The dip of the value of the Indian rupee in global markets brought this industry to an edge, says Saurabh Kumar, Manager, Product Head - Pan India, Power Capacitor Division, Havells India Ltd.
How far have Indian manufactureres been successful in implementing advanced technology in capacitors?
Capacitors are one of the most versatile electrical products and their application spectrum is the widest, ranging from computers, televisions, appliances, automobiles, aircraft, domestic & industrial equipments, power electronics, drivers, UPS etc. Contrary to common knowledge, capacitors are not just energy storage devices, but are also used for signal filtering, processing and power conditioning (power factor correction, transient suppression & harmonic filtering). With such wide band of applications, constant technical changes and innovations in the product are crucial to meet the requirements of product quality and efficiency.
However, many challenges are faced by the capacitor industry such as presence of large unorganised market, lack of awareness about importance of branded and quality products, anarchistic buying practices of consumers with much faith on old specifications, ferocious competition among peers from a largely unorganised segment, rise in input material costs. All these have constrained the capacitor industry in the past and technological advancements have been sluggish.
Ferocious competition among the peers and a rise in input costs brought the industry on the edge. Major challenges faced by the capacitor industry are:
- Lower price realisation and rise of input cost. Minimal margins.
- Lower capacity utilisation and less demand - leads to market stagnation.
Encumbered with problems pertaining to basic survival, the capacitor industry has not witnessed implementation of technology advancements in recent times.
Nevertheless, with new markets opening and the country targeting a gross domestic product (GDP) growth rate of 8-9 per cent in the coming years, we should be able to come up with the implementation of advanced technology and innovative products for a prosperous future of the industry.
What is the current status of this industry? Is it an organised one? Does this budget support the growth of the capacitor industry?
Currently, the Indian capacitor industry is capitally exhaustive with high break-even levels, and is majorly dependent on imports of crucial raw materials, which constitute 60 per cent to 65 per cent of the total raw material cost. Further, the dip of the value of the Indian rupee in global markets brought this industry to an edge.
In the last financial year, demand from the market was stagnant and beleaguered because of delays in projects, fiscal difficulties faced by EPC contractors and utilities.
Moreover, the much anticipated growth from certain emerging segments such as electric agility (EV & HEV), HVDC/FACTS, and local manufacturing of electronic goods came to a standstill. Exports of LV power capacitor and demand for MV power capacitor from a few utilities /States were the only sectors which brought positive profitable growth. If there is growth in all the mentioned segments, the scope of demand will increase.
Presence of domestic players from a large unorgansied sector, which constitutes 45 per cent of overall market share, has encouraged the undue bargaining power of consumers that subsequently led to price erosion over the last two years.
Again, the industry is optimistic primarily because of the announcements by the new government about the proposed reforms and investments in the infrastructure and power sectors, which would be the government´s prime focus area.
Do you see maximum opportunities for this particular segment in India that should be grabbed by domestic players?
Currently, the share of India´s exports in the global market is less than 1 per cent. The power sector is considered a sunrise sector across the developing world, and there is a significant export potential for the domestic players.
Advancements in technology and new emerging applications for capacitors will definitely maximise opportunities for the domestic manufacturers. For instance, railway rolling stock in future is expected to deploy advanced power electronics which will broaden the scope of use of capacitors to ensure higher reliability and longer life and also provide capability of operating under conditions of high temperature and vibration.
Energy saving and conservation is another area which will gain more significance as an important consideration in future electrical power systems; capacitors will play an important role here as well. There is a need for capacitors of high energy density and low loss capability to be banked to create large storage capacitors (MVAh).
Renewable energy system (wind power converters, SPV, hybrid systems), power transmission both conventional & emerging (HVDC, SVC, FACTS, smart grids), automotive (EV, HEV) applications and medical equipment are expected to be the next big markets for both power as well as power electronic capacitors.
How about the overall demand? Do you see a growth? If so, from which sectors?
Growth is inevitable in a developing economy. The government needs to focus on areas such as HVDC, high speed traction, electric automobiles etc., which will simulate primary as well as secondary demand. The industry also works to create demand by helping clients understand the benefits of power acclimatisation (reactive power compensation, harmonic filtering, transient suppression etc.).
Enhancing the level of quality and reliability of the products and services with cost competitive and innovative products will make the domestic industry globally competitive and help de-risk domestic manufacturing by reducing overdependence on the domestic market for survival and growth.
With the growing demand, do you feel that the capacity expansion will take place too? How about your plans for capacity expansion?
With huge investments planned by the government for the improvement of the power sector, capacities will necessarily need to expand. To address this demand, Havells will expand manufacturing capacity to 5 MVAr /month by 2015 and 10 MVAr / month by 2016-17.
What are the challenges pertaining to this sector? Do you see a price war vis-a-vis global players? Have they dominated this space till now?
The presence of a large unorganised sector of capacitors affects the policy framework and fragments the distribution market.
The sector has multiple suppliers, giving tremendous bargaining power to buyers. The challenge, in such a situation, is the overall lack of focus on quality of the product as the smaller players constantly bring the prices down. This also defeats the entire purpose of promoting safety in electrical equipments. The larger, branded players will not enter the price wars at the risk of compromising on quality. Proper legislation and regulations must be enforced to ensure basic minimum quality of product, irrespective of source. The government plays a very important role in imposing compliances. At the same time, it is also important to promote healthy competition & entrepreneurial initiatives. Another challenge is the reducing share of Indian manufacturing as compared to Chinese companies in export markets.
The reasons for the rise of China in the export market are:
- Financial Sops - Chinese manufacturers are given export subsidies, social security subsidies and access to financing at rates below 6 per cent per annum
- Chinese manufacturers have access to key raw materials at subsidised prices.
- In tenders issued by Chinese national power companies foreign companies, including Indian companies, cannot participate directly, as they need a local presence. No such conditions exist in India.
- Easy Acceptance of Performance Certificates - Indian utilities accept performance certificates issued by Chinese utilities and do not insist on certification by reputed international agencies.