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Push for super efficient fans faces uncertain future in India

by Sujit Chakraborty | Thomson Reuters Foundation
Friday, 2 August 2013 10:45 GMT

Employees wait for customers in KRS Electricals, an electrical appliance shop in New Delhi which stocks fans. THOMSON REUTERS FOUNDATION/Sujit Chakraborty

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Bureaucratic hurdles and a lack of interest in energy-efficiency by buyers could make selling efficient fans a challenge

NEW DELHI (THOMSON REUTERS FOUNDATION) – Sales of electric fans are rising 12 percent a year in India, as its sweating, ever-larger population looks for ways to escape temperatures being driven ever higher by climate change.

Making those fans more efficient could save on electric bills, cut the huge number of new power plants India needs and curb climate-changing greenhouse gas emissions.

But an effort to persuade Indian manufacturers to produce and sell super-efficient ceiling fans, backed by a $50 million loan from the Clean Technology Fund and other support, may struggle, experts say.

Manufacturers and fan distributors wonder if buyers can be persuaded to purchase super-efficient fans that, while offering lower monthly bills, might cost significantly more to buy than a low-efficiency fan does today, even with an expected discount funded through the programme.

Government processing delays have held up programme funding becoming available, and some potential manufacturers do not yet have the technology in hand to begin quickly producing the fans, experts say.

And smaller manufacturers complain that they have been excluded from the programme by government-set eligibility-to-bid criteria that favour big manufacturers, who programme backers believe could more quickly scale up sales.

Some of the problems are leading to delays which suggest the programme’s goal to introduce about five million super-efficient ceiling fans into India’s market over four years may be ambitious.

“The pilot project is currently undergoing review within the Government of India, as per established norms for projects of this size. This review requires inter-ministerial consultations, including with the Planning Commission,” said Mudit Narain, a World Bank energy economist based in India, in an email to the Thomson Reuters Foundation.

ENERGY EFFICIENCY PUSH

The effort to build super-efficient ceiling fans is part of an Indian Bureau of Energy Efficiency (BEE) programme to reduce the energy consumption of fans, seen across much of India as a household necessity.

The BEE functions under the Indian Ministry of Power. India’s major source of power is fossil fuels, so any energy-efficiency improvements could play a major role in arresting climate change.

In India, electric lighting is the largest source of household energy consumption, but there has already been a substantial reduction of energy use from lighting with the introduction of affordable compact fluorescent lights.

The BEE has also set mandatory energy efficiency labelling requirements for other electrical appliances. The Standards and Labelling programme rates the energy efficiency of air conditioners, refrigerators, television sets and other appliances on a scale of 1 to 5 stars, with five being the most energy efficient.

So far, fans have remained outside that labelling system, something the BEE hopes to change. It also wants to introduce super-efficient fans, with support for a manufacturer’s incentive scheme channelled by the Climate Investment Funds through the World Bank’s International Bank for Reconstruction and Development (IBRD).

The IBRD is making available $50 million for the programme through 2017, and other international agencies have committed financing totalling up to $130 million.

Two civil society organisations with proven track records of working on energy issues in India - Prayas Energy Group of Pune and Shakti Sustainable Energy Foundation of New Delhi – have been hired to carry out studies and offer advice on the fan energy efficiency drive. They published a guidebook to the project in April.

But Prayas Energy Group official Aditya Chunekar told the Thomson Reuters Foundation that the energy efficiency project is still awaiting clearance at the Indian Planning Commission, a process that might take months, he said.

According to Narain, of the World Bank, the bidding process for the project is “already underway, with expressions of interest received earlier this year.”

But Ashok Kumar, India’s top BEE official, said there could be delays in the first batch of fans hitting the market by the summer of 2014, as originally planned, depending on how long the government approval process takes.

LOOKING TO BIG MANUFACTURERS

Eight manufacturers have been listed as ‘eligible to bid’ for support to begin producing super-efficient fans, and Compton Graves, India, one of the largest, confirmed it will be among the bidders.

Companies were selected as eligible to bid based on having a record of selling at least 300,000 fans annually over the last three years, Prayas said. The aim of the criterion was to weed out “fly-by-night” operators who might produce inferior products that would be detrimental to the programme’s success, he said.

Narain said the aim was also to ensure “rapid transformation at a large scale in a short time” and that “requires participating manufacturers to have substantial market penetration, extensive sales channels and existing engagement with dealers and retailers, apart from eligible technologies.”

The problem, he said, is that “it may take years for smaller manufacturers to develop these market linkages and sales channels in a market as competitive as that for fans in India.”

Such rules are “in line with international procurement good practices for a project of this size,” Narain said.

But small manufacturers say the rules could prevent innovative and efficient Indian-made technology from gaining a foothold.

The guidebook produced by Prayas and his partners notes that “innovators and small manufacturers… can be the drivers of change in an industry.” But “it was felt that this criterion (to be already involved in large-scale manufacturing in order to bid) would not be too onerous for them because, in any case, innovators would need to team up with established manufacturers to manufacture and market their products.”

Smaller firms, who say they have the efficient motor technology in hand to build super efficient fans, however, insist they are reluctant to hand over technology they have developed to the big firms who do not yet have it.

They also fear big firms will have too little financial incentive to promote sales of the more costly super-efficient fans over their own existing models.

Nagaraja Mannan, managing director of Green Power Systems and Services, a small Bangalore-based firm interested in bidding to produce the fans, said the technology needed for super-efficient fans would require large fan manufacturers to rework existing assembly lines with little guarantee that higher priced fans would sell.

Large firms could also end up making smaller profit margins on efficient fans than on normal ones, again reducing their incentive to push sales, he said.

ANY BUYERS?

Finding buyers for super efficient fans may be the biggest hurdle, experts say. Currently available ceiling fans sell for about Rs 1,800 ($36), while highly efficient fans could probably not be priced at less than Rs 3,200 ($64), one manufacturer said.

Narain, of the World Bank, said manufacturers chosen to produce super efficient fans as part of the project will be eligible to receive a per-fan incentive of up to Rs. 500 ($8.39). If passed along to customers, that could help lower the cost of the new fans somewhat, though not bring them close to the existing cost of less-efficient fans.

The fans may face cultural resistance as well. Indian buyers tend to choose products based on design and colour rather than efficiency, Consumer Voice, a consumer non-governmental organisation, said in a January 2013 publication.

Arnav Kala, a spokesman at KSR Electricals, a large electrical equipment distributor in India, confirmed that its wealthier buyers show willingness to pay more for good-looking fans with lights attached, but are less interested in saving electricity.

“Our buyers want to pay higher prices for rich colours and decorations but energy efficiency without such decorative items does not make sense to them,” he said.

As a result, “I doubt how many SEE fans we can sell,” he said.

Kumar said the fan project “includes a component on awareness and advertising, to sensitise the consumers on the benefits of energy efficient appliances, especially those eligible under this program.”

The media campaign will build on the successes of the current Bachat ke Sitare television ad campaign by BEE, which showcases India’s progress in energy efficiency, Kumar said.

Sujit Chakraborty is a science and environmental journalist based in New Delhi. This article is part of a series funded by the Climate Investment Funds.

Our Standards: The Thomson Reuters Trust Principles.

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