- Indian electrical equipment industry has witnessed a negative growth of 4.1% in Q2 FY13
- On a half yearly growth comparison, Indian electrical equipment industry has witnessed a negative growth (3.6 %) compared to corresponding period of last year
- Transformer, Power Cable, Capacitor and Switchgear, which represent 60% weightage in overall industry growth, have witnessed a negative growth of 16.05%, 14.53%, 38.32% and 4.57% respectively compared to the corresponding period of last year
The Indian Electrical and Electronics Manufacturers’ Association (IEEMA), the apex Indian industry association of manufacturers of electrical, industrial electronics and allied equipment, today released the Q2 FY13 performance of the US$ 25 billion Indian electrical equipment industry. The industry has seen a negative growth for the second consecutive quarter in FY13. It has witnessed a negative growth of 4.1% compared to the sequential quarter Q1 FY13 (2.1%).
Transformer, Power Cable, Capacitor and Switchgear industries, which represent 60% weightage in overall industry growth, have witnessed a negative growth for the second consecutive quarter in FY13.
The Transformer industry has seen a negative growth of 16.05% against the negative growth of 7.6% for the sequential period of Q1 FY13. The industry has witnessed this negative growth trend across Power Cable and Capacitor, which registered a negative growth of 14.53% and 38.2% respectively compared to 12.9% and 24.8% negative growth in sequential quarter Q1 FY13.
The Switchgear industry, which was consistently growing till Q1 FY13, has witnessed a negative growth of 4.7% in Q2 FY13 compared to positive growth of 2.37% in Q1 FY13. Rotating machines segment has recovered slightly, witnessing a positive growth of 0.82% in Q2 FY13 against a negative growth of 2.6% in sequential quarter Q1 FY13. This is mainly due to revival in demand for HT motors and LT Motors to some extent due to execution of long pending orders from power generation and major core sectors.
Commenting on the Q2 FY13 results, Mr. J. G. Kulkarni, President, IEEMA said “We have witnessed the second consecutive negative growth in FY13, and this is an alarming statistic for Indian electrical equipment industry. Despite having a strong demand for electrical equipment in domestic market, Indian manufacturers are uncompetitive in their own country. An absence of a level playing field in the country for domestically manufactured equipment vis-à-vis imported equipment has made it difficult for domestic players to compete with overseas manufacturers; especially from China, who have emerged as a clear threat over the years. Imports of electrical equipment in the country have assumed very threatening proportions and have now captured 43% of the market for electrical equipment in India valued at Rs. 1.75 lakh crores in 2011-12, whereas there is significant domestic overcapacity.”
“The rise in cheap and unproven quality of imports is adversely impacting the growth trajectory of electrical equipment manufacturers and can potentially have a negative impact on the nation’s economy. Industry needs immediate attention from policy makers to create a framework that offers an opportunity for domestic players to leverage on the anticipated growth in Indian power sector and also capture a greater share of the huge global market for electrical equipment.”
Imports continue to rise giving alarming signs for sectors like Insulator, Motors, AC Generators, LV Switchgear and ACSR Conductors which has already crossed more than 20% of overall domestic industry size of past fiscal during first 6 months of the current financial year itself. Imports of power equipment under projects category has also increased by more than 25%. Specifically, import of Power Transformers and Reactors of 400 kV and 765 kV have increased to Rs. 332 crores from Rs. 115 crores during first half of the last financial year.
Sharp decline in Power Transformers, HT Breakers, Power Cables indicate delays in project / order finalizations due to precarious financial health of state utilities, SEBs coupled with uncertainty and credit crunch / high borrowing costs for private sector buyers. It is also reported that buyers are not accepting the ordered material leading to equipment stock piling up in the manufacturers’ premises; most of which is customized in nature.
All this has put tremendous pressure on the cash flow position of equipment manufacturers, who are already under severe burden of underutilization of capacities, high inflation, escalating imports, lack of testing & calibrating facilities in India, lack of skilled manpower, non-uniform & outdated procurement practices etc.
On a brighter note, Energy Meter sales have picked up mainly for Poly-phase Meters due to improved off-take by utilities, SEBs, private distribution companies etc. mainly under R-APDRP scheme. Growth is FHP motors, mainly single phase, is due to market shift from unorganized to organized players. Alternators demand continues to rise for all voltage ranges (5 kVA to 2,500 kVA) to fulfill the demand of uninterrupted power for many types of businesses.
Transmission Line Towers (TLT) & Conductors is the only sector currently growing at a good pace of 6.5% and 29%. Conductor demand is a pent up demand arising after delays of order finalizations whereas exports of TLT is playing a major role in overall growth of this product.
Select low voltage Switchgear products like MCBs, Motor Starters and House wiring cables are showing some resilience due to orders from realty sector. On the other hand, exports are growing for products like TLT, Energy Meters, LV Control Panel, MCCs/PCCs etc.
The domestic electrical equipment industry is not looking for any protection but wants a level playing field. The government needs to provide greater encouragement to indigenous manufacturing in strategic sectors like electrical equipment, as done by several countries including China. IEEMA has been asking for (1) limiting participation in tenders for bidding for domestically funded projects to domestic manufacturers only with tightened quality requirements so that only good quality & reliable equipment comes into the country; (2) putting in place a mandatory requirement of setting up a manufacturing facility in India, within a specified time frame of the award of the tender, where foreign bidding is allowed, to provide for level playing field bidding, that is, phased manufacturing process (PMP) should be made mandatory in the country for supply of major equipment; (3) stipulating a minimum percentage of the total procurement by any utility to be of ‘Made in India’ products; and (4) Protecting the domestic industry’s interests under different Regional Trade Arrangements (RTAs).
Thus, the industry seeks urgent intervention from the Central Government at the highest level for conducive policy initiatives while entering into 12th Plan so as to meet laid down targets of power generation capacity and related transmission & distribution capacity expansions.
|Growth Indices for Electrical Equipment Industry|
|Cumulative Growth Compared to same period of previous year|
|Product||Weightage||April – September 2012-13 (% Growth)|
|Overall IEEMA Electrical Equipment Growth Index||100||-3.6|