“EESL’s programme will bring down energy consumption and will make LEDs popular in this country besides providing an opportunity for Indian manufacturers to get a competitive advantage in the global market in terms of producing large volumes that they can export.”
Sunil Sikka, president, Havells, as well as president, ELCOMA (Electric Lamp and Component Manufacturers’ Association of India)
A paradigm shift towards LEDs
LED or solid-state lighting is the future of lighting and the government’s procurement of LED bulbs through the ESCO model is a fantastic way to promote it. LED technology was introduced 10 to 15 years ago but the pace of the market’s transformation from incandescent to LED bulbs was slow in the initial phases as then, the LED products were prohibitively expensive and were not efficient enough to justify the costs. Nowadays, LED bulbs have become far more efficient and costs have come down, so it seems a certainty that in the future, there will be only LEDs instead of other lights. The ESCO model of EESL accelerates the pace of market transformation.
EESL’s programme for domestic lighting helps the industry in two ways—one is that it reaches a large number of consumers within a short span of time and it ensures a quick change in consumer buying trends by the introduction of an efficient distribution model. This model allows consumers to pay for the bulbs in installments, utilising the savings gained from lower energy consumption. Therefore, there is no extra burden on consumers and it speeds up market transformation in favour of LEDs.
Due to the bulk procurement happening under this programme, the products are available at the best price, which is really cost- effective and industry also gets the advantage of the economies of scale. The ESCO model ensures a win-win situation for all LED ecosystem stakeholders including the government, industry and the consumers.
An opportunity for Indian firms to benefit from the economies of scale
Currently, the LED manufacturing infrastructure in the country is not yet completely geared up to take advantage of the increasing demand. Though EESL favours products that are made in India, what most in the industry are doing is just assembling — buying components that are imported and putting them together in India.
If we want to be global manufacturers of LEDs, then we need proper infrastructure in terms of machinery, practices and processes, which we don’t have at this point of time. You will be surprised to know that we are not even doing LED packaging; typically, Indian companies are taking completely packed LEDs and then putting them into housings with the help of drivers. So, there is very little local value addition. Moreover, we are not able to get the cost advantage that comes with proper backward integration. It hinders us from becoming a global player in the LED business.
One of the main objectives of the EESL programme is to make Indian industry ready to start producing huge quantities of LED bulbs to meet the huge demand generated through government procurement plans. In the near future, different government departments are expected to procure more than 200 million retrofit LED bulbs under the domestic lighting programme. EESL programmes provide a good opportunity for companies to scale-up manufacturing and in the future, some of them with the proper infrastructure can start exporting products and become global players. So, like China, we can also turn into one of the large producers. Right now, we do not export any LED product.
A win-win situation for both the government and industry
EESL programmes will bring down energy consumption and will help the government to achieve 24/7 power supply across the whole country, as committed by the prime minister. Further, they will make LEDs popular in this country. Besides, they provide an opportunity for Indian manufacturers to get a competitive advantage in the global market by achieving economies of scale. So, this novel programme will benefit both industry and the government.
This novel programme will be the only one of its kind in the world, if it gets successfully implemented. The industry should provide complete support to EESL so that it can effectively procure quality products. Quality assurance is very essential for the success of this model as people are looking at LEDs with a lot of optimism. If the product experience does not meet consumer expectations, then the result will be counterproductive.
Returning to a free market economy once prices come down
According to me, it is a wonderful programme to help the market mature, bring down prices and to build up economies of scale. Once those objectives are achieved, then the distribution should be left to market forces. The distribution ecosystem involves retailers, salesmen, logistics providers, delivery men, etc. As a country, we should not let our free market economy fail but should allow it to be consumer-driven. Once the market is mature, consumers will be able to understand the advantages of LEDs and will also be knowledgeable enough to differentiate between good and the bad LED products. They will surely take the right decisions when selecting from among the array of products offered by different brand owners.
