Market Outlook

The electrical equipment industry in India has witnessed an unprecedented growth during the last decade and has emerged as one of the fastest growing sectors. Higher socio-economic development powered by the government’s push for ‘power for all’ is driving the current market growth. Report suggests that, the market is poised to grow by USD 70.69 billion between 2020 and 2024, progressing at a CAGR of 16 percent. The industry body IEEMA also aims to boost the export of electrical equipment from $7 billion to $25 billion by 2025. But there are challenges and uncertainties as well.

Highlighting some of the bottlenecks that are holding back the electrical industry, Vijay P. Karia, Chairman and Managing Director, Ravin Group of Companies, said, “The first and foremost one is the lack of research and development. It is not the industry to be blamed alone for this, but we are bound by a few factors – one of the major factors being the current lowest bidder (L1) tendering norm of the government. In the L1 category, there is no space for any kind of innovation because a manufacturer has to deliver a product at lowest cost and in accordance to the (desired) specifications. Therefore, we always have that thin line of product quality between failure and a safety hazard.” It has to be noted that, the government is a major buyer in the electrical industry.

He also observes that the requirement of minimum of three quotation documents for tenders is also a deterrent to the industry. He further adds, “The Indian electrical industry has a very small global share and this needs to be increased tremendously. Electrical industry has to align to the fact that we need to change ourselves drastically in terms of products that we are offering, in terms of the way we are doing business, and in terms of quality.”

Commenting on what is next for electrical equipment market in India, Gautam Seth, Joint Managing Director at HPL Electric & Power Ltd, said, “Indian economy is at the verge of an inflection point, one that happens infrequently, however when it does, it changes the business to a higher domain of development and provides more opportunities later on.”

He said, “Our reliance on our neighbouring nations for imports of electrical and electronics products had been significantly expanding and Indian Electrical & Electronics Manufacturers’ Association (IEEMA) – an apex industry association of the Indian electrical equipment is consistently taking this up with the government to ensure Indian electrical industry insulated against ‘artificially cheap’ imports from our neighbouring nation. For the growth in the electrical equipment market, Indian manufacturers need to become self-reliant and upgrade the manufacturing technology at par with the international standards.”

Impact of COVID-19
COVID-19 pandemic has impacted industries, globally. However, the impact of the contraction will vary across sectors. According to Syed Sajjadh Ali, Managing Director – India, Electrical Sector, Eaton, “COVID-19 has certainly de-accelerated the growth momentum for electrical equipment with all ongoing projects in pause mode while all future projects back to the drawing board. Also, with certain restrictions on product imports, there is a growing pressure on local industry to support and manage the demand but expect normalisation soon. In spite of all the adversities the power sector has potential to grow.”

Gautam Seth, Joint Managing Director at HPL Electric & Power Ltd also observes that all the sectors have been adversely impacted by this pandemic. He said, “The antagonistic effect was experienced by real estate, construction, agriculture industries; the effect was along these expected lines very disruptive for organisations that are reliant on domestic consumption. In effect to this, our switchgear business saw huge downfall.”

However, talking about the impact of COVID-19 on the electrical equipment industry in India, Vipul Ray, Managing Director, Elmex Controls Pvt Ltd said, “The electrical equipment industry in India was already in a de-growth situation and then the pandemic has come. But, from June onwards, we can see that the industry is bouncing back and we feel that the electrical industry is in a stable state right now.”

HPL’s metering segment has witnessed orders of smart meters worth Rs 90 crore post the lockdown, informed Seth. “We are expecting more business opportunities in government projects also.”

He adds, “In the coming months, we foresee the growth in the solar sector and the demand for switchgears will grow. Also, the adoption of digital solutions will create a demand for more data centres thus we expect demand for switchgear components from there as well.”

According to Syed, decentralsing of power generation and seamlessly integrating this with the grid, reliably and affordably will be a revolutionary change in the power sector, suggests. He observes, “This will empower the users to invest in sustainable power generation sources of their choice and reduce the burden on the grids and further reducing the losses. With this every building, factory or establishment can be a potential power producer from renewable source. Also, with this the power can be distributed to remote locations without the need for extensive grids or networks.”

