Some relief for Electrical Equipment Industry as the Domestic Demand rises

India’s INR 1.30 lakh crore electrical equipment industry has witnessed a 6% growth in the first six months (H1) of 2013-14, due to a rise in domestic demand, according to production data released today by the Indian Electrical and Electronics Manufacturers’ Association (IEEMA).

After a weak growth in the first quarter (Q1) of the current fiscal, mainly on account of growth in exports, the second quarter (Q2) has witnessed a growth of 9.8% in the production of the electrical equipment industry due to a welcome rise in domestic demand. This has led to a moderate growth in H1 of FY’13-14 as compared to H1 of FY’12-13.

Some progress in power transmission and sub-station projects, power generating stations, especially renewable energy like wind, R-APDRP projects and orders from select core sectors like construction and real estate have helped in the moderate growth, although the electrical equipment industry continues to face very severe credit availability, enormous delays in project execution and non-adherence of payment terms by customers, mainly power utilities, resulting in unmanageable cash flow problems across the industry.

The depreciated rupee has made critical imported raw material and inputs for electric equipment more costly, but given the continued threat from imports of electrical equipment in the Indian market, domestic manufacturers are being forced to absorb this additional cost to remain competitive.

“The Indian electrical equipment industry has shown some revival in the first half of the current fiscal, after a negative growth of 7.8% in production in 2012-13. Domestic demand, coupled with increase in exports, hasmanaged to keep the industry afloat. The industry needs to build a robust export portfolio so that it can optimally utilise its built-up capacity which is currently under-utilised across all sub-sectors”,said Mr. Raj Eswaran, President, IEEMA.

The transformer industry, both power and distribution transformers,has seen a turnaround in growth from -4.5% in Q1 to 18.76% reported in Q2 of this fiscal. Power cable, capacitors, energy meters, transmission line towers, high-voltage switchgear have also improved their growth numbers in Q2over Q2.However, segments like conductors, low-voltage switchgear and rotating machines have further declined in Q2 FY’13-14.

Although, overall imports of electrical equipment have shown a negative growth, imports of power transformers, insulators, cables (mainly through power project import route) and AC motors &generators have continued to increase. In 2012-13, imports had captured 38.26% of the market for electrical equipment in India, whereas there was significant under-utilisation of installed domestic capacity.