AS Subramaniyan | Chairman, MV/HV Switchgear Division, IEEMA
What percentage of the power business is this segment?
The Indian electrical equipment industry is Rs 1.3 lakh crore. Of this, the switchgear and control gears, is about Rs 15,000 crore. Here, the MV/HV switchgear standalone is Rs 3,500 crore. But, there is glut of capacity. Demand from industries and power generation is yet to see sufficient buoyancy as the economy´s investment cycle is yet to kick in.
What are the latest emerging trends in this field?
Switchgear industry in the MV/HV range is very mature in the Indian context. Precisely, these cases should not be seen as new products of basic research but more as new applications and technology extensions which will gain greater currency. Powergrid has taken a bold step in considering introduction of 1,200 kV level for inter-regional power transmission. This development should happen in 2018, necessitating introduction of 1,200 kV circuit breakers as well. Prototypes for this have already been developed by the industry and are under trial at Powergrid´s testing stations at Bina.
GIS technologies are quite entrenched in the country at 765 kV, 400 kV, 220 kV, 110 kV voltage levels. On the 33 kV level, most urban discoms deploy GIS tech only. Consequent upon proven improved operational reliability and space economy vis-a-vis AIS, I see emergence of GIS technologies at 11 kV level as well in the near term. A few progressive utilities are in discussion with manufacturers for a review of the topic. But, it would be premature to cite names.
Switchgear co-exists in the network with other smart grid technologies as well. Emergence of distribution automation and self-healing grid necessitates integration of smart grid solutions such as FPI, FRTU, etc. into 11 kV RMU as well.
Discoms in Maharashtra, Tamil Nadu and Uttar Pradesh are adopting such intelligent RMUs. Overseas, there are prototypes being developed to deploy vacuum technologies for switching voltages beyond 36 kV, going up to 110 kV.
What are the driving factors to boost growth of the sector?
All measures pursued by the Government to stimulate the economy, like land reforms and GST, are in the right direction. The Government is also committed towards developing the power sector and infrastructure. Industry corridors formulated by DMICDC, Renewable mission of 170 GW by 2022, housing for all, 100 smart cities and ´AMRUT´ schemes stand out as good examples.
The industry certainly owes compliment to the government for nurturing these ambitious forward looking endeavours. In addition, the industry is also awaiting revival of investments generation sector, de-bottlenecking of transmissions and most importantly, improvement of discom finances. All these are critical to the achievement of the mission of 24x7 power for all, will and in turn boost growth of our segment. I think the future is bullish for the segment.
What is your estimate on the growth for switchgear applications in India? How optimistic are you over the next two years?
There is considerable investment seen in the transmission segment by both government and private sector entities. The distribution sector, under notified funding schemes, is also modernising the network in pockets. In all, demand from utilities are satisfactory.
I expect that the impacting growth in generation, industries and infrastructure sectors will begin in FY2016-17, by when the stimulus levers of the government will reach ground level. In value terms, MV/HV is likely to witness nominal growth in 2016, say about 5 per cent. But, I expect robust growth of more than 7 per cent from 2017 onwards, and perhaps stronger in the later years.
What are the challenges faced in this segment?
At the moment, the industry needs a level-playing field, especially in the HV/EHV segment. There are many recent tenders of utilities which have been awarded to manufacturers from China & Korea, who are able to quote prices substantially lower by 15 per cent, compared to domestic manufacturers. However, their designs and life cycle support are yet to be proven in India.
To give you a perspective, orders placed on these manufacturers have grown from Rs 80 crore in 2011 to Rs 450 crore till date. Domestic manufacturers have, over the years, invested heavily in product development, skill development, plants and machineries, and ancillaries with a view to giving quality products and life cycle services to customers, besides generating local employment.
With this backdrop, placing orders with Chinese/Korean suppliers without local footprint, that too for locally-funded projects, is not seen as a pro-industry stance. Let us not forget, we are talking about devices which are strategic in nature as they are core to our power sector. Therefore, in my view these award decisions should also have a basis of national security, which may be at jeopardy due to any change in geo-political situation.
In short, in respect of any equipment of strategic significance, where domestic technologies and capacities are available, sourcing should be done locally, through competitive bidding process. We are open to competition, yet the players have to put in place the local mandatory fundamentals without which the life cycle support to our utilities may be impaired.
What suggestions would you recommend to counter these challenges?
We would like to make representation to authorities, through IEEMA, for introducing a condition that such manufacturers must set up local footprint to qualify for bidding. They have to become local manufacturers like many other MNCs have become. Lets see how this works.
As with other industries like steel, the Government has already introduced safeguard duty of 20 per cent for a defined period. Similarly, they should consider safeguard duties for the switchgear industry for a period of say, two years, which also allows the players time to set up sufficient local footprint. This will also establish their long-term commitment to serve Indian customers.