LED Bulb Orders Too Big Philips India Capacity Can't Keep Up

- Sep 15, 2018-

In September, Philips India won a government tender for 50 million LED bulbs for UJALA, and has already supplied the first several batches of bulbs, most of them "made in China". 

According to the contract, philips India will supply 50 million nine-watt LED bulbs worth 38 rupees (about 3.9 yuan) each to EESL, the state-run energy efficiency services company that runs UJALA's program, in 150 days. 

EESL general manager Saurabh Kumar said: "according to the contract, the number of LED bulbs provided by philips should be 50 million within five months.Philips said the first bulbs were imported from philips lighting's factories in China, though it is boosting India's capacity to supply 12m LED bulbs a month from December.Imports are only a temporary measure to ensure timely delivery.According to philips, they will gradually stop importing bulbs and, in addition, philips' Indian factories will be fully operational within a month or two. 

Under the UJALA plan, EESL first offered private companies a purchase contract for a certain number of bulbs.Once delivered, the bulbs will be distributed to state power companies.When consumers go to the power company to pay their bills, they can buy LED bulbs priced below market prices.At present, the price of philips nine-watt LED bulbs is 130-190 rupees (about 13.34-19.49 yuan). 

"As a leader in the global lighting market, we source LED bulbs from our worldwide manufacturing plants and through India's strong network of suppliers," said Harshavardhan Chitale, vice President and marketing director of philips lighting India.We already have mass manufacturing capacity, and last year we supplied EESL with more than 15 million indian-made LED bulbs.Some of the bulbs in this particular order will be sourced from factories around the world, but most will be supplied by Indian plants, as the volume of this particular order is large and needs to be substantially increased. 

Responding to a question about how the company could offer bulbs at such a low price, Chitale said: "" while we cannot comment on the specific tender price, we can say that due to the large number, we offer a price that makes LED bulbs more affordable to end users while meeting all tender requirements.The surge in demand for LED bulbs in India has boosted sales so much that we can maximise shareholder value in this way by offering better prices through economies of scale. 

If other companies can match the lowest bidder's bid price, they should also get a substantial share of the supply contract, according to the tender documents."As with all EESL tenders, the requirement is that orders will be allocated among 5-6 bidders who are technically qualified and able to match the L1 price (the price offered by philips in this bid).EESL follows the same principle, requiring bidders to reach L5 to match L1 prices.Neither of them agreed to do so, and so, as the RFP (solicitation for proposals) showed, the EESL allocated the entire order to philips, which had expressed a willingness to supply 50m in the tender, "says Kumar.