AC and Refrigerator Stocks Surge as Government Eases BIS Certification Rules

The shares of air-conditioner and refrigerator manufacturers, including Voltas (1.89%), Blue Star (2.47%), and Havells India (2.62%), witnessed gains in today’s trading session. The rally comes after the government announced the exemption of certain critical components from mandatory Bureau of Indian Standards (BIS) certification to prevent potential supply disruptions ahead of what is expected to be an intense summer.

Key Exemptions to Prevent Shortages

The Department for Promotion of Industry and Internal Trade (DPIIT) has lifted the BIS certification requirement for:

• Grooved copper tubes
• Air-conditioner compressors with a capacity of 2 tonnes and above

These exemptions apply to both domestic production and imported components, including those from China, which has been a major supplier to the Indian market.

Industry’s Struggle with Domestic Shortages

According to a news report, Industry executives had raised concerns about a severe shortage of essential AC and refrigerator components, as many Chinese and other foreign suppliers had not yet received BIS certification. This issue had the potential to create significant bottlenecks in production, particularly with rising temperatures driving demand for cooling appliances.

Additionally, reports indicate that domestic manufacturers are charging higher prices for copper tubes compared to international vendors, further increasing costs for companies.

Upcoming Policy Changes Under Consideration

While the DPIIT’s exemptions currently apply only to AC compressors of 2 tonnes and above, the government is reportedly considering extending similar relaxations to:

• AC compressors below 2 tonnes
• Refrigerator compressors

Reports say an official notification on this matter soon, which could further stabilise production and supply in the coming months.

Temporary Import Allowance for Copper Tubes

To balance domestic supply and import dependency, the government has allowed:

• Imports of grooved copper tubes without BIS certification until June 30, 2024
• Imports of AC compressors (2 tonnes and above) without BIS certification until February 10, 2026
• Between January and March, industries can import copper tubes up to 25% of their total 2023-24 imports

This move aims to prevent price escalations and stock shortages as demand picks up.

Industry Impact and Future Outlook

As per government regulations, all brands must ensure that the components used in their ACs and refrigerators have BIS approval, regardless of whether they are sourced locally or internationally.

Amber Enterprises, India’s largest AC contract manufacturer, recently highlighted in its earnings call that production in April could be impacted due to component shortages.

Conclusion

The government’s decision to temporarily relax BIS certification norms provides relief to AC and refrigerator manufacturers, ensuring that production continues smoothly ahead of peak summer demand. While this move has boosted market sentiment and stock prices, industry leaders are still advocating for long-term solutions, including enhancing domestic manufacturing capacity for critical components.

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