Industry body Indian Electrical & Electronics Manufacturers’ Association (IEEMA) recently held its annual convention in Mumbai. The convention, which anchored around the theme “Go Global,” sought to create a roadmap for Indian electrical equipment manufacturers to turn globally competitive. An eminent panel not only deliberated on the said theme but also imparted keen insights on the changing dynamics in the Indian power T&D sector. This special story is based on gleanings from this panel discussion.
The global competitiveness of the Indian electrical equipment industry has always been a topic of hot debates. A better part of the Indian manufacturer fraternity has faced the onslaught of cheap imports from China. Several representations were made to the Indian government to protect the domestic industry from the Sino impact. Chinese imports have adversely impacted Indian companies not only in the domestic market but in the international market as well.
The big question here is whether India is able to compete with China, at least in the electrical equipment. The answer appears to be a resounding yes. “It is a myth that we cannot compete with China,” emphatically noted Shreegopal Kabra, Immediate Past President of IEEMA, in his inaugural speech. Kabra stressed that there will always be a tussle between price and quality, in which quality will emerge victorious in the long run. To counter the onslaught of less expensive Chinese equipment, several Indian companies have resorted to slashing their prices but more often than not, this has resulted in deterioration of quality. “We are spoiling the local market by reducing prices,” observed Kabra.
There is significant government funding towards R&D but this expenditure is fragmented and does not always produce concrete results. R&D expenditure should be mapped to a project and also to an industry. This will lead to the development of new equipment or solutions that have much more direct-application value.
All the same, there appears to be strong appetite for quality products even in some purchasing circles in the domestic market. According to Kabra, some Indian real estate developers have being sourcing electrical equipment (typically wiring accessories) from European markets. This is despite the fact that such imports would be costlier than domestic equipment. If such instances grow, it would point to a situation where Indian purchasers are choosing quality over price.
Indian electrical equipment manufacturers also have an opportunity to tap the overseas markets, indirectly. This is illustrated through a recent example where significant procurement of cables and other low-voltage electrical equipment was made through an Indian company that was appointed EPC contractor for a large petroleum refinery project in Nigeria.
Real estate is poised to become a big business driver for electrical equipment, especially low-voltage gear like cables and wiring devices. It is estimated that the size of the Indian real estate market (resident and commercial) was $160 billion in 2017, and is estimated to grow at 12 per cent. IEEMA feels that the size of the Indian electrical equipment industry would reach of size of $100 billion by 2025, balancing imports and exports. Out of this, the building sector is likely to account for as much as 50-60 per cent, IEEMA estimates.
In the real estate sector, there was a time when developers, with a view to maximize their profits, went in for substandard electrical equipment, especially cables. For a real estate buyer or even a home owner, the impact of substandard wiring cables is not perceptible. However, the safety of the home or commercial unit is several compromised. Now, since the introduction of the Real Estate (Regulation and Development) Act, 2016, popularly known as “RERA”, the interest of home buyers and home owners is substantially protected. In the context of the electrical equipment industry, RERA has made electrical manufacturers more conscious of supplying quality products. It has also made developers more accountable. Real estate developers are now more likely to show more diligence while selecting electrical supplies.
Impact of electrification
Dr. P.V. Ramesh, CMD, Rural Electrification Corporation Ltd, asserted that electrical equipment manufacturers have tremendous domestic business opportunity in view of widespread electrification works. Dr Ramesh observed that between now and 2025, Rs.19 trillion will be invested in the power generation sector, while the power transmission segment will witness investment of Rs.5 trillion. In the power distribution sector, there is likely to be investment of Rs.1.5 trillion annually. A substantial part of the investment in power distribution will be towards smart metering, Dr Ramesh said.
It may be mentioned that nodal agency Energy Efficiency Services Ltd is in the midst of mass procurement of smart meters and even prepaid meters, especially in areas like Uttar Pradesh and Haryana, where recoveries to power distribution utilities is poor. The Central government has also proposed that over the next three years, all energy meters in India will be converted to prepaid meters. Incidentally, under the Ujwal Discom Assurance Yojana, a total debt reduction of Rs.16,000 crore of 54 state distribution utilities has been realized, so far.
