LPG Shortage Hits AC Industry, Raises Production Costs: Nuvama

NEW DELHI: India’s air conditioner manufacturing sector is facing mounting pressure as a shortage of Liquefied Petroleum Gas (LPG) disrupts production processes and drives up costs, according to a report by Nuvama.

The supply crunch, triggered by geopolitical tensions and logistical challenges, has led authorities to prioritise domestic LPG consumption. As a result, commercial users and electronic manufacturing firms are struggling with limited access to the fuel at a time when companies are gearing up for peak summer demand.

LPG plays a crucial role in heat exchanger brazing, a key process in AC manufacturing. With supplies tightening, several companies have shifted to alternative fuels such as oxy-acetylene to maintain production. However, this substitute comes with higher costs and added risks due to its dependence on imported raw materials like limestone and crude-linked inputs.

The report highlights that India relies heavily on imports for such materials, making the industry vulnerable to global supply fluctuations. These challenges are further compounded by weak seasonal demand following an underwhelming summer last year and recent unseasonal rainfall in parts of northern India.

To offset rising input costs, manufacturers have increased prices of air conditioners and related products. Industry players have implemented hikes in the range of 5–10 per cent, with additional increases expected due to currency depreciation and compliance with new energy efficiency norms.

Despite these headwinds, major brands are likely to post moderate revenue growth in the final quarter of FY26, though margins may remain under pressure. Meanwhile, electronic manufacturing service providers could face sharper financial strain due to escalating costs and operational constraints.