IEEMA aims for $ 25 bn electrical & electronics exports by 2024-25: R K Chugh
After June 15, 2020, the Government took many steps to curb imports of electrical and electronics (E&E) products from China into India. In this interview with Rakesh Rao, R K Chugh, President of IEEMA, explains the benefits of these steps and road ahead for the industry.
Electrical and electronics (E&E) industry is one of the leading contributors to the Indian manufacturing sector’s growth. The size of Indian electrical and electronics (E&E) industry - including EPC projects - is estimated at $ 42 billion (approximately Rs 3 lakh crore). Indian Electrical and Electronics Manufacturers' Association (IEEMA) covers nearly 95 per cent of the industry (by value). After June 15, 2020, the Government of India took many steps to curb imports into the country. In this interview with Rakesh Rao, R K Chugh, President of IEEMA,
explains the benefits of these measures and road ahead for the industry.
How do you analyse the performance of Indian electrical and electronics (E&E) industry in 2019-20? What is the share of imports in the Indian E&E market?
Compared to 2018-19, the electrical & electronics industry was down by 13-14 per cent in 2019-20. This was mainly because most of the government projects in transmission and distribution were implemented by March 2019 and after that there was a lull in the government investment.
Even before COVID 19
struck, in January 2020, the average capacity utilisation in the industry was about 70 per cent. COVID 19 pandemic has played havoc with the industry. Now, the capacity utilisation will be in the range of 40-50 per cent.
In the last 6 months, the demand for power has gone down and as a result distribution companies (discoms) and transmission utilities (the two key customers of E&E equipment) are suffering very badly. They have kept on hold their capital expenses and the running projects have been delayed.
First quarter of this financial year was a washout in any case due to lockdown triggered by COVID pandemic. Though industrial activity has picked up since July 2020, most of the manufacturing units are running with 50-60 per cent capacity.
About 25-30 per cent of the industry is catered by imports. Though India has the capability to manufacture many of these imported products, local industry is suffering because other countries are dumping cheap products in India.
How grave is the concern about imports (in particular from China) in power equipment sector?
China accounts for 30-35 per cent of total imports. Out of the total imports, approximately $3 to $3.5 billion electrical & electronics equipment are imported from China. Worrying part is the quantum of imports has been increasing from China in the last couple of years.
Government has come out with series of measures to clamp down on imports from China. Industry is not against import of technology or products/components which are critical or are not manufactured in India. We should import from countries that are politically friend towards India.
To reduce import & encourage local manufacturing, Indian Government in the recent weeks took number of steps like raising tariff, rigorous testing of foreign equipment and prior permission requirements for imports from adversary countries, etc. How will these help manufacturers in India?
In the recent times, the government has come out with a series of notifications. According to one such notification of Ministry of Power, items, which are sensitive in nature, will not be imported from certain countries, and even if we had to import, these items will have to be tested in Indian laboratory. China has been using many kinds of non-tariff barriers to restrict imports from India. As reciprocal approach, it is very good that India also implements some stringent restrictions on imports from the neighbouring country. In recent years, SCADA and other critical communication equipment were coming from China. This trend is not good especially when there is a hostility between the two countries and when there is a chance that the other country may use these equipment to their advantage.
Will these steps lead to price increase of electrical & electronic products and, also result in cost escalations for power project developers?
Solar cells and modules (which go into renewable projects) could feel some impact for short period of time. Good news is that Indian manufacturers have risen to the occasion and have increased their manufacturing capacity. It is just a matter of time (may be less than 2 years) before we become self-sufficient in this segment also. We also need to look into the fact that are the prices offered by these countries realistic or not. In many instances, we have found that these are artificially low priced to kill the domestic industry.
In national interest, the user should be ready to pay a little high price for the products manufactured locally in the short time. There will be short term pain, but in the medium to long term it will be helpful to the industry.
In electronics space, many of the electronic components are imported from abroad. Our efforts within the industry is to source these components from alternate countries. Why to depend only on one or two countries for these items? We should broadband our sourcing as part of overall supply chain management. We have seen in COVID 19 time what a disaster it can be if you are only dependent on one country for your sourcing and that country is facing some issues. It could be always better to have multiple sourcing options and stop sourcing from the countries who are not politically friendly to India. So, in that aspect our industry is fully in sync with the Government of India.
The government should also provide some incentives to the industry for R&D and also take steps in boosting foreign direct investments into the country so that we are not left behind as far as the global competition is concerned. The industry cannot survive only on domestic market, you need to be a part of global supply chain.
What is your outlook for the industry for 2020-21?
Electrical & electronic products are used in majority of the industries. As part of the National Infrastructure Pipeline (NIP) initiative, the Government will be spending Rs 110 trillion on various infrastructure projects by 2025. Out of this, Rs 28.56 trillion has been earmarked for investment in 295 energy projects (that include solar, wind and power development projects). With investment cycle likely to kick start again, the Indian electrical and electronics industry can expect demand to come back especially with the imposition of restrictions on imports.
Besides, IEEMA, along with the Government, is working towards increasing India’s contribution in the global electrical & electronics market. IEEMA aims to increase India’s share in the global E&E industry from the present less than 2 per cent to 5 per cent in the next 4-5 years.
About 15 per cent of Indian E&E industry’s turnover comes from exports (accounting for $7.5 to 8 billion), which we intend to take to 25 per cent by 2024-25. Despite COVID 19, IEEMA is aiming to take India’s E&E exports to $ 25 billion by 2024-25.