Transformers form critical components of a power grid, and hence, India's cherished power sector ambitions depend squarely on the capability of the transformer industry to deliver. Be it transmitting power at ultra-high levels of 1,200kV or reaching power to the remotest of villages, a transformer is an indispensable and all-important link in the power chain. The Indian transformer industry has for long been traditional but is now seen maturing rapidly. However, there are several challenges on the road ahead that need to be tackled deftly. Only this will ensure that the transformer industry efficiently takes up the big "load" of responsibility lying in store, notes Venugopal Pillai.

The Indian transformer industry—including ony power and distribution transformers—is estimated to have grown by 14 per cent in FY11, according to statistics released by IEEMA. The industry size is an estimated 14,754 crore. However, this could be an underestimate as it is based only on information compiled from IEEMA members. India has a big class of small-scale distribution transformers of whom physical and financial data is difficult to obtain.

According to forecasts made by Electrical Monitor, domestic production of transformers is likely to reach 2.3 lakh MVA in FY12, up from an estimated 1.91 lakh MVA in FY11 and 1.53 lakh MVA in FY10. Capacity utilization of the Indian transformer industry, as reliable statistics suggest, is between 65 and 75 per cent. The average annual production of transformers has been rising steadily from 47,000 MVA in the IX Plan (1997-02) to 83,000 MVA in the X Plan (2002-07). The ongoing XI Plan has seen the highest ever average annual production of around 1.7 lakh MVA.

Performance of Transformers: 2008-09 to 2010-11
	Weight	Market*	y-o-y % change
	(%)	( crore)	2008-09	2009-10	2010-11
Transformers	24.9	14,754	-1.2	9.1	15.0
Power Transformers	10.7	6,181	25.8	17.2	13.0
Distribution Transformers	14.2	8,572	-16.9	3.0	16.0
Total**	100.0	58,315	2.7	11.3	14.0
Source: IEEMA; *Estimated industry size in 2010-11;**For entire electricals industry

In terms of MVA (MegaVolt Ampere-the unit for measuring a transformer's capacity) power transformers account for 65 per cent while distribution transformers have a 35 per cent share. (See Box: Power and distribution transformers). In the current Indian context, a power transformer has a rating from 11kV to 765kV, whereas a transformer with rating from 1.1kV to 11kV is termed as a distribution transformer.

Power and distribution transformers

Transformers are essentially devices that are used to change voltage in the power transmission and distribution process, with minimum loss of energy. A power transformer is installed at all points starting from the source (power generation plant) up to the last substation, just before distribution of power starts. Depending on whether the transformer causes an upward or downward change in voltage, these are called "step-up" or "step-down" transformers. Power transformers are usually oil-filled and are above the 33kV range and above 10 MVA capacity. In India, power transformers up to 765kV are currently under commercial use. A distribution transformer is a step-down transformer that is used to convert highvoltage power supply into low-voltage supply for the end user. This stepping down is usually done from the 33kV level to the 1.1kV level. Distribution transformers could be oil-filled or of the dry type. As distribution transformers are physically closer to the end-users, safety is an important consideration. Given that dry transformers are less likely to explode than the oil-filled variant, they are given increasing preference despite the higher capital costs. Dry-type transformers, apart from offering higher safety, also take up less space. Due to this, such transformers are increasingly being used in commercial applications like metro stations, malls, cinema halls, hospitals, high-rise buildings, etc. Currently, dry-type distribution transformers account for only 10-12 per cent of the total production of distribution transformers.

Power utilities account for 70 per cent of the total transformers consumed, followed by power-centric industrial consumers (steel, cement, fertilizers, etc) that take up 20 per cent. An estimated 10 per cent of Indian transformers are exported. While principal export destinations have been developing economies like Central Asia and Africa, Indian transformers are also finding their way to developed countries like USA, UK, Canada, etc.

GROWTH DRIVERS
Principal growth drivers to the power and distribution transformers are discussed below.

XII Plan period: Growth of the transformer industry would be linked squarely to the quantum of investment that India commits to the power T&D sector. Traditionally, power T&D has been a grossly neglected area. In an ideal situation, every rupee spent in creating power generation facilities has to be matched by an equal amount in setting up power T&D infrastructure. This ratio of 1:1 has never been honoured in India. Experts feel that at best investment in T&D has been 50 per cent of that in power generation, as against the desirable 100 per cent. The ensuing XII Plan period (April 2012 to March 2017) is expected to be radically different from its predecessors. According to government estimates, India is expected to see an investment of 13 trillion in the XII Plan. This will be equally distributed—for the first time ever—between generation and T&D. This by itself is the biggest growth driver for the transformer industry.

The transmission sector is likely to see investment of 2.5 trillion in the XII Plan period with 4 trillion going towards power distribution projects. The demand for transformers can be gauged from the fact that 15 per cent of the total cost of a typical transmission projects goes towards transformers. Hence, the business opportunity size for transformers coming purely from transmission projects is 37,500 crore in the XII Plan period. This translates into an addressable market of 7,500 crore per year.

The demand for transformers can also be viewed from another angle. The traditional thumb rule has been that every mw of new power generation capacity needs 7 MVA of transformation capacity. In the XII Plan period, India is expected to witness aggregate new power generation capacity of 75,000 mw. This would need transformation capacity of 525,000 MVA during the entire Plan period, or 105,000 MVA per year. Independently, the power ministry has estimated that in the entire XII Plan period, around 150,000 MVA of new transformation capacity would be installed at the 220kV level alone. The rule of 7 MVA per mw was true at a time when India's transmission infrastructure was largely of the 220kV type with sporadic instances of 400kV lines. Now, India has progressed to even 765kV lines and therefore, as some transformer manufacturers point out, the standard transformation metric in the coming years, would be around 11 MVA per mw of new power generation capacity.

