Renewable energy will create demand for new E&E products

  • Interviews
  • Aug 01,18
Sharp rise in demand in Q3 & Q4 and stabilised GST helped Indian electrical and electronics (E&E) industry register a record performance in 2017-18.
Renewable energy will create demand for new E&E products

Sharp rise in demand in Q3 & Q4 and stabilised GST helped Indian electrical and electronics (E&E) industry register a record performance in 2017-18. Almost all sectors are in green after 2 years of dull period; mainly due to domestic demand, states Sunil Misra, Director General, Indian Electrical & Electronics Manufacturers’ Association (IEEMA). However, low-cost imports and global slowdown & political turmoil (resulting in lower demand for exports) could play a spoilsport to this party. In conversation with Rakesh Rao, Misra offers solutions to some of these lingering issues and highlights new opportunity areas for the Indian manufacturers of electrical and electronics products.
 
After a lull of almost seven years, the Indian electrical and electronics industry has gained momentum by clocking a record 12.8 per cent growth in 2017-18. What are the reasons for this? 
A substantial improvement in growth was experienced in the third and fourth quarter of 2017-18 which resulted in a sharp rise in the performance. During this period, the industry grew by 25 per cent in Q3 and 14 per cent in Q4. The astonishing growth of 12.8 per cent is propelled by growth in segments like rotating machines by 12 per cent, HT Motors 18 per cent, cables 20 per cent and Meters 28 per cent. 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 stabilised GST.
 
There has been a decline in growth of conductors and insulators in 2017-18. Is this an area of concern?
The conductors industry’s size in terms of exports and imports is estimated at Rs 1,260 crore and Rs 395 crore, respectively. 
 
There are some anomaly exist in procuring conductors as finished good under Chapter-98, where the basic import duty is 5 per cent. Imports of electrical equipment under Chapter 98 is a clear disadvantage to the domestic industry. The IEEMA conductor division represented the matter to the concerned authorities, requesting for a decrease in custom duty of basic raw material, primary aluminium metal to 5 per cent from the existing rate of 7.5 per cent under Chapter 76 of the Customs Tariff Act.
 
On the other hand, insulators’ industry size in terms of exports and imports is estimated at Rs 395 crore and Rs 659 crore, respectively. There are serious concerns on the survival of porcelain insulator industry. As very less number of orders were placed during the year, the entire porcelain insulator industry faced a big problem. Furthermore, high imports from foreign countries severely impacted the domestic composite insulator industry. Utilities are inviting International Competitive Biddings and meeting country’s requirement through large scale imports from China.
 
Imports still account for a large share of the E&E sector. What is the reason for this? And how can we reduce dependence on imports?
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. Government has been aggressively using various trade defense action measures to provide level playing field to Indian industry.
 
The government has launched schemes such as DDUJGY (Deen Dayal Upadhyaya Gram Jyoti Yojana), Integrated Power Development Scheme (IPDS), UDAY, SAUBHAGYA, etc. Are these schemes helping in generating demand for E&E sector?
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 along with REC has created a North East Cell to give impetus to this growth by emphasising on distribution in North East.
 
The government is procuring smart and prepaid meters to be deployed across the country. How it will help equipment manufacturers in India?
Metering industry has grown in last couple of years in providing technology as well as in numbers but at the same time prices are fluctuating and it is going downwards trends. It’s a pleasure to inform you that almost 99 per cent of the utilities requirements of products and solutions are design and developed indigenously by the metering industry which is a great achievement by the industry.
 
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. So this is good opportunity for the industry. 
 
What are major challenges before the Indian E&E industry?
The domestic electrical equipment manufacturing industry has over the years installed sufficient capacity to cater to the demand of power sector. However, the domestic electrical equipment manufacturing industry facing severe problems on account of the following factors: 
 
  • Issues/bottlenecks related to coal/fuel linkages, land, environmental clearances, etc resulting in a sharp decline in orders maturing in the domestic market 
  • Orders getting deferred or being put on hold. Weak investment sentiments and financing constraints from the lending institutions 
  • Intensified competition due to increased number of new players/joint ventures formed in the private sector in the country for super-critical boilers and turbine generators thereby affecting price realisation and impacting margins 
  • Lack of level playing field including infrastructure bottlenecks suffered by the domestic industry vis-à-vis foreign suppliers/manufacturers 
  • Global slowdown and political turmoil resulting in lower demand for exports.  Lack of domestic availability of critical inputs/ raw material 
  • Shortage of skilled manpower 
 
Is renewable sector opening up new growth avenues for E&E companies?
The demand in renewable has supported to overall demand & will create demand for new products & solutions especially at LV segment. The Government of India has wholeheartedly backed the renewable sector in India by announcing a target of 176 GW by 2022, of which 100 GW has been allotted to solar, 66 GW to wind and the remaining 10 GW to the development of other renewable energy sources like biomass, geothermal and small hydro power projects. The corporate too have shown interest to commit huge investments towards this goal. Besides this, enabling amendments have been proposed to the Electricity Act, including open access reforms and enhanced Renewable Purchase Obligations. 
 
How is digitalization impacting E&E sector?
Digitalization is becoming increasingly important to a wide variety of energy sectors. Furthermore, with digital technologies changing so rapidly, there are many unknowns about how technology, behaviour and policy will evolve over time and how these dynamics will impact energy systems into the future.
 
What is your outlook for E&E sector for 2018-19?
The size of the industry is valued at around $ 42 billion, a fourth of it is made up of power generation equipment, with transmission and distribution contributing the rest. The industry provides direct employment to about 500,000 people and indirectly to about 1 million. We, as a country, are aspiring to increase the output of the electrical equipment industry to $ 100 billion by 2022 and become a destination of choice for overseas producers of such equipment.
 

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