’t they be made in India? And if they are not being done for the production of cost.

Also, we must keep some artificial or physical barriers to ensure that indigenous industry develops and start making those components. So unless something is very capital-intensive which cannot be done in India leaving that 15 percent, rest 85 percent of the content should be Indian. Then only our export worthiness would improve and as an industry we will be able to do better.

  • Published On Nov 27, 2019 at 10:00 AM IST

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