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| December 2013

Rising metal prices and dumping a major challenge

Alternator market, which is heavily unorganised, is grappling with rising metal prices and dumping of cheap products in the market. However, innovative and advance technologies are taking edge.

Rotating machines whether motors or generators are among the crucial equipment required while running a manufacturing unit. Generators play an equally important role in the precarious power availability situation in India, whereas motors are drivers of the machinery. Riding on the growth of industrial development, the motor sector grew rapidly to meet the requirements of general-purpose motors in all segments of industry. Its growth was boosted further by the requirement of special purpose motors for specific applications in cranes, cement mills, machine tools, mining, textiles and agricultural pump sets. EE motors incorporate the latest developments in design and material technology resulting in minimum losses both for cores and windings. The generator industry in India is catering to the alternative power requirements of large and small units, commercial establishments and the domestic sector as a whole. Domestic manufacturers in India are capable of manufacturing AC generators right from 0.5 KVA to 25,000 KVA and above with specified voltage ratings. State-of-the-art generators with electronic AVR units, permanent magnet excitation, class H insulation, single bearing construction brush-less.

Status
The generator industry has large number of players especially in the lower range. The estimated size of the market is around Rs 1,500 crore, according to IEEMA. Organised sector accounts for about 35 per cent. Original equipment assemblers (OEAs) buy engines and alternators and assemble the generator and sell to customers. Portable gensets are used mainly by shops, restaurants, small offices and business establishments. Stationary generators <125 kVA used in large residential and commercial complexes, hotels, hospitals, Generators of capacity >125 kVA are used in large core sector and process industries. Indian LT AC brushless alternator market (10 - 2,000 kVA), finds that finds that the market earned revenues of $202.1 million in FY 2009-10 and estimates this to reach $352.5 million in 2015.

"The burgeoning industrial sector and peak power deficit at about 15 percent are expected to stoke demand for diesel generator set sales in India," says Frost & Sullivan Research Analyst Udit Krishnan. "This will in turn uplift pros¡pects for the LT AC brushless alternator market.

Market for motors is in the region is pegged over Rs 5,000 crore. DC Motors, FHP, flameproof; squirrel cage, slipring motors are commonly used. Major market for lower HP motors is in the agricultural sector  used in irrigation pump sets. FHP is used in water coolers, ACs, deep freezers, pumps, washing machines, wet grinders, garage compressors, sewing machines, etc. Other motors find application primarily in the industrial sector.

Most of the international players manufacturing these electrical equipments are present in India either as JVs or subsidiaries. The segment has a fragmented structure with large number of manufacturers in the organised sector with a turnover of less than Rs 50 crore. This is also due to the fact that there are over 3,000 firms in the unorganised sector who are manufacturing in the low technology band. This is in evidence mainly in the product categories which are of standard nature. In power generation equipment and HT motors where the emphasis is mainly on projects, the market is dominated by a few large players.

It is expected that product segments such as higher capacity electric motors, generators and alternators will witness a consolidation phase in India. In the low voltage equipment categories where the technology barrier is not high, the industry will witness fragmentation with more players entering India especially from China which is expected to be a strong competitor. However, the dominant opinion is that only players who have proven technology, produce quality products and render a package of services will be able to survive in the future. Investment in manufacturing is looking at scaling up the production capacities in many sectors and signals of a capacity overhang that had dragged down investment since the mid 1990s are not there. Industry sectors like oil, cement, steel and aluminium have increased their capacity utilisation and are now looking at future demand which will further boost the demand for products required by the industrial customers like rotating machinery. Growth of the rotating machinery industry is an indicator of industrial growth as these products are primarily used in the power equipment industry. Substantial growth of almost 70 per cent in high-tension motors implies that investment activities in power stations and core sector industries are increasing. The small motors have also shown good growth of about 22 per cent due to a large export market and the momentum gathered by the white goods industry as a result of the overall economic growth in the country.

Energy efficient motors are going to gain importance with the focus on energy savings. Though the initial cost of these motors may be slightly higher than that of standard motors, the initial extra cost is compensated by the savings in electricity cost due to their superior efficiency. Hence companies are positioning themselves in this product category by either developing, or procuring technology.

Only a handful of manufacturing companies are involved in the entire range of activities like design, engineering, manufacturing, erection, commissioning and servicing. The other companies are manufacturing products which are supplied directly to OEMs, or through distribution channels and hence activities like erection and servicing are not required.

The percentage of sales spent on R&D ranged from 0.2 per cent to as high as 10 per cent of gross sales. However the industry average of the amount spent on R&D as a percentage of sales was negligible at 0.5 per cent whereas the international leaders spend as much as 5-6 per cent of their sales. For example when Siemens spent approximately 5,063 million Euro and ABB $ 690 million, BHEL the highest spender in India spent approximately Rs 1,252 million.

The market leaders are also looking at both organic and inorganic methods of growth. The quality consciousness of the industry is comparatively high with more than 90 per cent of the companies either ISO certified, or seeking certification. However, there are a few smaller players who do not, or cannot, adhere to a strict quality regime due to cost factors and they are reported to use second grade copper and other inputs.

The challenge
Price of copper, steel and other materials have been quixotic. China is quite capable of dumping at unimaginable prices. Demand could fluctuate. The rotating machine industry has weathered it all. Today, as an enterprise it is leaner and meaner. The threat is from a different quarter the imperative of energy efficiency. The renewed interest among Indian and foreign promoters in new generation projects and the recovery in the utility sector, will lead to new projects. Companies need to continue focusing on operational excellence, cost optimisation and exports to be profitable in the face of ever increasing competition.

Presently, energy efficiency motors account for under 3 per cent of total demand. Electrical motor is among the early products for labeling owing to its energy intensity. On an average, motors account for 65 per cent of electricity bill in a manufacturing unit. In spite of these compelling statistics there is no movement forward.

Energy efficient motor is expensive. But the life time cost, including energy savings, of an energy efficient motor is less than the overall cost of an ordinary motor. Educating the lay consumer is a herculean task; and there are vested interests to contend with. There is another reason why energy efficiency warrants immediate attention. Country after country is introducing energy efficiency and environmental norms under the aegis of WTO. If the domestic market is not ready for these products, industry hasto make disproportionate investments to comply with regulations at other countries. The time has come for stringent policy prescriptions.

Conclusion
The renewed interest among Indian and foreign promoters in new generation projects and the recovery in the utility sector, will lead to new projects. In view of the recent gas finds in the private and public sectors, gas will emerge as the major source of power generation if the prices are reasonable. The new renewable energy policy aims to provide electricity to remote village through renewable standalone systems and local electricity grids.

The Electricity Act 2003 is opening up opportunities for private sector utilities in the generation, transmission and distribution. This will lead to higher investments in captive power generation capacity. Demand for generating equipment will, therefore, be greatly enhanced. Many world wide companies are looking at India as a cost effective manufacturing hub. In addition, high growth and disposable income is resulting in extraordinary demand for manufactured products.

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