India has become the cheapest manufacturing base for colour televisions and refrigerators in the world, beating even rival China.

Part of this cost advantage is because of the strengthening of the rupee against the dollar, which has resulted in the drop in prices of imports.

"We were losing out to the Chinese because of the high cost of imports. But after the strengthening of the rupee, that disadvantage has evened out, making us the cheapest manufacturer in the world," says Gulu Mirchandani, chairman and managing director of Mirc Electronics, the maker of Onida brand of televisions.

Adds VN Dhoot, chairman and managing director of Videocon, "This year, the export price of a 21-inch television for us is $68 as against the export price of $76 in the case of Chinese companies."

The integrated circuits, which constitute 20 per cent of the cost of the TV, are imported. So are a lot of the inputs that go into the manufacture of the picture tubes, which constitute 60 per cent of the cost. This is where the strengthening rupee has helped the Indian producers.

However, BPL chairman Ajit Nambiar says India still has some distance to go before it can match China in prices. "China produces over 20 million TVs a year as compared with 6 million produced by India," he adds.

The cost advantage is there for refrigerators as well. A 170-litre direct cool refrigerator costs under $100, a few dollars less than it costs in China.

"In case of low-end refrigerators, where India wins over China or is at par, the import component of cost will be only around 5 per cent and hence the strengthening of the rupee has had little effect. Yet, our prices match those of China," says Raj Jain, managing director of Whirlpool of India.

The production head at LG India, Sanjay Arora, says that in the past few months, the exchange rates have benefitted Indian manufacturers of televisions, though rising prices of steel and copper may have been a damper for the refrigerator makers.

Indian manufacturers have sought duty rationalisation for both CTVs and refrigerators, which will help bring down price and increase penetration.

It has been found that for the lower income classes in India (monthly income less than Rs 3,000 and between Rs 3,000 and Rs 5,000), the refrigerator costs almost 2.3-6.2 times the monthly income -- which results in low penetration (1 per cent for the lowest income class and 26 per cent for the lower income class).

In China the income multiple is 1.2-2 for the lower income classes resulting in higher penetration -- 72 per cent for the lowest income class and 84 per cent for the next income class.

"Ideally, an income multiple of 1-2 for the lowest income classes in India will result in much greater penetration," said an executive of the Refrigerator and Airconditioner Manufacturers Association.

The price factor

• Cost advantage is due to strengthening of the rupee against the dollar, leading to a drop in price of imports
• Manufacturers have sought duty rationalisation for colour TVs and refrigerators, which will help bring down prices and increase coverage
• For lower-income classes, refrigerators cost almost 2.3-6.2 times the monthly income, leading to low coverage
• In China, the figure is 1.2-2 times, resulting in higher coverage