Electrical equipment industry records negative growth: IEEMA [27 Aug 2012]

August 26, 2012 8:30 pm

For the first time in 10 years, the Indian electrical equipment industry has seen a negative growth of 2.4 per cent in the first quarter of the current fiscal (2012-13) compared to the corresponding period of Q1 FY12 (13.82 per cent) and sequential quarter Q4 FY12 (14.10per cent), industry body IEEMA informed. Releasing the Q1 FY13 performance of the US$25 billion Indian electrical equipment industry, IEEMA said, “The transformer industry has seen a negative growth of 7.6 per cent in Q1 FY13 against the growth of 6.6 per cent for the corresponding period of Q1 FY12. The capacitor and cable industry has witnessed a double digit negative growth of 24.8 per cent and 12.9 per cent respectively compared to the positive growth of 20.9 per cent (capacitor) and 44.6 per cent (cable) in Q1 FY12. The rotating machines industry has witnessed a negative growth of 2.6 per cent in Q1 FY13 against the growth of 9.6 per cent for corresponding quarter of last year.”“The transformers, rotating machines and capacitor industries has been decelerating every sequential quarter and has seen a negative growth in Q1 FY13, implying distinct slowdown in industrial capex activities and slowdown in off-take by users due to credit squeeze, high interest costs, etc.”, the report said. “The growth in switchgear industry has been consistent, registering an increase by 2.4 per cent compared to 2.5 per cent in corresponding quarter of last year.”Ramesh Chandak, President, IEEMA said “Ironically in Q1 of FY13,there was over-achievement of the country’s power generation and transmission &sub-stations capacity addition targets. So, under ideal conditions, domestic manufacturers of power equipment should have correspondingly gained business, but reality is otherwise. In recent years, a surge in imports of cheap and inferior quality electrical equipment from abroad is significantly impacting the Indian electrical equipment industry with under-utilisation of recently enhanced capacities across several products. The commercial viability of the industry is getting dented and can have severe long term consequences, leading to a situation of unnecessary dependence on imports at the cost of domestic manufacturing.’’“The domestic electrical equipment industry, because of its heterogeneous character and despite its critical role in the economy, has not received focused attention of the policy makers.In the telecom sector, the government has initiated a move to make it mandatory for all telecom companies to procure at least 30 per cent of all electronic equipment domestically on security grounds. The power sector is of at least as much strategic importance as the telecom sector, if not more. Disproportionate reliance on imported power equipment, with uncertain quality and lifecycle, and with no domestic manufacturing facility to provide immediate spares, replacements, etc. especially for heavy equipment, is fraught with long term risks”, he observes.The double whammy is that while the Indian electrical equipment industry has recorded a negative growth, imports have increased by 100 per cent for insulators, motors and generators. According to IEEMA, Indian electrical equipment manufacturers are facing a tough competition in the domestic market from foreign suppliers. Absence of a level playing field for the domestic industry to compete with imported electrical equipment, especially from China, is a clear and present threat. While, Indian imports of electrical equipment have grown in the past five years at a CAGR of 28.28 per cent, China’s share in Indian imports of electrical equipment has dramatically increased in the last few years and now it stands at around 44 per cent  of the total from around 15 per cent in 2005-06. Imports from China have grown at a CAGR of 59 per cent in the last five years.