The Department for Promotion of Industry and Internal Trade has issued a May 2026 order capping imports of air conditioner and refrigerator compressors for FY26 — with relaxations extended into FY27 — at specified percentages of FY25 import volumes, in a move designed to accelerate domestic manufacturing under the Make in India and PLI frameworks but one that risks acute supply shortages during India’s peak summer demand season.
The cap is most restrictive for sub-2-tonne AC compressors — the category that accounts for over 85% of the Indian residential air conditioning market — where imports are capped at just 30% of FY25 volumes. For refrigerator compressors in the corresponding popular capacity segments, the cap is set at 40% of FY25 volumes. The policy is stricter for the most mainstream products precisely because those are the segments where the government wants to force the fastest localization.
The supply math is uncomfortable. India requires approximately 15 million AC compressor units annually to meet current demand — demand that has been accelerating sharply as heatwave frequency and intensity increase. Domestic manufacturing capacity stands at approximately 7-8 million units — roughly 50% of requirement. For refrigerators, domestic production covers approximately 60% of compressor demand. Capping imports to 30-40% of last year’s already insufficient import volumes — at a moment when domestic capacity covers only half of total requirement — creates an arithmetic shortfall that has no immediate resolution.
Companies in the direct line of fire
Voltas Limited, the Tata Group’s residential AC market leader, has significant exposure to imported compressors. As the largest listed pure-play AC brand in India, any supply disruption in the compressor pipeline translates directly into production constraints and potential revenue shortfalls during the April-June peak demand quarter — the most critical quarter for AC sales. Voltas does not manufacture compressors domestically at scale.
Blue Star Limited’s managing director publicly warned that the quota structure favours companies with heavier historical import volumes — a design feature of the policy that disadvantages smaller or newer importers who may have been growing their import base and thus have a lower FY25 baseline against which the percentage cap applies. Blue Star, with its significant residential and commercial AC portfolio, faces both supply constraint risk and a structural disadvantage relative to peers with larger historical import bases.
Havells India, through its Lloyd brand, has substantial AC exposure and will face similar compressor sourcing challenges. Johnson Controls-Hitachi Air Conditioning India, focused exclusively on the AC segment with a global supply chain, will need to rely on its existing domestic manufacturing footprint and parent company relationships to navigate the import cap.
Whirlpool of India, with its strong refrigerator market position, faces the 40% cap on refrigerator compressors — a constraint that arrives alongside already elevated raw material and logistics costs from the West Asia crisis.
Who benefits from localization pressure
Amber Enterprises India Limited — a major AC component and contract manufacturer supplying Voltas, Daikin, and other brands — is positioned as a long-term beneficiary of the localization push even as it faces near-term supply chain complexity. The policy accelerates the commercial case for domestic compressor manufacturing investment. Amber has been investing in deepening its AC manufacturing capabilities and could capture incremental value as brands seek to reduce import dependence.
PG Electroplast Limited, which assembles AC units and components for major brands and has been investing in new compressor manufacturing plants, is a direct beneficiary of the policy’s direction. New domestic compressor capacity from players like PG Electroplast will become commercially viable faster under import restriction than it would in a fully open import regime.
EPACK Durable Limited, similarly positioned in AC-related manufacturing, stands to benefit from the accelerated localization mandate over the medium term.
MNCs with existing domestic production footprints — LG Electronics India, Samsung, and Daikin — are relatively advantaged because their historical import volumes are larger and their domestic manufacturing integration is deeper, giving them both a higher absolute import allowance under the percentage cap and greater ability to partially substitute with locally made components.
The near-term risk
The immediate concern is timing. The DPIIT order arrives as India enters its peak heatwave demand season — the April-July window when AC sales are concentrated and any supply disruption has maximum commercial impact. A 30% cap on sub-2-tonne compressor imports, applied to a market where domestic capacity covers only half of total demand, mathematically implies that some portion of demand will go unmet unless domestic manufacturers rapidly scale production — which cannot happen overnight.
The likely outcome in the near term is a combination of price increases as constrained supply meets robust heatwave demand, production scheduling prioritisation toward higher-margin models, and potential revenue misses for brands unable to source sufficient compressors to meet order backlogs. The companies best insulated are those with the largest FY25 import bases — since their absolute allowance under the percentage cap is highest — and those with the deepest domestic compressor sourcing relationships.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a SEBI-registered financial advisor before making investment decisions.