Gas supply crunch a worry for AC makers ahead of peak season

MUMBAI: Ahead of the onset of peak summers, a brisk business season for consumer durables companies, some AC makers are feeling the heat of the West Asia war as restricted supplies of LPG and shortage of petrochemicals are beginning to hit production, industry executives said. LPG is used in processes such as brazing of copper and curing of powder-coating while petrochemicals is key to the manufacturing of polymers which are used in the plastic mechanical parts of AC units. To be sure, there’s no major disruption on ground as of now but if things do not get better, it could be a challenge heading into the season. For consumers who will already be paying more for new AC stock which will hit the shelves around April-May on the back of price hikes, the war led supply crunch could pose an added burden on pockets.



“We are facing certain challenges related to production–first is availability of LPG and PNG which are required for certain manufacturing processes in ACs and other product categories. Also, scarcity of petrochemicals. It is causing some disruption in day to day production. We are working with our vendors to curb wider impact,” said Vikas Gupta, MD (operations) at PG Electroplast which manufactures ACs and a range of other white goods for brands. Given the likelihood of an extended summer, Gupta hopes the war will subside by then, helping demand. Temperatures have already started rising in parts of India and some forecasts have hinted at the possibility of El Niño later this year.





“Geopolitical tension in the Middle East has started creating some supply-side constraints across certain input materials used in AC manufacturing,” said Kamal Nandi, business head and EVP at appliances business of Godrej Enterprises Group which is working with vendors to optimise procurement strategies and ensure continuity of production. Besides limited supply of LPG, availability of key plastic raw materials like Polypropylene and Polystyrene has been meagre, accompanied by sharp price increases, Nandi said.

Epack Durable is looking at alternatives for brazing copper for ACs even though that will push up the cost of production, said MD & CEO Ajay Singhania. There has been no loss in production till now but gas agencies have said that there could be challenges going ahead if supply crunch remains. The company is now focusing on ramping up induction cooktops given the surge in demand, said Singhania.

New energy norms have already pushed up AC prices by about 5% with another 8%-10% hike on the back of high commodity costs, said B Thiagarajan, MD at Blue Star. “There is apprehension within the industry about supply challenges,” said Thiagarajan. The vulnerability arises from supply concentration–about 88% of India’s LPG imports come from the Middle East and that equals roughly about 54% of the country’s total LPG demand. “If disruptions continue, the supply gap could be significant,” said Sumit Pokharna, VP, fundamental research at Kotak Securities.

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