The equipment industry has registered a 16.60 per cent growth in the first six months of the current fiscal, says IEEMA.
The Indian electrical equipment industry has witnessed a pickup in its growth momentum by registering a 16.60 per cent growth in the first six months of the current fiscal (H1 2010-11) even though it is still less than the peak 21.96 per cent growth in 2006-07.
Data collection and rigorous analysis by Indian Electrical & Electronics Manufacturers' Association (IEEMA), which monitors production and sales data of member organisations and represents 95 per cent of the sector, shows that it has grown by 15.82 per cent in the second quarter of financial year (Q2) 2010-11 as compared to only 2.89 per cent in Q2 2009-10. Since the sector usually witnesses much higher growth every year in Q3 and Q4 due to year-end bunching of orders by utilities, sustained demand was anticipated in the medium-term. Now it is widely recognised that the next boom of capital appreciation in the medium-term will be driven by the power and capital goods sector.
The industry is facing a number of challenges, which if addressed by all stakeholders, can further accelerate growth and contribute significantly to reducing the power demand-supply gap in the country. Major challenges include upwards volatility in raw material prices, lack of standardisation of product specifications for T&D equipment across utilities, lack of appropriate planning leading to bunching of orders by utilities resulting in sub-optimal utilisation of available domestic manufacturing capacity, unrestricted imports of products with uncertain lifecycle and quality, slow pace for adoption of new technology by domestic manufacturers and low investment in R&D, looming shortage of skilled technical manpower, inadequate testing facilities for HV equipment, etc.
The growth figures reported are in terms of volume and represent an absolute increase in output, which will differ from financial growth since a quick analysis of results announced by some of the majors reveals that although there is a marginal rise in top lines, pressure is visible on the declining bottom lines.
Switchgears lead the pack
Buoyancy in demand from Power Grid, independent power producers and big utilities for HV and EHV switchgear has resulted in a 39.9 per cent growth. Medium voltage breakers are in huge demand for substations and have clocked a growth of over 45 per cent. LV products like contactors, MCBs, etc, continue to grow at over 35 per cent due to sustained demand from certain infrastructure sectors.
Effect of star labelling
The transformer industry has witnessed an overall growth of 20 per cent. Domestic demand (growing at more than 25 per cent) is supporting the overall growth since exports have declined by 15 per cent, mainly in the power transformer segment.
The distribution transformers segment has been a major driver for this growth, having grown by 24.3 per cent. Despite the adverse impact from the unorganised sector, there seems to be a revival in the interest of the organised sector to participate, which may be due to the Bureau of Energy Efficiency (BEE) star labelling programme, R-APDRP programme and CEA's recommendations for utilities to procure minimum three star rated distribution transformers. Growth of power transformers is steadily increasing as seen from the healthy order book position of almost 1.4 times of annual production. Till H1, a growth of 14.1 per cent has been registered.
The cable sector, however, has not kept pace and has grown by 10.8 per cent, with power cables growing by 16.8 per cent. A positive sign has been the huge rise of over 50 per cent in HV cables supplied in the domestic market. Rotating machines have clocked 17.2 per cent growth, led by alternators (33.6 per cent) and LT motors (18.9 per cent). In LT motors, high end motors (above 355 frame size) have witnessed a good demand, as an alternative for HT motors. Alternators for above 30 kVa have shown a good growth, indicating a thrust for uninterrupted power. Growth of 25.4 per cent in capacitors has been largely driven by global demand and domestic demand orders.
Energy meters have more than doubled growth from Q1 to Q2 due to a rise in orders for single-phase static meters. Growth of the transmission line sector, however, has slipped to 4.9 per cent mainly due to a decline in growth of 7.4 per cent for the conductors segment. Transmission line towers, however, are in demand, especially for HV transmission networks.
In short, the industry is expecting good times ahead. But it needs to overcome challenges to ride on sustained demand in the medium-term.
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