Project Consultancy, Reports & Profiles

Electric equipment industry contributes over 2% of GDP which is projected to increase to about 12% in 2015 according to a study by Frost & Sullivan. During the period, consumption of electrical equipment is estimated to increase from over USD 28 bn now to USD 363 bn, growing at a CAGR of about 30%. It is also expected that during 2010-2015, the Indian equipment manu-facturing will grow at 5.5 times the growth rate of global electronic equipment production.

The electrical equipment and accessories industry, with its highly diversified content, may be broadly segmented into (i) generation equipment, (ii) transmission equipment, and (iii) distribution equipment. The equipments and accessories under these segments include motors, turbines, gene-rators, switchgears, transformers, circuit breakers, induction motors, power capacitors, meters, transmission towers. Besides these, the spectrum covers a whole range of power cables including XLPE and AAC and ACSR conductors and electrical consumer products like fans, electric lamps, exhausts and domestic appliances and accessories. inverters, gensets, UPS also fall under its domain.

The electrical industry has been showing signs of recovery after poor performance in the recent years. The domestic electrical industry, which includes equipment for generation, transmission, distribution and use of power in industrial units, constitutes a major part of the electrical products.

The growth of the industry is directly related to the development of power generation and distribution. India's generation capacity of 2,300 MW in 1950 expanded to over 116,500 MW including non-utilities at the end 2000-01. The total installed capacity of electric power generation further increased to 141,080 MW in 2007-08 (upto January 2008) compared to a capacity of 128,000 MW during the same period in 2006-07. The Eleventh Plan has targeted a capacity addition of 78,570 MW.

The five years (2007-2012) may be the best of times for power equipment makers with the power sector on a expansion spree. With order-book growth expanding over the last three years, there is a good chance that this will continue. Close to 82% of the planned generation capacity for the Tenth Plan was either implemented or was in the process of being implemented. Even assuming a 70% implementation ratio for the Eleventh Plan, close to 55,000 MW will be added. Five ultra mega power projects, totaling 20,000 MW are coming up in 2008. In the transmission sector, for example, Power Grid Corporation is planning a capex of Rs 710 billion by 2010.

Earlier, the shortfalls in achieving the Plan targets of addition to power generation and up-gradation of transmission and distribution had adversely affected the electrical equipment industry. The peak shortage which was over 11% of the requirement in 2003-04 increased to 11.7% in 2004-05 and to over 12% in 2005-06. The shortage further rose to about 14% in 2006-07. In the ten months of 2007-08 the peak shortage had risen to over 15% of the peak demand of 107,010 MW.

According to the Power Ministry, the power sector has tied up Rs 2,240 billion worth of investments to build power plants with 70,000 MW capacity in the next three years. India's capacity to manufacture power equipment is set to increase four-fold to around 43,000 MW over the next 5 years, through investments of over Rs 300 bn. The additional capacity of 33,000 MW is expected to be added by 2015. Companies like L&T, JSW, and Reliance are in process of setting up equipment manufacturing capacities. Apart from the addition of indigenous capacity, this will also lead to upgradation of technology in the equipment sector. There is also a significant presence of the small scale and medium-sized companies in the electrical equipment industry, the share of which is estimated at around 35%.

According to the Power Ministry, the power sector has tied up Rs 2,240 billion worth of investments to build power plants with 70,000 MW capacities in the next three years. The Indian government has set ambitious goals in the 11th plan for power sector owing to which the power sector is poised for significant expansion. In order to provide availability of over 1000 units of per capita electricity by year 2012, it has been estimated that need-based capacity addition of more than 100,000 MW would be required. This has resulted in massive addition plans being proposed in the sub-sectors of Generation Transmission and Distribution. Investment is also expected to flow into different segments of the value chain, covering the segments of power generation, transmission and distribution and allied sectors such as equipment, technology and services. The private sector is expected to play a more active role in investment and capital productivity. The government has undertaken a number of initiatives to facilitate private sector participation.

With some fast moves at launching fast track projects to augment supplies, the Indian industry needs to improve its competitiveness. The Indian market is growing and multinationals with newer technologies are now more active.