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Cold comfort for Rahul Gandhi: The aam aadmi too likes the AC

Author: Sandeep Singh & Anil Sasi
Publication: The Indian Express
Date: October 29, 2013
URL: http://www.indianexpress.com/news/cold-comfort-for-rahul-the-aam-aadmi-too-likes-the-ac/1188555/0

In the rising heat of the political battle for five states, the air conditioner is fast becoming a refrain in Congress vice-president Rahul Gandhi's speeches slamming the BJP.

Be it in Alwar or, most recently, in Bundelkhand, he used it to claim that the Congress is grounded in reality. Whereas, the BJP's is a politics of those with air conditioners, in other words, disconnected and elitist.

There's a slight problem with this: the facts don't warm up to such rhetoric.

Air conditioners are no more an exclusive preserve of the privileged, if that is what Rahul was trying to convey. And he doesn't have to look beyond his humble party headquarters in the capital for evidence.

The Lutyens' building on Akbar Road has at least 30 split and 20 window ACs to help the grand old party keep its cool, with just two air-coolers for company - one of them meant for the guard at the gate.

While it might be tempting to attribute that to the comfort with which the party has been in power for nearly a decade, figures from the country's AC industry have an interesting story to tell. One of rising incomes and aspiration in towns far away from Akbar Road.

The AC market has grown at a compounded annual rate of 17 per cent over the last three years, according to management consulting firm Kanvic and the All India Air-Conditioning & Refrigeration Association — to Rs 17,600 crore in 2011-12 from Rs 11,000 crore in 2008-09.

While ACs are still found only in a mere 3.8 per cent of the estimated 31 million households, the spread to smaller cities and towns, where incomes have risen, is key to the surge — Tier-II and Tier-III towns such as Meerut, Rajkot, Nashik, Allahabad, Vijayawada, Guntur, Salem, Jabalpur, Amritsar, Nellore, Roorkee and Kollam.

Industry experts say penetration into semi-urban areas is also sharply increasing, riding on a rapid drop in prices and a marked improvement in the quality and quantity of power supply across most states, especially in the northern and western heartland.


Besides, there has also been a shift in the consumers' perception of ACs from being a luxury to a necessity as they get accustomed to AC environments at work, in cars and even public transport.

Until 1990, India had only four pairs of fully AC trains: the two Rajdhanis connecting Delhi to Howrah and Mumbai, and the two Shatabdis connecting the capital to Jhansi and Kanpur. Today, there are 97 pairs or 194 fully air-conditioned trains and the number of AC 3-tier coaches in other trains is only growing. Although the number of passengers travelling in AC coaches is still just about 1.5 per cent of total passengers, growth has been fast - 57 per cent in the last five years.

Much of this transformation, in fact, has happened while the UPA has been in power and is something the Congress could actually try claim credit for.

"While the top eight metros with 5 million-plus population remain the largest contributors to the category with an average 36 per cent of the pie, the emerging metros between 1 to 5 million population reflect 26 per cent of sales," says Pradeep Bakshi, President and COO, United Product Business Group of Voltas Ltd.

Voltas, along with Godrej, is a leader in smaller cities and towns while Korean giants Samsung and LG are stronger in the bigger cities.

"Tier-II and Tier-III towns with a population band of 1-10 lakh constitute 32 per cent of total sales (all branded ACs)," said Bakshi.

There has also been a fundamental shift in the source of demand for room ACs, with the bulk of sales moving away from the traditionally dominant commercial sector toward the residential sector. The share of the commercial sector halved to 40 per cent in the 15 years from 1995-96 - with growth in this segment largely shifting to central airconditioning units in malls and commercial complexes - while that of the residential segment trebled to 60 per cent in the same period.
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