Distribution Transformer Market: Trends, Opportunities & Competitiveness

A comprehensive analysis on distribution transformer market in India highlighting its competitive landscape

The transformer market in India is estimated to be over Rs 12,000 crores where power transformers contribute 45 per cent of the total market and distribution transformers contribute 55 per cent. India’s transformer market is predominantly unorganised with many small participants catering to the smaller distribution transformer markets. However, many are slowly graduating to the medium-sized category, thus expanding the organised participants’ base.

Anticipating the huge domestic demand, Toshiba Transmission & Distribution Systems (India) [TTDI] has invested around US$30-million at its Hyderabad factory that has boosted production capacity for transformers up by 50 per cent and established two production lines for new technology products, informed Dr. Katsutoshi Toda, Managing Director, TTDI.

Focus on life-enhancement
In India, the road towards developing power infrastructure is over the horizon. High generation demands, capable enough to cater the present power requirements is still in its phase of development whereas the prospective of infrastructure development puts us under significant load of enhancing our capacities to fuel the growth of the nation. To simply put, any growth or development requires industry to expand, which will directly increase their power consumption thereby needs investing in transformer (distribution) assets to enhance loads. Every link to this cycle is interdependent, and power is one of the key factors for the promising India to meets its expectations.

Transformers in the distribution system entail highest volumes in the power utility, supply and consumer chain. Irrespective to the advancements made in the field of power generation, distribution transformer is an irreplaceable asset. Today most of our power distribution system, including the several HV consumer plants and facilities, are on their peaks of the asset ageing cycle. Most of the transformers installed today are severely aged whereas aged doesn’t necessarily means unfit-for-operation or not reliable; but they certainly need maintenance and up keeping. Engineers today are well aware of this challenge and understand that like their past generation – reactive approach cannot be entertained and they along with NDL’s transformer lifecycle management professionals are working towards the life-enhancement of these assets, informed Divyansh Kohli, CEO and Executive Director, NDL Power Ltd.

Growth drivers
According to Patel of JDS Group of Companies, the investment climate is positive in the Indian power sector. He adds, “Due to policy of liberalisation, the sector has witnessed higher investment flows than envisaged.” The power ministry has set a target of adding 93,000 MW in the 13th Five Year Plan (2017-2022). The industry has attracted FDI worth Rs 48,357.00 crores or US$9,828.08 million during the period April 2000 to June 2015. The government has launched schemes like DDUGJY, IPDS and NEF for improving distribution sector since distribution sector is a link between consumers and utilities, it is a cash register for the entire sector. All these projects will lead to lot of demand of transformers in coming 3 years. “But only worry is proper and timely implementation of these projects,” points out Patel while sharing expressing his concern.

Challenges
Sahaj J. Patel, Director, JDS Group of Companies estimated that the transformer industry in India as on date is worth around Rs 15,500 crores. However, he observed, since past one year the market for distribution transformers in India has taken a major hit due to following reasons:
• Delay in implementation of REC norms by various state electricity boards. Since past two years REC has made mandatory for all SEBs to purchase BIS marked Level 2 rated distribution transformers. Most of the states have taken lot of time in approving the REC norms.
• Due to delay in implementation of above all the DDUGJY and IPDS tenders have been delayed by at least a year. The government has approved budget of Rs 110,000 crores for both schemes combined but most of the SEBs have still not seriously started release of orders to turnkey contractors.
• As on date, there are only two NABL accredited laboratory in India – CPRI and ERDA for complete testing of distribution transformers. Also, waiting period in both these labs is not less than 2 to 3 months for testing to be conducted. Due to this delay lot of transformer manufacturing companies have not got BIS license till date. The industry requires minimum 25 such laboratory to get testing done on time.
• Unfortunately in India to supply distribution transformers you need dual certification BIS and BEE. BEE certification is also taking lot of time anywhere between 2 to 3 months. To get certification for different sizes with different star ratings is expensive and tedious process.
• 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 2.5 lakh tonnes of CRGO every year.

As and when the above issues get sorted out transformer industry should grow with leaps and bounds especially with proper implementation of DDUGJY and IPDS schemes, observes Patel. He anticipates that the industry can grow with minimum 10 per cent incremental yearly growth for coming 3 years.

Dr. Katsutoshi Toda also mentioned some of the major bottlenecks which are affecting the growth of the industry are:
• Procedural delay in implementing the projects (DDUGJY and IPDS schemes). This also brings forth the lack in synergy between central and state governments.
• Poor financial condition of major utilities are resulting into lower allocation or budgets for the procurement of new material. The government’s new scheme “UDAY” is expected to give boost for the utilities and improvement in the procurement activities thereon.
• Non-uniform procurement policies and qualifying criteria for vendors.
• Tendering procedures and contract awarding based on L1 bidder and negotiations leads to malpractices due to price pressure and hence market is driven by prices rather than quality (low qualifying criteria).
• Pre-Qualifying Requirements (PQR) provide no encouragement for field trials of innovative products or technologies.