Opportunities & challenges for Switchgear business
Rising demand for energy is emerging as a key factor driving India switchgear market on account of development of renewable energy sector and government scheme for rural electrification. The switchgear market in India is in the growth stage of the industry life cycle. “With the increase in infrastructural projects both within residential and commercial sectors and upcoming power plants will act as major drivers towards accelerating the demand for switchgears in the country,” said Syed.

Eaton is a global leader in the field of power distribution and controls. We have a strong commitment towards bringing in sustainable products and solutions to India. Many of these innovations from Eaton are already available to the Indian customers those raise the standards of sustainability and safety. Notable examples here are SF6 free solid insulated ring main units and AFDD (arc fault detection device) which have the potential to early detect electrical arc faults, which are the major reason for electrical fires.

Where’s the ‘green shoots’?
Overall electricity demand is at 96-98 per cent of pre-COVID level as per ICRA. India electricity demand is witnessing a gradual recovery and stood at over 96 per cent of the pre-COVID level in July and further improved to close to 98 per cent of pre-COVID level in August, mainly led by recovery in rural areas. On the other hand in July, the industrial sector remained in dire straits with the manufacturing sector contracting 11.1 percent in July compared to the 4.8 percent growth in July last year. The capital goods sector, shrunk at 22.8 percent in July compared to a decline of 7 percent in the year-ago period.

These macro-economic trends impact the electrical equipment industry also and we are seeing a slow uptake in the business overall post unlocking begun in India, said Syed. “Segments like data centres, healthcare and small capacity UPS for home usage have been very active lately but industrial demand remains muted.”

He also anticipates: “We are hopeful that initiatives like ‘AtmaNirbhar Bharat’ would give the necessary impetus to the manufacturing industry and would support many ancillaries around them which will boost the demand of electrical equipment. Also, large scale infra projects in the country are resuming which will also aid overall economy.”

HPL’s top priorities in the next normal after COVID-19
For companies in the utilities, energy and resources sector, it will be essential to combine powerful scenario-planning with an assessment of how various advancements could influence their business in the short, medium and longer-term. Whatever the situation, we see various issues that will shape our vital reasoning, observed Seth. He said, “We would be embedding more digital solutions and analytics to transform the businesses and making it more advanced also, building more safety, flexibility, and productivity into our core operations. In a nutshell, expand our decision-making envelopes and consider the framework level impact across three spheres: organisations, stakeholders, and the global environment. Our main focus would be enhancement of in-house manufacturing setup to provide the best quality products for end consumer satisfaction.”

Conclusion
The power sector in India, hit hard by COVID-19, is slowly getting back on track. Peak power demand is back to normal as it has touched 174.33 GW on 11th September, surpassing the highest level of 173.15 GW in September last year, showing spurt in commercial and industrial activities in the country.

“There’s an exciting time ahead for Indian electrical industry. Now we will have to work very hard to see that we formulate proper SOPs in terms of manufacturing and take the government as our partners and the government also considers the industry as their partner for this,” Karia believes.

“We have to set our expectations to make sure that we have to deal with the crisis and whatever we do out of this crisis is important because it is said that, never let a crisis go waste,” concludes Ray.

Electrical industry has to align to the fact that we need to change ourselves drastically in terms of products that we are offering, in terms of the way we are doing business, and in terms of quality.
Vijay P. Karia, Chairman and Managing Director, Ravin Group

We have to set our expectations to make sure that we have to deal with the crisis and whatever we do out of this crisis is important because it is said that, never let a crisis go waste.
Vipul Ray, Managing Director, Elmex Controls Pvt Ltd

For the growth in the electrical equipment market, Indian manufacturers need to become self-reliant and upgrade the manufacturing technology at par with the international standards.
Gautam Seth, Joint Managing Director, HPL Electric & Power Ltd

COVID-19 has certainly de-accelerated the growth momentum for electrical equipment with all ongoing projects in pause mode while all future projects back to the drawing board.
Syed Sajjadh Ali, Managing Director – India, Electrical Sector, Eaton

An exclusive analysis on what’s next for electrical equipment market in India.
Subhajit Roy, Executive Editor