Analysis on impact of Make in India initiative over transformer industry
Impact of Make in India Power is one of the most critical components of infrastructure crucial for the economic growth and welfare of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy.
India’s power sector is one of the most diversified. Power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to non-conventional sources such as wind, solar, and agricultural and domestic waste. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is planned.
Govt’s focus on attaining ‘Power for All’ has accelerated capacity addition in the country.
In XII plan (2012-17)8800MW generation is planned to be added in the system along with the matching. Transmission and Distribution Network to even the power from the generating systems to the end users. In the year 2014-15 generation capacity addition stood at 22,566MW the highest so far.
As on November 2015, total thermal installed capacity stood at 196.2 GW, while hydro and renewable energy installed capacity totaled 42.6 GW and 37.4 GW, respectively. At 5.8 GW, nuclear energy capacity remained broadly constant compared with the previous year. India’s rooftop solar capacity addition grew 66 per cent from last year to reach 525 Mega Watts (MW), and has the potential to grow up to 6.5 1GW.
There is Indian government’s campaign on Make in India and related programs. This is a sense of heightened expectations from industry and other stakeholders. Within the power sector the ambitious schemes of Deen Dayal Upadhyaya Grameen Jyoti Yojana and Integrated Power Development Scheme coupled with emphasis on renewable, the emerging business opportunities seem to be very promising.
As per ITMA, power sector is a key sector to promote sustained industrial growth. Some initiatives by the government to boost the Indian power sectors are:
The Union Cabinet has approved the Ujwal Discoms Assurance Yojna for financial turnaround and revival of power distribution companies (DISCOMs), which will ensure accessible, affordable and available power for all.The Ministry of Power has planned to provide electricity to 18,500 villages in three years under the Deendayal Upadhyaya Gram Jyoti Yojana. Out of these, 3,500 villages would receive electricity through off-grid or renewable energy solutions.The Government of Odisha plans to set up a large 1,000 MW solar power park under public-private partnership mode involving an investment of about `6,500 crore (US$ 1 billion).Indian government announced a massive renewable power production target of 175,000 MW by 2022; this comprises generation of 100,000 MW from solar power, 60,000 MW from wind energy, 10,000 MW from biomass, and 5,000 MW from small hydro power projects.The Union Cabinet of India approved 15,000 MW of grid-connected solar power projects of National Thermal Power Corp Ltd.
Make in India is focused at unlocking the huge economic potential of India, and is also aimed towards establishing and sustaining large-scale manufacturing projects, supported by a robust and reliable power network to catalyse growth. Out of the 25 sectors that are in focus for Make in India, the major sectors which can positively impact the transformer business in India are construction, electrical machinery, railways, renewable, and thermal power.
“As the manufacturing sector gains momentum, there will be increased need for reliable power, influencing both power generation as well as transmission and distribution. Hence the ‘Make in India’ initiative, will trigger demand for transformers,” states Manjit S Sethi, Vice President, Transformers, Power Grids Division, ABB India.
At present, in the transformer sector, most of the manufacturing is already in India. Further, energy efficient transformers can be manufactured in India to meet industrial requirements. India has been an exporter of transformers for long time, but with Make in India, the country has the opportunity to become a more attractive destination as an export base.
According to Anil Kadam, Senior Manager, Energy Business, Schneider Electric India the Make in India will open up many opportunities for employment. On this note he says, “Make in India is a concept which will enable the country to unlock huge economic potential and create unprecedented employment opportunities. From establishing and sustaining large-scale manufacturing projects to creating a robust power network, the Indian economy will achieve healthy growth levels. India has to become a manufacturing power house in order to drive the economy and generate many more employment opportunities for the large pool of skilled and unskilled labour available here.”
As far as Kirloskar Electric Co Ltd views are concern the initiatives such as Make in India will certainly encourage domestic manufacturing and reduce the imports from China but it will take some time to show impact on the industry.
Regarding the impact of Make in India initiative over transformers industry in India Kirloskar Electric Co Ltd observes that the Make in India concept will certainly reduce the imports from China. Government needs to impose few quality qualifications requirement to curb imports from China and focus on Make in India concept. A lot to happen in terms of foreign investment where we need to make sure imports of large size machines are cut down with Indian service facility requirement imposed, to make them to come to India and set up facility. All this will not show sudden impact.
