“Chinese imports have led to closure of many businesses”
..says Jitendra Kumar Agarwal, Joint Managing Director, Genus Power Infrastructures Ltd, who believes Indian electrical equipment industry is under pressure with the consistent increase in imports especially from China threatening its growth. In this interview with Rakesh Rao, he highlights challenges before the Indian electrical and electronics (E&E) industry and suggests solutions to overcome them.
From electrical and industrial electronics (E&E) industry, what are hits and misses of Budget 2019-20?
I found the Budget 2019-20 in general as a balancing act by the new Finance Minister. The true intention of becoming a $5-trillion economy in next few years as envisaged in budget is praiseworthy. There is a social angle in the budget with special focus on infrastructure, manufacturing, financial services, measures to boost Make in India, digital payment and the social sector.
Not extending 25 per cent corporate taxes to entire Indian Inc, which would have revived the investment cycle, further simplification of GST regime, ambiguity in the details of implementation of various initiatives and reforms left me little disappointed.The budget could be considered as “green” with its emphasis on clean energy in the form of tax relief on electronic vehicles and renewable energy. There is a target of taking electricity and clean cooking facilities to every single rural family by 2022. The government plans major reforms in the power sector, including revival schemes for distribution companies and fuel starved power plants that depend on natural gas.
There are talks of setting up mega manufacturing plants in technology areas such as semiconductor fabrication, solar photovoltaic cells, lithium storage batteries, solar electric charging infrastructure and provide them with some investment linked income tax exemptions and other tax benefits. I am happy this would reduce our dependency on overseas sources to that extent. The government has proposed to streamline multiple labour laws. To improve employability of youths, 10 million youths will be imparted industry relevant skill training under the Kaushal Vikas Yojana. We, in particular the E&E industries, will be keenly looking forward to and observing these initiatives and reforms.
Overall the budget proposals ensure holistic development of the country consistent with the policy agenda of this Government from
How will some of the announcements like "One Nation - One Grid", changes in UDAY scheme, etc help the industry?
One Nation-One grid is a wishful thinking on an initiative to bring affordable power to all states. Its implementation plan is not clear. Hence how far, it is going to be practical, only time can tell. UDAY scheme failed to live upto its earlier expectations and is now faced with criticism owing to no relief on the rising debt and overdues of DISCOMs. Originally UDAY had several initiatives cum milestones the main being improving operational efficiencies of DISCOMs by deploying compulsory smart metering, upgradation of transformers, feeder metering etc to reduce electricity lost during transmission and distribution (mainly theft). The budget has now proposed examining performance of UDAY scheme. If the UDAY scheme is revived and improved further, it has potential to make distribution sector financially healthier, which in turn would help electrical industry in general, and more so metering industries like Genus by way of increased demand for smart and prepaid meters.
The government is procuring smart and prepaid meters to be deployed across the country. How it will help equipment manufacturers in India?
There is a significant under utilisation of domestic capacity as far as meters are concerned and this proposed deployment of (high end) smart and prepaid meters would definitely help equipment manufacturers to better use its plant capacity. Moreover this would help generate much needed employment opportunities for qualified engineers, technicians, skilled and unskilled workforce. It may further be noted metering equipment industry does not generate air and water pollution, (the need of the hour) and also does not need large area of land for production of meters. Smart meter manufacturers can also use their local expertise to participate in many smart & prepaid meter roll out that are going to happen in many of the Asian, Middle East and African countries in the next few years.
The procurement of smart meters and prepaid meters from local manufacturers would be in line with the Digital India and Make in India initiatives of the new Government.Smart meters are going to be highly useful even for the consumers as they not only can keep a watch on their energy consumption, but also indirectly help them pay less for their energy consumption due to reduction in loss that we foresee after the deployment of smart meters. As of now majority of honest consumers end up paying more for none of their fault to compensate the commercial loss incurred by the distribution utility due to tampering indulged by small section of dishonest consumers!
Are you planning to launch any new products this year? If yes, could you please elaborate?
Yes, we have smart meters as well as prepaid meters in our product portfolio. This year we plan to launch Smart Prepaid Meters along with associated software & solutions, in line with the ambitious plan of R K Singh, Minister of State (IC) for Power and New & Renewable Energy. To quote his words, “In next three years, metering will go smart prepaid, and gone will be the days of bills reaching your house”. The smart prepaid metering will revolutionise the power sector by way of reduced AT&C losses, better health of DISCOMs, incentivisation of energy conservation and ease of bill payments etc. With this product launch, Genus will be fully geared up to meet the expectations of Power Minister.
What are the key challenges before Indian E&E industry?
Failure to have semiconductor manufacturing ecosystem (wafers/chips) even though promised by successive governments have made us dependent hugely on overseas suppliers and of late we have suffered enormously either with scarcity of electronic components or their prices shooting up unexpectedly. The sooner the Government of India comes out with a concrete and workable policy on the establishment and promotion of semiconductor fabrication industries, the better it is for most of the electrical industries like us.
The other key challenge before the Indian E&E industries is to survive with mounting delayed payments from the distribution utilities, leading to blockage of funds and working capital of the industry. Many industries are getting sick as they are not able to manage cash flow due to this over delayed payment from the distribution sector.Finance at high rate of interest, adverse impact of reverse auction, L1 concept of Government procurement without considering life cycle cost and quality of the equipment are other challenges being faced by the electrical industries.
How real is the threat of imports to Indian E&E industry? Are FTAs (Free Trade Agreements) hurting domestic E&E industry?
Indian electrical equipment industry is under pressure with the consistent increase in imports especially from China threatening its growth. Chinese imports have led to the closure of many homegrown businesses, some had to even switch from manufacturing to trading! The country is drifting towards over dependence on Chinese inputs. The requirement of meters and allied products in China internally has reached saturation with the result, their capacities are lying idle and they are now trying by all means to flood the Indian market with their products.
Chinese manufacturers are also using ASEAN-India FTA route to push their products into India by setting up plants in Thailand, Indonesia, Malaysia etc. Chinese investments in most of the ASEAN countries are backed by Chinese government subsidies provided to expand in overseas markets. They are also subsidised generously by the respective governments to attract more investment. The subsidies on raw materials, incentives for export, low cost of funds and better infrastructure are making Chinese products cheaper thereby adversely affecting Indian industries. Indian electrical equipment industries with made in India products are more than capable to compete with Chinese products both in pricing and quality provided we are offered a level playing field by proper checks or fair control & monitoring of imports from China by the Indian government authorities.
I also foresee cyber security getting compromised on our intelligent grid, that are commissioned, operated and maintained by Chinese suppliers. In other words, our grids are becoming vulnerable to threats from embedded malware and cyber attacks with the use of imported equipment.
Industrial growth has slow down in the last few months. Is it affecting the growth of your industry?
Fortunately, it has not directly affected our metering Industry. This is mainly due to impetus given by the Government policies to distribution sector, as a result of which there is good demand in meters and related products such as cables, distribution transformers etc. Consequently, Genus is maintaining its growth trajectory as well.
What are your growth plans for the company?
A lot is happening in the metering domain and we are keeping a close watch on it. We foresee exciting developments taking place in Smart Grid and Smart City space in India in the coming days and this is definitely providing us with an opportunity to grow further. We are also expanding globally with our smart metering products finding acceptance in the smart meter roll outs of many overseas utilities including reputed ones in South East Asia and Gulf countries.