Gauging the competitive landscape
The Indian distribution transformer industry is currently dominated by unorganised sector. According to Dr. Katsutoshi Toda, the capacity for supply is more than market demand resulting into unethical competition and manufacturing practices. “Inclusion of distribution transformer in the mandatory standard of IS1180 Part 1 and raising the efficiency standards are the right directions taken by the Indian government. With the BIS – Quality control order coming into the picture, we expect some improvement in the quality aspects and healthy completion thereon,” he said while talking on the competitiveness.

When designing and procuring today, transformer should be looked as a capital asset, and investment made which shall bear returns to the stakeholder. “The buyer today needs to understand, transformer is static equipment with all capital intensive material as its composition which shall probably bear higher scrap value down a few decades as compared to the present market value. We should be concerned about the cost of operation and the transformer ownership cost; not the best-buy price of transformers,” suggests Kohli.

In the same breath, he said, unfortunately the competition in the market today amongst the manufactures is showing its ugly face. He adds, “In the past decade, where the technology and efficiencies has significantly increased, we have experienced a significant downturn in the quality of transformers.”

Kohli further observed that the big brands in transformer manufacturing are mostly focused towards power and distribution transformer of over 220KV, and therefore outpouring the distribution transformer from several OEMs. “There are several factors responsible but only when the consumer understands and looks transformer as a capital investment, and is self-aware about all malpractices existing in the industry, they can steer towards reliable and effective power system,” he further sums up.

2017-18 will be year of consolidation
Patel also agreed that Indian transformer market is predominantly unorganised with many small participants catering to the smaller distribution transformer markets. However, he observed, many are slowly graduating to the medium-sized category, thus expanding the organised participants’ base. “Transformer over capacity in the Indian market has led to immense pricing pressure scenario severely impacting the profitability of the market players. I personally feel FY 2017-18 will be year of consolidation where we will see lot of incompetent (quality) industry will find difficult to survive where as new entrants will also come looking the heavy investment in power sector by Indian government. If focus is kept on quality then it should make things easier for transformer manufacturer to sustain and have incremental growth at same time.”

Developing new technology
JDS Group of Companies has developed new technology for the transformer with the use of high temperature materials to provide a variety of economic, environmental and safety benefits to the user, including: lighter weight, smaller size, reduction in fluids, improved safety, less flammable, more capacity and lower energy losses, said Patel. The major customers for JDS are the power utility boards, industrial and railway markets. He claims that the use of these new transformers will change the electrical industry in a good way. The high temperature materials, mainly Nomex aramid papers and boards can be used with conventional fluids in an economic way for power and distribution transformers for increased capacity and improved reliability. They can also be used with less flammable or higher temperature fluids for dramatic reduction in size and weight, with greater safety and environmental reliability. JDS is currently manufacturing transformers with capacity of 100 KVA to 2.5 MVA.

Reliability partner
NDL has been the reliability partners to our clients and patrons for their power system, asserts Kohli. For aged assets, we undertake residual life assessment studies to determine the transformer failure tendency, and perform several activities to enhance and increase the effective transformer life, by decades even. NDL has specialised team, with their R&D tools for condition monitoring and trending analysis, with transformer asset fleet management. With most of the major FMCG industries, NDL runs their custom-designed Power Management System for their entire power system, incorporating designing, condition monitoring, testing and maintaining their power assets, hassle free and ensuing them zero ‘0’ downtime.

In 2010, NDL installed their transformer manufacturing and repairing plants which was launched undertaking the ideology of manufacturing ‘FIFTY-PLUS Transformer’ – a transformer that commits a reliable operation of over 50 years. “We are remanufacturing and redesigning old transformer, and manufacturing transformer’s on custom requirements by our clients, which certainly cannot meet the best-buy tag, but ensures reliable operation and high returns to their stakeholders,” Patel adds.

Committed to ‘Make in India’
Talking about the TTDI’s future plans in India, Dr. Katsutoshi Toda said, “Since the foundation of TTDI, we have always endeavoured in introducing new technology products and solutions, and improving product quality through technology transfers from Japan. In line with our ‘Make in India’ commitment, TTDI will seek to expand its business through full-scale operations and provide cost-competitive products by localising procurement, design and manufacturing within India, securing a 20 per cent share of the Indian T&D market in the coming years.”