The REC CMD also observed that under Saubhagya, the national household electrification scheme that was launched in October 2017 and for which REC is the nodal agency, a total of 4 crore households have been targeted for electrification by April 2019. So far, 1.40 crore households have been electrified and currently 1-1.5 lakh households are being electrified on a daily basis.
Merging of T&D
Sushil Kumar Soonee, ex-CEO of Power Systems Corporation Ltd (POSOCO), made some very interesting observations of how the Indian power grid will evolve in the coming years. Firstly, power generation is moving increasingly from centralized to decentralized, thanks to distributed sources of generation, especially renewables. This will lead to a proliferation of micro grids. However, Soonee pertinently observed that micro grids will not lead to the redundancy of the mega grid. In fact, the mega grid would continue to be dominant and the micro grids would lend support.
Traditional electrical equipment will soon need to be devised in such a way that it facilitates connectivity. It should be equipped with the capability to “communicate” with users and also with other equipment. The dividing lines between electrification, automation and digitization are blurring fast, and electrical equipment will need to be designed keeping this convergence in mind.
Power demand will be increasingly elastic, thanks to the induction of generation from renewable energy. The government, incidentally, has targeted 175 GW of renewable energy-based power generation capacity by 2022. Induction of intermittent generation from renewable assets will be amongst the biggest challenges to the power grid, Soonee said. Grid operators will need to prepare themselves for grid resilience. Grid operators will not be to avail the current philosophy of “command and control”. The proliferation of disaggregated electricity generation from renewable energy sources will change the grid dynamics. The flatness in the load curve will eventually go away. These new dynamics will engender new market players, like power aggregators.
The separation of “carriage” and “content” in power distribution will define a new paradigm. There is much traction in implementing this move as an important amendment to the Electricity Act, 2003. Once done, there is will be one distribution licencee that will own the distribution network and grant unrestricted access to multiple supply licencees. Currently, there is just one distribution licencee that owns the network and also supplies electricity. With the proposed bifurcation of what is called as the “wire” and “supply” business, consumers can choose their supply licencee. This will bring promote competition, which is a quintessential objective of the Electricity Act.
When such aforementioned shifts take place in the power T&D segment, there will be little distinction between the terms power “transmission” and “distribution” as we understand them today.
Ramesh C. Chandak, former CEO & MD of KEC International and now an independent consultant, shared his insights on global competitiveness of Indian companies. Chandak observed that typical Indian electrical equipment manufacturers do harbor aspirations for corporate growth, but these ambitions are not backed by concrete business plans. For instance, every Indian company aspires to grow its exports business. However, Chandak explained that growth in demand for electrical equipment is much slower in most countries compared with in India. Hence, any growth in exports business will necessarily take place by eating into the market share of other countries. Without a proper plan of how this would be achieved, Indian companies would never find it easy to realize the desired exports growth.
There was unanimous agreement amongst panelists about the proliferation of e-mobility in India. The e-mobility ecosystem comprising electric vehicles, lithium ion batteries, EV charging stations, etc is seen evolving rapidly in the coming years. The EV industry is a big business opportunity for India, estimated at a staggering $15 billion.
The energy in one litre of petrol is equivalent to 9 kwh. If one takes the average mileage of even a two-wheeler, it works out to say 50 km per litre. Hence one gets mobility of around 5.5 km per kwh of energy. As opposed to this, an EV typically gives 10 km of mileage per kwh of energy consumed. Hence, EVs are much more energy-efficient. If one takes into account the relative cost of petrol and electricity, the case in favour of EVs becomes even stronger.
What is most interesting to note that even globally, those that took the lead in manufacturing of EVs were never automobile manufacturers, but electrical equipment companies or simply new-age companies. Tesla, a US-based multinational founded in 2003, is a great example. Even in India, EVs were first manufactured by a Bangalore-based startup called Reva Electric. This company was subsequently acquired by Mahindra & Mahindra Ltd. Electrical equipment manufacturers thus have the opportunity to break ground in the e-mobility space.
(Cover Photo: Siemens)