Climate change is resulting in rising global temperatures every year. This has already boosted demand for cooling systems across the world, though there has been a conscious initiative under the Montreal Protocol to control usage of refrigerants that cause global warming.
India, being a tropical region, is one of the worst hit countries in terms of rising temperature. Ministry of Statistics and Programme Implementation data suggests that India’s average annual temperature has increased by 2° Celsius to 31.5° over the last decade.
Incidentally, India has the lowest access to cooling across the world, reflected in its low per-capita levels of energy consumption for space cooling at 69 kWh vs. the world-average of 272 kWh. Other data suggests only 8% people in India have air conditioners vs. 90% in the US and Japan.
Although India’s refrigerant/cooling demand has stayed the lowest in the world, it is set for rapid growth ahead, led by the country’s fast-growing economy, increasing income levels, and rising urbanization.
The Ozone Cell (Ministry of Environment, Forest & Climate Change) estimates the demand (in tonnage of refrigeration) for cooling solutions growing 8x in the next 20 years (FY18-38) implying a CAGR of 11% (>1.5x India’s GDP growth). The building sector cooling demand shows the most significant growth at nearly 11x, followed by transport air-conditioning (5x), and cold-chain and refrigeration (4x).
Currently, most technologies use refrigerants such as R22 (a HCFC) and R410A for space cooling, but the phase-out of R22 will be replaced by R32 and blends such as R404A, R407C, R410A or low GWP refrigerants. In transportation refrigeration, R134A gas plays a lead role, but could see application of improved HFCs such as 134a, HFO 1234yf, carbon dioxide (R-744) and HFC-152a going ahead.
Given the robust cooling demand outlook for India, the refrigerants industry could emerge as a long-term secular growth play in India. Specifically, SRF (the only Indian manufacturer of the entire range of refrigerants, HFCs as well as HFO) could be the best beneficiaries of the emerging trend in refrigeration. Other Indian listed players are Navin Fluorine and Gujarat Flouro.
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