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Focus | December 2011

Switchgears and control gears: Waiting to take off

There is a need to take concrete steps to encourage R&D activities in view of the gap in technology in India, says Anil Nagrani.

The Indian electrical equipment industry comprising of multinationals, large medium and small players is fully geared up to produce, supply and export a wide variety of equipment including switchgear and control gear items that are required by the expanding industrial and power sector. This industry sector manufactures the entire voltage range from 240 V to 800 kV. The 1,200 kV equipment is under indigenous development for the 1,200 kV test station at Bina in Madhya Pradesh.

The current technology level in India is contemporary. It is estimated that the present size of the Indian switchgear industry is around Rs 12,000 crore. The industry grew by about 21 per cent in volume terms in 2010-11. The overall exports decreased by 8 per cent whereas imports increased mainly for medium voltage (MV) or high voltage (HV) by over 25 per cent. Weightage of the switchgear industry based on the IEEMA electrical industry index is 15.2 per cent.

Currently, the MV and HV segments are suffering from overcapacity due to a lack of orders. Inadequate demand could be due to insufficient planning by users and delay in finalising tenders. Unfortunately the bunching of orders also creates supply-delivery problems. Also L1 (lowest quoted price) procurement system followed by all utilities i.e., procuring products at the lowest price creates a hurdle for bringing good quality material in to the system. Further insistence on repeated type testing of products in spite of inadequate type testing laboratories poses additional delays and harm to equipment.

Market opportunity for LV, MV, HV & EHV Utilities segment

HV and EHV demand majorly derives from utilities. India's power generation capacity of 2,300 MW in 1950 expanded to 180,000 MW in 2011. With the 11th Five Year Plan (2007-2012) capacity is expected to increase by a maximum of 55,000 MW. The government is focusing on increasing the penetration of electricity in villages. Schemes like R-APDRP and RGGVY are providing an excellent opportunity for the LV and MV switchgears market with a large number of villages which are yet to be electrified.

Industrial segment

India's industrial sector accounts for about 30.0 per cent of GDP, with most of the industrial divisions reporting a growth in output in the fiscal. An increase in process automation levels was observed which support push-buttons, contactors and switching relays, as well as the protection relays market, which finds application extensively for motor control. Investment in the new infrastructural setup is set to increase the market for intelligent switchgear systems (ISGS), ring main units (RMUs), moulded case circuit breakers (MCCBs), air circuit breakers (ACBs) and contactors and relays (C&Rs). Another indicator of sustainable growth is the increase in gross assets of organisations.

Commercial, infrastructure sectors

The infrastructure sector is one of the most important thrust sectors in the 11th & 12th Five Year Plan of the government with an estimated investment of $475 billion over the next five years up to 2017. An average GDP growth of about 7.6 per cent and massive investments from the private and public sector are expected to drive the growth in infrastructure segment.

This includes modernisation of crucial economic and social infrastructure such as new hospitals, commercial complexes, IT parks, shopping malls, ports, railways, metro, roadways and schools etc. Infrastructure development is expected to benefit the ring main units (RMUs), intelligent switchgears, air-insulated and moulded-case circuit breakers market for switching, control and general protection applications.

Residential segment

In the residential construction sector, the market has picked up in the 2010-11 post-recession and with support from the government. The prices of real estate are firming up and projects which were on hold have restarted. Continued growth of the residential sector is likely to drive the MCBs, earth leakage circuit breakers (ELCBs) and MCCBs market which has already clocked a growth of over 20 per cent over the last fiscal. Recently the revised National Building Code NEC 2011 in line with the latest IEC code has been launched. This will help improve both electrical and fire safety for the common man.

Power plant modernisation and refurbishment

As in other parts of the world, numerous power plants in India are nearing the end of their service plan, thus requiring overhauling and modernisation. This includes replacement of existing transformers, which are on average over 30 years old and the replacement of LV, MV and HV switchgear. Power plant modernisation and refurbishment is expected to additionally support growth of the switchgear market.

Alternative energy sources

The Indian government continues to research and invest in renewable energy sources such as wind, solar-thermal and hydroelectric power. The renewable energy market has grown by about 2,400 MW to 20,100 MW. Growth in this segment is likely to sustain at the current or higher levels over the next 4-5 years. The increase in investment in alternative energy sources is also expected to support market growth, as LV and MV switchgear products are required for general protection as well as switching. The MCCB and MCB markets are expected to benefit considerably from alternative energy expansion.

Weaknesses
  • The switchgear industry has to largely depend on financially weak EBs for its sales, The EBs condition has increasingly worsened over the years.
  • Uncertainty and slow pace of reforms
  • Increasing competition from the unorganised sector and Chinese imports
  • Macro-economic challenges which constrain public and private funding and high interest rates  
  • Low investments in R&D, lack of innovation
  • Integration or assimilation of new technologies into development of new products in the sector needs improvement
  • L1 procurement system in utilities i.e., procuring products at lowest prices creates a hurdle for bringing good quality material in the system.    
Threats
  • Under-utilisation of installed capacity  
  • Lack of HV switchgear test facilities in the country
  • Increasing competition from un-organised sector in low end or low tech items or imports in LV segment and project imports.
  • One-sided contracts by user industries or price variation contracts are not accepted by many users
  • Improper procurement planning or bunching of orders  
  • Entry of unproven contractors or sub-contractors with minimal technical knowledge.  
  • Lack of standard specification and design parameters clubbed with an increasing trend of customisation is adversely impacting delivery schedules as well as taking away benefits of economies of scale.  
  • The new clause of consequential damages which in short means an organisation supplying equipment is not only responsible for the supply but also for damages arising out of the equipment.   
Opportunities
  • Generation capacity is expected to be augmented by around 150,000 MW under the 11th & 12th Five Year Plan (2007-2017). More than 60,000 MW under construction.
  • The T&D network expansion
  • Schemes like APDRP and RGGVY are providing an excellent opportunity for the LV and
  • MV segments under the 'Electricity for All' initiative
  • Expansion of key industry sectors (cement, steel, petrochemicals, telecom and others)  
  • Expansion of infrastructure like telecom, railways, airports, ports, roads, etc.
  • Replacement and retrofitting programmes.  
  • 800-1,200 kV transmission line development  
Looking at the gap in technology in India it is felt that there is a lack of real R&D activity and innovation in the industry. So there is a need to take concrete steps to encourage R&D activities.

The author is Senior Director, IEEMA Operations, Mumbai. Views are personal.
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