July 2018

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Power transmission and distribution industry has come a long way, and has undergone significant progress

witnessing exponential growth after independence. In about 70 years India has reached power generation capacity of more than 300 GW from about 1400 MW in 1947. The sector remains to be one of the most critical, now capable of serving entire country while reaching 100% electrification. Country’s demand is however ever increasing, and therefore power sector is not only geared to grow but be at par with having the latest technology. In order achieve so and get deeper into global markets, significant addition to the installed generation capacity is required. With this, it is inevitable that need for electrical equipments shall increase substantially in coming years. How much of the demand would be available to Indian Industry depends upon various factors- some in control of the industry and some not in control of the industry like reforms in domestic (taxes, processes and procedures) and international policies.

Indian power sector is not only growing, but also undergoing a significant change that has redefined the industry outlook. Total installed capacity recently reached 344 GW, with ‘State Sector’, ‘Central Sector’ and ‘Private Sector’ commanding 24.6%, 30.2% and 45.2% respectively.

Fuel MW % of TotalTotal Thermal 2,22,693 64.80%Coal 1,96,958 57.30%Gas 24,897 7.20%Oil 838 0.20%Hydro (Renewable) 45,293 13.20%Nuclear 6,780 2%RES* (MNRE) 69,002 20.10%Total 3,44,002

Source: Ministry of Power

During 2017- 18, the peak demand was about 164 GW and the Installed Capacity was 344 GW, with generation mix of Thermal (64.8%), Hydro (13.2%) and Renewable (20.1%).

Addition to Generation Capacity under Five-Year Plans

19.01 21.13

54.96

88.54

100

0

20

40

60

80

100

120

9th 10th 11th 12th 13th

(GW)

Source: Central Electricity Authority

• Afteralullofalmostsevenyears,theIndianElectricalequipmentindustryhasonceagaingainedmomentumbyclockinganimpressivegrowthof12.8%inFY17-18

• Quarter3andQuarter4sawimpressivegrowthof25%and14%respectively

• Highgrowthinsegmentslikerotatingmachines(12%),HTMotors(18%),cables(20%)andMeters(28%)

July 2018

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The Government of India has released its road map to achieve capacity of 175 GW in renewable energy by 2022, which includes 100 GW of solar power and 60 GW of wind power. The Union Government of India is preparing a ‘rent a roof’ policy for supporting its target of generating 40 GW of power through solar rooftop projects by 2022.

772 811 877 912 967

1,049 1,107 1,160 1,212

-

200

400

600

800

1,000

1,200

1,400

2009- 10 2010- 11 2011- 12 2012- 13 2013- 14 2014- 15 2015- 16 2016- 17 2017- 18

Generation (Billion Units)

Source: Ministry of Power

6.60

5.56

8.11

4.01

6.04

8.43

5.64 4.72

3.95

- 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00

2009- 10 2010- 11 2011- 12 2012- 13 2013- 14 2014- 15 2015- 16 2016- 17 2017- 18

Generation Growth (%)

Source: Ministry of Power

The Government of India has identified power sector as a key sector of focus so as to promote sustained industrial growth. Some initiatives by the Government of India to boost the Indian power sector:

Generation capacity1 Lakh MW generation capacity added.

(2,43,029 MW in March 2014 to 3,44,002 MW in March 2018)

hh India emerges as net exporter of electricity. 7203 MU supplied to Nepal, Bangladesh and Myanmar in FY 2017-18.

hh Energy deficit reduced from 4.2 per cent (in FY 2013-14) to 0.7 per cent (in FY 2017-18)

2 One Grid One Nation:

hh Expansion of transmission grid by 1 lakh ckm

hh Highest ever transformation capacity addition of 86,193 MVA in FY 2017-18

hh 26 projects worth Rs. 48,427 crore awarded through Tariff Based Competitive Bidding

hh Inter-regional transfer capacity addition more than tripled (16,000 MW in FY 2010-14 and 50,500 MW in FY 2014-18)

3 Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGKY):

hh 100 per cent of village electrification

hh Outlay of Rs. 75,893 crore

hh Funds to states increased by 2.5 times

(Rs. 10,873 crore in FY 2010 -14 and Rs 24,890 crore in 2014-18)

hh 2,56,750 km HT and LT lines

hh 4,09,989 distribution transformers

4 Integrated Power Development Scheme (IPDS):

hh Outlay of Rs. 65,424 crore

hh 1376 towns IT enabled

hh 1900 additional towns under progress

hh 1156 towns reported reduction in AT&C losses

hh 1,29,093 km HT and LT lines

hh 66,947 distribution transformers

5 Ujwal DISCOM Assurance Yojana (UDAY):

hh More than Rs 20,000 crore interest cost saved by DISCOMs under UDAY

hh Reduction in AT&C losses in 17 states within one year of operation

hh Revenue gaps bridged by 33 per cent in one year of operation

hh India’s rank improved to 29 in 2018 from 111 in 2014on World Bank’s Ease of Getting Electricity Ranking

6 Saubhagya

hh Launched for universal electrification

hh Camps organised at village level. Minimum documentation required

hh Special drive for economically weaker sections under Gram Swaraj Abhiyan

hh 60.34 lakh households electrified since 11th Oct, 2017

7 Power for All 24*7:

hh Joint initiative of Govt of India and State Governments

hh Roadmap for 24*7 power supply prepared. States ready to ensure 24*7 Power for All from 1st April, 2019

hh Focus on North-East region:

hh Electrification of 5855 villages and intensive electrification of 9004 villages completed.