Major bottlenecks The growth of transformer industry is directly related to that of the power sector. In this regard, financial condition of state discoms has been a perennial concern for the transformer industry. State power utilities have been facing losses due to the supply of subsidised power to agricultural farmers, theft of power, and inefficient T&D infrastructure. This has restricted private investment in the power T&D sector, thereby reducing the quality of service from discoms. This, in turn, is affecting the capacity building program and transmission of power. “High failure rate of distribution transformers is also a big concern for the transformer industry in India,” states Kadam.
The average operational life of a transformer is between 25 to 30 years; however, transformers in India mostly require repair much earlier. “Another major concern faced by the domestic transformer industry is growing imports from China as well as South Korea. The share of Chinese manufacturers in Indian electrical equipment imports has shot up in recent times. The absence of a level playing field for the domestic industry poses a major threat to local manufacturers,” adds Kadam.
As per Kirloskar Electric Co Ltd the major bottlenecks of the sector are, sudden implementation if BIS quality control, poor liquidity in market, non sanctions of coal blocks hampering power projects, no real investment in steel sector and power sector, not many enquiries in infra sector, only solar projects are seen as hopes for transformers industry.
“Transformer equipment sector mainly faces several bottlenecks including financing constraints for infrastructure projects, limited availability of EHV/UHV testing facilities and global slowdown, set to lower demand for exports,” observes Sethi.
As per ITMA, inadequate supply of prime quality Cold Rolled Grain Oriented (CRGO) steel is the biggest challenge faced by transformer manufacturers in the country. CRGO requirement is completely met through imports; it is in fact challenging to assess the true quality of the material that is used by the transformer manufacturers in India. India needs 3 lakh tonne of CRGO every year and an appalling 70 per cent of this is scrap grade material.
High failure rate of distribution transformers, is a big concern for the transformer industry in India. The average operational life of a transformer is between 25 to 30 years; however, transformers are known to be recalled for repair in as early as three years. The failure rate of distribution transformers in India is estimated at 10 to 15 per cent (in stark contrast to the less than 2 per cent failure rate in developing countries). This is due to the low entry barriers in the distribution transformer market leading to unorganised players entering the market, and competing on the price factor. SEBs historically follow a L1 vendor selection criteria, which has led to proliferation of many small players that compromise on the quality of transformers manufactured.
SEBs have been facing losses due to the supply of subsidised power to agricultural farmers, theft of power, and inefficient T&D infrastructure. This has restricted private investment in the power T&D sector, thereby reducing the quality of service from SEBs. This, in turn, is affecting the capacity building program and transmission of power.
The growth in testing infrastructure has not kept pace with that of production, both, quantitatively and qualitatively. Testing infrastructure available at India’s premier agency, the Central Power Research Institute is proving short of demand. Manufacturers of large power transformers at times need to send their equipment for testing to overseas facilities like Korea Electrotechnology Research Institute and KEMA which is expensive. Apart from this, huge logistical costs and lead times are also involved.
ConclusionMake in India has created a positive energy in the industry, it is much spoken topic across the country. This initiative has given boost to the industry and is striving hart to drive the country towards being manufacturing hub. Apart from that, Make in India has created huge impact and has opened up lots of opportunities for the industry. Transformers are an essential part of the power sector as they provide reliable and uninterrupted power supply. Further the industry will see many changes happening due to initiative and with this initiative the country will flourish and take the country to the next level.
As per experts views, Make in India initiative has huge impact on transformers industry providing various opportunities. Optimistically in the coming years transformers industry in India will scale up with new heights by clearing up the bottlenecks in the sector.
—————————High failure rate of distribution transformers is also a big concern for the transformer industry in India.
Anil Kadam, Senior Manager, Energy Business, Schneider Electric India
————————-As the manufacturing sector gains momentum, there will be increased need for reliable power, influencing both power generation as well as transmission and distribution. Hence the ‘Make in India’ initiative, will trigger demand for transformers
Manjit S Sethi, Vice President, Transformers, Power Grids Division, ABB India
Analysis on impact of Make in India initiative over transformer industry