KARACHI, May 23: Manufacturers of refrigerators and deep freezers have phased out 40-50 per cent ozone depleting substance (ODS) gas much earlier against the actual target of phasing out of 50 per cent by early 2004 as per Pakistan’s global commitment under Montreal Protocol Agreement.

The local industry will have to reduce the consumption of freon gas by 85 per cent in 2007 and 100 per cent in 2010. The manufacturers have already geared up its effort to achieve the international targets much earlier.

The local industry has been using freon gas in two types of categories — one in compressor as refrigerant cooling gas and second in fridge’s rigid foam. In other words, 60 per cent of freon gas is used in fridge and deep freezers’ foam and 40 per cent in the compressor.

An executive of a leading domestic appliances maker said one company has launched refrigerators based on green gas by phasing out the ODS gas in compressor segment last week, while majority of fridge and deep-freezer makers have phased out the ODS gas in foam portion two months back. Manufacturers are now importing green gas from Europe.

“Phasing out of ODS in refrigeration industry is well ahead of target as per country’s global Montreal Protocol commitment,” an official of Refrigerators and Air-conditioners Manufacturers Group (RAMG) said. “We have prepared a road-map to achieve 100 per cent switchover by 2007 well ahead of target of 2010 allowed under Montreal Agreement,” he said.

By 2010, only green gas based technology of fridge and deep-freezers will be accepted after complete phasing out of freon gas.

The official said that the industry is now bearing the cost of changing to green gas from non-ODS components and gas consumption of foaming chemicals have risen as insulation of higher density foam are required. At an average it amounts to additional cost of Rs450 per unit in case of refrigerators and Rs500 per unit in case of deep-freezers. The local makers are bearing the higher cost of switchover to green gas as they have decided to achieve the target of Montreal Protocol three years earlier.

In the last 10 years, the local industry has come out of the woods and given a robust performance despite tough competition with foreign brands, under-invoicing, dumping and smuggling.

It was a small industry until 1990 producing 70,000 refrigerators and 50,000 deep freezers. At that time, the market share of local industry was 31 per cent as compared to 69 per cent enjoyed by imported products in fridge. Number of manufacturers were 13. In 1990, the local industry enjoyed hefty tariff protection with customs duty on built-up units at 125 per cent and the deletion programme had just been initiated.

From 1992 onwards, the government decided to gradually lower the level of protection to the industry by cutting the import duty on built-up units and enforcement of deletion programme. The industry accepted the challenge.

The number of manufacturers had come down to only four from 13 as only serious players had been left in the field who had invested heavily and expanded their production base by almost five times. The industry had achieved over 85 per cent deletion. The import duty on built-up fridge was slashed to 25 per cent from 125 per cent (an average reduction of Rs15,000 in landed cost of imported fridge). The local production of fridge went up to 300,000 units in 2001-2002 from 70,000 in 1989-90. Local production of deep-freezers also increased to 135,000 in 2001-2002 from 50,000 in 1989-90. The local industry is now anticipating production of 350,000 fridge by the end of 2002-2003.

“The market share of local fridge makers have gone past 85 per cent and 100 per cent in deep freezers,” the official of RAMG said.

However, the industry has been facing stiff challenges arising out of low duty regime and free flow of cheaper imported goods besides facing serious threats from dumping and under- invoicing, which have gained momentum in the last few months. The government should check the flow of cheaper imports from China which is specifically playing havoc with split air-conditioner industry.

He said the association in its 2003-2004 pre-budget proposals has sought changes in anti-dumping laws. The anti-dumping ordinance, safeguard and countervailing duties ordinance need to be suitably amended to allow imposition of anti-dumping or countervailing duties in anticipation of injury to the local industry.

The government should also consider cut in sales tax to 12.5 per cent from 15 per cent, he said.