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hh 130 towns IT enabled.

hh 52.28 lakh LED bulbs distributed under UJALA

hh Rs. 9866 crore projects undertaken for strengthening/development of intra-state transmission

8 UJALA

hh 107 crore LED bulbs distributed

hh 30.01 crore LED bulbs distributed under UJALA resulting in saving of 15,500 crore per year

hh 77.99 crore additional LED bulbs distributed by industry.

hh 87 per cent reduction in LED bulb procurement cost through demand aggregation.

hh 4376 MW hydel capacity addition (FY 2014-18)

Addition of Generation capacity during 12th plan (2012-2017)

0 5000 10000 15000 20000

Bio

Small Hydro

Solar

Wind

4956

985

11348

14928

(MW)

13th Plan Capacity Addition

Gas - 4340MW | Hydro-15300MW | Nuclear-2800MW

29034, 25%

81237, 71%

5055, 4%

Wind Solar Other RES

(MW)

Based on production and sales data collected from member organizations, which represents about 95 percent of the entire electrical equipment installed in India coupled with detail analysis of other non-member sectors, it is seen that electrical and industrial electronics industry has witnessed an overall growth of 12.8% in the year 2017-18 over the previous year, with domestic industry size increasing by 32%. In the last Quarter (Q4, 2017- 18), 14.3% growth was registered after an acceleration in Q3 (of 24.7%) and just 4.28% in Q2 over same period of last year. Growth in Q1 was however 9.71%.

Transmission

12th Plan Vs 13th Plan (Est.)

15556 31240

157787 163268

19836

58540

203787 191268

0

50000

100000

150000

200000

250000

HDVC 765 kV 400 kV 220 kV

12th Plan 13th Plan (Est.)

in cKM

Transmission12th Plan Vs 13th Plan (Est.)

19500

167500

240807

312958

33500

281500

343807 387958

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

HDVC 765 kV 400 kV 220 kV

12th Plan 13th Plan (Est.)

in MVA/ MW

Growth Index of Electrical Equipment Industry for the period Apr’16- Mar’17

12.2

5.2 6.7

20

6.4 11.3 12

28.1

14.6

-3.2 -2.7 2.4

28

-40

-30

-20

-10

0

10

20

30

40

Sluggish demand (albeit continued growth) and imports continued to adversely impact industry’s market share especially certain segments like Conductors and Insulators.

Mr Shreegopal Kabra, President, IEEMA said, “A substantial improvement in growth was experienced in the 3rd and 4th quarter of 2017-18 which resulted in a sharp rise in the performance. During this period, the industry grew by 25% in Q3 and 14% in Q4. The astonishing growth of 12.8% is propelled by growth in segments like rotating machines by 12%, HT Motors 18%, cables 20% and Meters 28%. The government is procuring smart and prepaid meters to be deployed across the country. It has urged electricity meter manufacturers to scale up production in India, as it plans to shift all connections to smart prepaid meters over the next three years. Energy Efficiency Services Limited (EESL) has floated two global tenders for procuring a total of 10 million smart meters.”

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“Growth is also seen in transmission mission line towers due to increase in demand in the domestic market. The Installed Generation Capacity as on 31st March 2018 is 3,44,002 MW. Almost all sectors are in green after 2 years of dull period; mainly due to domestic demand. The high growth in Q3 & Q4 is also due to stabilized GST,” he further added.”

The industry’s record performance is attributed to Government’s schemes like DDUJGY, IPDS and Saubhagya where the country is racing to provide electricity to households in the villages. The government unveiled Rs 16,320 crore Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) in September to provide electricity connection to around 4 crore families in rural and urban areas by December 2018. Joining hands with government for this cause, IEEMA alongwith REC has created a North East Cell to give impetus to this growth by emphasizing on distribution in North East.

With reforms like Make in India and Ease of doing business, India has jumped a record 30 places to the 100th spot in the World Bank Doing Business rankings and aims to be in the top 50. Thus to achieve the target the present Government has been showcasing the spectrum of measures focusing on rural and infrastructure sectors.

