EESL’s 10 million energy-efficient fans program: Pathways to encourage innovation, scalability – ET Government

Blog 4 min read EESL’s 10 million energy-efficient fans program: Pathways to encourage innovation, scalability A long-term program with periodic efficacy assessments is required. The initiative to distribute 10 million energy-efficient fans is commendable. However, the program’s success hinges on a nuanced and multi-faceted approach. Energy Efficiency Services Limited (EESL), a joint venture of four National Public Sector Undertakings, has promoted energy-efficient practices in India. Following the success of its LED program earlier last decade, EESL has now embarked on an ambitious plan to distribute 10 million energy-efficient fans. While the program draws inspiration from the LED revolution, it presents unique challenges and exciting opportunities that merit a thorough examination. In essence, the fan industry in India has been a stronghold of Indian manufacturing for several decades. Although it has been commoditized over the years, the industry saw a spark of innovation with advancements in motor technology. This innovation, spearheaded by a few private sector players, played a pivotal role in popularizing the super energy efficient fans in India. What the country needs now is a nuanced approach that encourages both scalability and innovation. Specific incentives, such as tax benefits for core manufacturing and innovation, for sustainable manufacturing practices could incentivize investments in R&D and new manufacturing practices. In the global landscape, India has the potential to be a leader in fan manufacturing and could serve as an alternative to China. A few bold policy measures could protect and nurture this indigenous industry, ensuring that it doesn’t lose out to imports, especially when the origin of the new technology is Indian. With an estimated 40 million fans sold annually and a potential shift to 5-star rated fans with the implementation of mandatory labeling, there is a need to define the program’s target audience. The deployment of 10 million fans without proper context could have the potential to create disturbances in the open market, thereby working against the interests of manufacturers and making it counterproductive, with the potential to result in inventory issues and diminish the interest of current manufacturers. Another question is whether the current trend of market penetration of 5-star fans is considered. Mandatory star labeling occurred this year, and manufacturers had a grace period to clear older 75W stock. These stocks significantly contributed to the sales during the summer of 2023, skewing data to show apparent low penetration. Sales data from popular brands indicate significant market penetration, with a conservative estimate suggesting a run rate of around 4 million 5-star fans this year. This shows that the market is organically progressing towards energy-efficient fans. EESL’s current approach may inadvertently render the industry more susceptible to imports and compromise on product quality, thus making it important to introduce strategies that encourage innovation while ensuring the industry’s resilience against external factors. If the program intends to replace older, less efficient fans, it is crucial to consider the environmental impact of disposing of these fans. Since the primary objective of saving energy is the environment, effective recycling or disposal methods must be regarded to mitigate environmental impact. Determining the rationale for replacing functional fans for energy efficiency requires comprehensive research that compares long-term environmental savings from energy efficiency against the disposal’s environmental costs. Given the program’s undefined duration and scope, a short-term initiative could generate artificial demand spikes, causing disruptions in the supply chain, particularly since the annual organic growth is below 10 million units. A long-term program with periodic efficacy assessments is required. The initiative to distribute 10 million energy-efficient fans is commendable. However, the program’s success hinges on a nuanced and multi-faceted approach. The mandatory BEE star rating and the new BIS standards have initiated the shift towards energy-efficient fans, and it would be beneficial to focus on being a catalyst for market penetration by adopting a comprehensive strategy that leverages the popularity and connection with the policy rather than directly forcing it through artificial price reduction and rapid disruption of the distribution system. EESL can take the lead in guiding manufacturers and consumers through knowledge-sharing initiatives that extend beyond just energy efficiency, such as educating electricians about standards of wiring and handling super energy efficient appliances, spreading the awareness of thermal comfort features in home architecture and mandating the use of fans in all air-conditioned rooms. It is also crucial to shift the burden of discounts from the manufacturers wholly or partially to being distributed among stakeholders who stand to gain from the long-term benefits of energy efficiency and environmental conservation. By shifting the responsibility of discounts away from manufacturers, the program ensures a more sustainable approach beyond merely pushing for higher sales volumes. EESL could take the lead in reducing tax rates on fans to lower the price of super energy-efficient fans. A tax reduction would directly lower the retail price, making super energy-efficient fans also accessible to a broader segment of the population. This move would benefit consumers and align with the EESL goal of market penetration. By adopting this holistic approach, EESL can ensure its success in another mass technology program and set an example for a sustainable initiative.

