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The Effect of LED growth on the CFL market in IndiaDecember 2012

Contents:

1. Current scenario | Dominance of CFLs2. Future Scenario | Impact of LEDs2.1 State of LEDs Manufacturing in India2.2 Growth Drivers of LEDs2.3 Impact on sale of CFLs2.4 Impact on End User Segments2.5 Impact on geographical usage3. Conclusion4. Technical Annex

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Until about 10 years ago, the lighting market in India was dominated by fluorescent tube lights (FTLs) and incandescent bulbs (ICLs). They were easily available, cheaper when compared to other lighting sources and were easy to install and maintain. But the biggest drawback of using these light sources was their inefficiency. If we talk about ICLs, only 20% of the energy consumed by these lamps gets converted into light, while the rest turns into heat. Despite the issue of poor conversion, FTLs and ICLs continued to grow and dominate the market in the absence of a cost efficient alternative. However, given the poor conversion ratio and the constant focus on power consumption, as high as 17% for lighting, meant such a situation was unlikely to continue.  

Therefore the government started taking initiatives to promote the ‘then feasible’ energy efficient lighting source, that is, the compact fluorescent lights (CFLs). Initially these lamps were quite expensive when compared to the age old ICLs and FTLs, but with spreading awareness and special subsidies by the government, the prices of CFLs came down drastically in the last few years, and therefore the demand increased substantially. According to the industry figures published by Electrical Lamp and Component Manufacturers Association (ELCOMA), the manufacturing of CFLs in India has grown manifolds from a mere 20 million pieces in 2002 to a massive 340 million pieces in 2011.

Current scenario | Dominance of CFLs

CFLs find their application across all end user segments but the biggest reason for CFL dominance is its wide acceptance by the residential segment. Today almost 60% of Indian households use CFLs, whether urban, semi urban or rural. Also, CFLs are up to four times more energy efficient when it comes to lumens/watt output. If we can replace a 100 watt ICL with a 22 watt CFL, we get the same lumen output but the CFL will use70-80% less energy. The life of an ICL is 1,000 hours but for a CFL it goes up to 8,000 hours. They are also aesthetically more appealing than the ICLs as they come in different shapes and sizes.

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Current scenario | Dominance of CFLs

The government has been one of the biggest contributors to the overall CFLs market, as for the last 10 years they have been trying to push CFLs as against older technologies. For example, Punjab State Power Corporation (Powercom) replaced almost two crore ICL bulbs with CFLs across the state under Bachat Lamp Yojna in 2009. Similarly, Karnataka government also planned a phase out plan for ICLs where they were giving free CFLs in exchange of ICL bulbs. But in the last two to three years, the growth of CFL lamps has slowed down a little bit.

Diagram 1: Declining growth of CFLs manufactured (in volume) in the last four years

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BAG Electronics is known across the world as a premier partner in the lighting industry. They create innovative solutions and new ideas for more efficiency and lower energy consumption, and as such are active in markets that point to the future. Their corporate group develops, manufactures and markets electronic components for the operation of fluorescent and high pressure discharge lamps as well as for LED applications. They offer not only products but made-to-measure solutions, and they meet such demands with efficient processes and optimal delivery performance. They have approximately 3,000 employees around the world. In addition to their headquarters in Arnsberg, Germany, they also maintain sales and development locations in Europe and Asia as well as production sites in China, India and in the Philippines. BAG offers a wide spectrum of electronic control gear for the operation of LED modules with the ZITARES product family. Long term BAG experience in the sector of electronic ballasts was implemented for development of the ZITARES control gear in order to achieve maximum quality and reliability for the various applications. Because LED today offers an efficient alternative to conventional light sources in many applications, the ECG is also an essential factor for considering total system efficiency. ZITARES in this respect offers a selection of products with an above average efficiency of up to 93%.

ValueNotes is an India-based provider of business research and intelligence. Over the past ten years, ValueNotes has specialized in the management of research, business intelligence, and information. We work with leading global corporations, consulting firms, research and B2B publishers, PE and VC firms, and money managers.

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