NEW DELHI -- Keen to encourage energy conservation, Prime Minister Narendra Modi's government has launched a "super-efficient" air conditioner targeted at India's urban dwellers.
The state-owned company behind his product is Energy Efficiency Services, a joint venture between four state-run enterprises -- NTPC (formerly National Thermal Power Corp.), Power Finance Corp., REC (previously known as Rural Electrification Corp.) and Power Grid Corp. of India.
Energy Efficiency Services, better known as EESL, started sales of the air-conditioner on its website this month. EESL is also behind the implementation of a nationwide scheme to encourage the use of light-emitting diode bulbs and is spearheading the country's ambitious move toward electric vehicles. It has invested 1.9 billion rupees in the air conditioner project, which is partly funded by a grant from the Asian Development Bank.
The air conditioner is made by industry leader Voltas, a Tata Group company, and retails at 41,300 rupees ($603) each. EESL said there were two other bidders in the procurement process, Japan-headquartered Daikin and India's Godrej whose prices were higher.
The company hopes to replicate the success of its national LED program launched in 2015. Thanks to bulk-buying of LED bulbs from manufacturers such as Philips and Crompton Greaves, EESL was able to offer them in India at about 70 rupees per unit, down from 300-400 rupees, within a year of launch.
Analysts cast doubt on EESL's ability to match its LED success. "For expensive equipment like air conditioners, something that first improves the efficiency of existing [products] is important," said Amarjeet Singh, co-founder of Zenatix, an energy management startup under Hero Group which offers solutions to plug power leakages.
Consumers are less likely to experiment with a product that costs more than 35,000 rupees, he said, pointing to the highly price-sensitive Indian market.
EESL is also procuring electric cars for government departments from Mahindra & Mahindra and Tata Motors, to meet the state target of turning 30% of its vehicles to electric ones by 2030.
EESL said the price of the EESL-Voltas air conditioner is 30% lower than those given five-star ratings and on a par with three-star ones. Household appliances are graded on a scale of one to five based on their energy efficiency in India where a higher rating reflects greater efficiency.
On the basis of the Indian seasonal energy efficiency ratio, the EESL-Voltas AC is rated 5.4, higher than the best available or five-star product in the market whose ratings range from 4.5 to 4.8.
Air conditioners are energy guzzlers that suck up 50-60% of power in a household. The EESL-Voltas will operate on 960 watts of power, compared with 1,155 watts used by a 4.5-star rated peer. EESL said this means consumers can save on 300 units of electricity, or 2,400 rupees, every year. In the first phase till December, EESL hopes to sell 50,000 units, after which it is planning an India-wide launch with deployment of 200,000 units within a year. A new bidding process will be initiated for the next round, and EESL said it would explore opportunities to engage utilities, industrial establishments, among others, for demand aggregation and the scaling-up of the program.
The company expects the installation of 50,000 air conditioners to save 145.5 million kilowatt-hours of electricity (or 1.2 billion rupees) annually, mitigating around 120,000 tons of carbon dioxide.
HDFC Securities said: "We believe India can sustain [over] 10% air conditioner volume [compounded annual growth rate] driven by cheaper financing options, growing disposable incomes, rising temperatures and increasing number of households."
