Consumer durables demand may get a push on govt’s rural electrification drive

New Delhi |
Published:October 1, 2017 1:32 am

The rural consumer durables market is growing at a CAGR of
25 per cent.

The government’s continued push to rural electrification could come as good fortune for a host of consumer durables and electronics makers. In April 2015, the Centre’s rural electrification drive, Deen Dayal Upadhyaya Gram Jyoti Yojana (DDGJY) identified 18,452 unelectrified villages countrywide, which is now down by 83.4 per cent today, at 3,046 villages — making targeted penetration to village households with power easier for consumer durable companies. Besides, the newly-minted Pradhan Mantri Sahaj Bijli Har Ghar Yojna (Saubhagya) scheme, which promises electricity to every household by 2018, will shed more light on profitability of consumer appliances makers down the line.

Urban markets accounted for the major share (67 per cent) of total revenues in the consumer durables sector in India in FY15, which sits at 60 per cent today, say analysts. In rural markets, durables like single-door refrigerators and semi-automatic washing machines are likely to witness growing demand in the coming years as the government plans to invest significantly in rural electrification. The rural consumer durables market is growing at a CAGR of 25 per cent.

Given the thrust on LED lights by the government for their energy efficiency and longevity, Bajaj Electricals rode the wave first. “We have an order book worth Rs 2,000 crore for LED lights as part of the electrification of villages drive in the states of Bihar, West Bengal and Karnataka,” says Shekhar Bajaj, CMD, Bajaj Electricals.

While Bajaj’s light supply has a direct bearing with the electrification drive in villages, Anish De, partner and lead energy and infra advisory, KPMG, points out a big correlation between “reliable” power supply and demand for appliances. “Not only access, even the quality of power has improved over the last three years,” says De.

That reflects in the sales of Samsung India, which notches up 35 per cent of its sales today from rural areas, from just about 30 per cent two years ago. “We were strongly focusing on rural markets Tier 2 onward and launched service vans to provide customer service to consumers across rural India last year,” says Rishi Suri, director, consumer electronics, Samsung India.

Though Whirlpool of India refrained from divulging any numbers, managing director Sunil D’Souza agreed to the opportunity arising from rural electrification. “At Whirlpool, we are making sure we have the portfolio to appeal to first-time buyers, as also building our premium portfolio and expanding distribution and footprint on services to take advantage of this upcoming opportunity,” he said.

For one, Anil Kumar Kadam, general manager for business development and solutions architecture at Schneider Electric, has been working on microgrids in the hinterland for long, and has seen first hand power as an enabler in rural areas.

“With sustained power in villages, we are seeing a sudden offtake in durables, which is led by states like Maharashtra, Uttar Pradesh and Tamil Nadu,” he said, adding how there has been a noticeable transformation as villagers are lapping up lighting gear, television panels, high-resolution DTH and mobile phones.

Kadam goes on to highlight how control farming is becoming staple after stable power flowing in to rural areas. “Control farming involves quite a few new technologies, such as using high voltage and high heat producing bulbs for livestock to grow faster.”

Today, even Panasonic India has found control in the hinterland with 40 per cent of its customers coming from there, which stood at 30 per cent two years ago. “Our growth in Tier 2 market onward has been significant as compared to Tier 1 over the last year… in 2016, we had 6,500 actively billing dealer points, which has increased to 9,100 August-end,” says Ajay Seth, head–sales and service, Panasonic India.

Even Godrej Appliances, a Rs 2,750-crore flagship division of Godrej & Boyce, has seen the surge. “In appliances, our CAGR in rural areas is higher owing to high adoption, high per capita and electrification,” says Kamal Nandi, business head and executive vice president of Godrej Appliances.

While it’s true that the definition of an electrified village under the DDGJY scheme hinges on a mere 10 per cent of the households being electrified in the entire village, the shared optimism among the durable makers even before the Saubhagya comes into effect definitely signals the charge of the light brigade. FE

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