Following the success of its LED program earlier last decade, EESL has now embarked on an ambitious plan to distribute 10 million energy-efficient fans. While the program draws inspiration from the LED revolution, it presents unique challenges and exciting opportunities that merit a thorough examination. In essence, the fan industry in India has been a stronghold of Indian manufacturing for several decades. Although it has been commoditized over the years, the industry saw a spark of innovation with advancements in motor technology. This innovation, spearheaded by a few private sector players, played a pivotal role in popularizing the super energy efficient fans in India. What the country needs now is a nuanced approach that encourages both scalability and innovation. Specific incentives, such as tax benefits for core manufacturing and innovation, for sustainable manufacturing practices could incentivize investments in R&D and new manufacturing practices. In the global landscape, India has the potential to be a leader in fan manufacturing and could serve as an alternative to China. A few bold policy measures could protect and nurture this indigenous industry, ensuring that it doesn’t lose out to imports, especially when the origin of the new technology is Indian. Increase focus on existing target market and duration With an estimated 40 million fans sold annually and a potential shift to 5-star rated fans with the implementation of mandatory labeling, there is a need to define the program’s target audience. The deployment of 10 million fans without proper context could have the potential to create disturbances in the open market, thereby working against the interests of manufacturers and making it counterproductive, with the potential to result in inventory issues and diminish the interest of current manufacturers. Another question is whether the current trend of market penetration of 5-star fans is considered. Mandatory star labeling occurred this year, and manufacturers had a grace period to clear older 75W stock. These stocks significantly contributed to the sales during the summer of 2023, skewing data to show apparent low penetration. Sales data from popular brands indicate significant market penetration, with a conservative estimate suggesting a run rate of around 4 million 5-star fans this year. This shows that the market is organically progressing towards energy-efficient fans. EESL’s current approach may inadvertently render the industry more susceptible to imports and compromise on product quality, thus making it important to introduce strategies that encourage innovation while ensuring the industry’s resilience against external factors. Replacement Market: An Environmental Quandary If the program intends to replace older, less efficient fans, it is crucial to consider the environmental impact of disposing of these fans. Since the primary objective of saving energy is the environment, effective recycling or disposal methods must be regarded to mitigate environmental impact. Determining the rationale for replacing functional fans for energy efficiency requires comprehensive research that compares long-term environmental savings from energy efficiency against the disposal’s environmental costs. Given the program’s undefined duration and scope, a short-term initiative could generate artificial demand spikes, causing disruptions in the supply chain, particularly since the annual organic growth is below 10 million units. A long-term program with periodic efficacy assessments is required. The initiative to distribute 10 million energy-efficient fans is commendable. However, the program’s success hinges on a nuanced and multi-faceted approach. The mandatory BEE star rating and the new BIS standards have initiated the shift towards energy-efficient fans, and it would be beneficial to focus on being a catalyst for market penetration by adopting a comprehensive strategy that leverages the popularity and connection with the policy rather than directly forcing it through artificial price reduction and rapid disruption of the distribution system. EESL can take the lead in guiding manufacturers and consumers through knowledge-sharing initiatives that extend beyond just energy efficiency, such as educating electricians about standards of wiring and handling super energy efficient appliances, spreading the awareness of thermal comfort features in home architecture and mandating the use of fans in all air-conditioned rooms. It is also crucial to shift the burden of discounts from the manufacturers wholly or partially to being distributed among stakeholders who stand to gain from the long-term benefits of energy efficiency and environmental conservation. By shifting the responsibility of discounts away from manufacturers, the program ensures a more sustainable approach beyond merely pushing for higher sales volumes. EESL could take the lead in reducing tax rates on fans to lower the price of super energy-efficient fans. A tax reduction would directly lower the retail price, making super energy-efficient fans also accessible to a broader segment of the population. This move would benefit consumers and align with the EESL goal of market penetration. By adopting this holistic approach, EESL can ensure its success in another mass technology program and set an example for a sustainable initiative. (The author is CEO of Superfan; Views are personal)