Mr Sunil Misra, Director General, IEEMA reacting on the industry growth articulated, “We believe that this growth momentum will be sustained since major chunk of transmission and distribution projects are likely to be ordered in next fiscal. However, most of the orders would be through EPC route with more new players entering the business and sub-contracting the same to existing contractors. The sectors seem to be reviving from the dark days. Talking about the renewable sector, the Solar Capacity has increased rapidly in last three years from around 2.6 GW to 22 GW. The government is taking proactive steps to achieve the RE generation targets. However, there are still concern areas which have led to decline in growth of Conductors and Insulators.”

At the same time while the growth was there in all the sectors, there was a surge in raw material price in major metals and insulating materials. This has affected adversely the cash flow of the manufacturers thereby affecting the delivery.

Exports in power sector have been growing at about 8% CAGR, while imports have been at 4% in last 5 years.

(Rs. Crores)

Period Exports Imports

2008-09 21,244 38,003

2009-10 18,371 41,077

2010-11 18,742 49,632

2011-12 22,628 75,175

2012-13 26,630 64,579

2013-14 30,670 58,459

2014-15 35,420 55,988

2015-16 38,580 53,986

2016-17 39,280 55,291

2017-18 41,677 55,608

With such growth in power sector, it is important to protect electrical equipments’ industry from imports. Today, the focus of industry however has been imports coming under even FTAs (Free Trade Agreements), which have caused injury to certain product segments of the industry.

Further, it is equally important to enhance exports. However, larger part of the industry feels that Govt. needs to further incentivize the industry. And recently with concerns raised by the US on export incentives being available to Indian industry, it is of prime importance to not only protect interest of the industry but also look for alternates.

Simultaneously, industry segment which is facing injury due to undesirable imports (as industry is self- sufficient to serve current and growing demand), it must try to regularly check whether such imports are happening due to unfair trade practices. Govt. has been aggressively using various trade defense action measures to provide level playing field to Indian industry.

While protecting the domestic demand from imports and providing level playing field, Govt. and industry need to put efforts to generate demand, bring quick policy reforms and encourage more investment in power generation. India will be able to double its power generation in the next seven years, Union Coal and Power Minister Piyush Goyal said. Some major investments and developments in the Indian power sector which have been reported are as follows:

July 2018

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hh Energy Efficiency Services Ltd (EESL) has raised US$ 454 million from Global Environment Facility (GEF) for its energy-efficiency projects in an attempt to boost India’s move towards becoming a low carbon economy

hh IL&FS Financial Services Ltd has partnered with Jammu and Kashmir (J&K) Bank Ltd to finance nine hydropower projects in J&K with a total capacity of 2,000 MW, which require financing of around Rs 20,000 crore (US$ 3.12 billion)

hh With the aim of giving a boost to renewable energy, the State Bank of India (SBI) and the World Bank have decided to sanction credit worth Rs 2,317 crore (US$ 356.82 million) to seven corporates towards solar rooftop projects to generate a total of 575 megawatt (MW) of solar energy

hh India added 467 MW of grid interactive wind power capacity between January-November 2017, while wind power projects with cumulative capacity of 9,500 MW are expected to be bid out by March 2018, according to Mr R K Singh, Minister of State (Independent Charge) for Power and New & Renewable Energy, Government of India

hh A total of 26.3 million households which are below poverty line (BPL) have been electrified under the Rural Electrification component of Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY), according to the Ministry of Power, Government of India

Three important growth drivers to achieve set targets while ensuring growth of domestic electrical equipment industry are ‘Demand Protection’, ‘Technology Upgradation & Investment’ and ‘Domestic & International Policy Reforms’.

Domes�c & Interna�onal Policy

Reforms

Technology Upgrada�on

&

Investment

Demand Protec�on

Expectations from th e Governmenthh Only domestic industry participation as regards

tenders for domestically funded projects

hh Price preference to domestic manufacturers should be given in ICBs

hh Domestic manufacturing set- up should be allowed in a given time frame against requirements as under tenders before bid closing

hh Domestic manufacturers should be allowed to bid for low technology requirement (even if they have not produced the same) if they are producing high technology products of similar category and have earlier participated in tender for requirement of such technology

hh Testing of equipment from a foreign supplier be mandatorily done in Indian laboratories

hh Minimum procurement by any utility should be of “Made in India” products

hh Basic Customs Duty on all electrical equipments should be raised to 10%

hh Standardisation

hh Testing and calibration facilities should be upgraded

hh Promotion of R&D

hh Skill development

hh Fully supply of raw materials should be ensured

hh Domestic industry’s interest should be safeguarded under FTAs

hh Exports of products should be incentivised

hh NTBs faced by exporters to be addressed

hh Encourage foreign investment in raw materials, parts and components

hh Export incentive to 100% “Made in India” products

Expectations from the Industryhh Upgrade technology to next level

hh More focus on Research & Development w.r.t. product design, manufacturing and testing facilities. More investment in R&D, therefore

hh Tie- up with technology suppliers and enter into strategic alliances

hh Fresh investments to achieve Government’s renewable (Solar and Wind) energy mission

- IEEMA Research Group