Mandatory Star Labeling

The growing tribe of distribution transformer manufacturers in the unorganized sector and the poor quality of their equipment has been a longstanding cause for concern. The number of such manufacturers is inestimable as they are never part of formal bodies like industry associations. Industry sources allege that the sheer survival of these manufacturers is due to the unfortunate collusion that has, perhaps inadvertently, developed with power utilities. As these manufacturers do not exercise quality control or use prime material, they can afford to quote prices that are impossible for any quality-conscious producer to match. As power utilities are bound by the L1 criteria, these manufacturers qualify as suppliers. This ensures their subsistence and, worse, contaminates the power T&D grid with inefficient equipment. In January 2010, the Bureau of Energy Efficiency (BEE) made it compulsory for distribution transformers to have a "star labeling". This was done with a view to ensuring energy efficiency. In the context of transformers, it means low energy loss during the process of transformation. The industry has welcomed this move and it is expected that the overall quality of distribution transformers would improve significantly. Marginal players would now be forced to improve their product quality or exit the business. Either way, it is in universal interest. While welcoming the move, transformer manufacturers also feel that the process of BEE certification should be standardized and type-testing should be obviated to the extent possible. There are cases when a transformer supplier has BEE-certified equipment but a slight variation in specification (sought by power utilities) causes the supplier to undergo the type-testing and BEEcertification process all over again.

Role of PGCIL: When it comes to very large power transformers, Central transmission utility Power Grid Corporation of India Ltd (PGCIL) is a big consumer. The National Grid project that aims to facilitate seamless power exchange between the five regional grids is PGCIL's flagship project. As of September 2011, this interregional transfer capacity (IRTC) stood at 23,800 mw. The original target was to attain IRTC of 37,150 mw by March 2012, the end of the XI Plan period. However, this target has now been scaled down to 32,650 mw. Considering that 8,850 mw of capacity is to be set up within 18 months (September 2011 to March 2012) if the target were to be honoured, PGCIL is expected to expedite the project resulting in a surge in demand for high-rating power transformers.

PGCIL is likely to incur capital expenditure of 1 lakh crore in the XII Plan period (2012-17), significantly higher than an estimated 55,000 crore in the ongoing XI Plan. Going by the norm that 15 per cent cost of a transmission project is towards transformers, PGCIL is likely to spend 15,000 crore to this effect during the entire XII Plan period.

R-APDRP: The Central government's Restructured Accelerated Power Development & Reforms Programme (R-APDRP) that aims to bring down ATC losses is construed as a big demand driver for both power and distribution transformers. R-APDRP aims to bring down aggregate technical & commercial (ATC) losses in project areas to 15 per cent. This nationwide programme is urban-centric, touching cities and towns with a population of 30,000 or more. Apart from transformers, R-APDRP calls for a large number of products and services including sophisticated IT and telecomrelated ones.

As R-APDRP aims at bring about efficiency in the power transmission and distribution chain, the programme would involve replacement of old transformers with more efficient ones. R-APDRP has also resulted in a spurt in demand for pole-mounted distribution transformers, industry sources point out. Besides, in some urban areas, higher-rating power transformers are also being installed close to distribution areas, with a view to reducing "step-down" losses.

India sets 1,200kV world record

A big endorsement to India's indigenous manufacturing capabilities has come in the form of the 1,200kV transformer range. These ultra-high voltage transformers will form an integral part of India's ambitions of transmitting power at 1,200kV levels - the highest in the world so far. Power Grid Corporation of India, in association with domestic manufacturers, is in the midst of a pilot project at Bina in Madhya Pradesh to test equipment and monitor live conditions, preparing the ground for commercial use of 1,200kV power transmission. According to the best of Electrical Monitor's knowledge, four domestic manufacturers have so far built 1,200kV transformers that are being deployed at the Bina test station. The four companies include public sector unit Bharat Heavy Electricals Ltd and three in the private sector - Crompton Greaves, Areva T&D India (now part of Alstom Grid) and Vijai Electricals. Here is a brief summary. Areva T&D (India) Ltd: The power transmission business of Areva T&D India, now part of Alstom Grid, flagged of India's first 1,200kV capacitive voltage transformer (CVT) from its Hosur plant in Tamil Nadu. The CVT, shipped in October this year, will be deployed at Power Grid Corporation of India's 1,200kV Bina test station in Madhya Pradesh. Apart from the CVT, Areva T&D India will support the project with disconnectors and digital current transformers. All these equipments will be produced at the Hosur and Chennai factories in Tamil Nadu. Bharat Heavy Electricals Ltd: In July this year, BHEL announced that it had developed the country's first indigenous 1,200kV ultra high voltage alternating current (UHVAC) transformer of 333 MVA rating. The transformer has developed, manufactured and successfully tested by BHEL entirely through in-house know-how. In addition, the company has manufactured and installed a 1200kV, 180 MVA transformer to be used as a testing transformer in its UHV Test Laboratory at Bhopal. BHEL is also involved in the supply of other key equipment including 1,200kV insulators for the Bina test station. Crompton & Greaves Ltd: Thapar Group company Crompton Greaves in December last year dispatched a 1,200kV capacitive voltage transformer (CVT) for the Bina test station. The product developed with indigenous technology at CG's Nashik plant in Maharashtra was tested at Central Planning & Research Institute (CPRI), Hyderabad. CG has promised to deliver some more equipment including a 333MVA power transformer of 1,200kV rating and a 1,200kV surge arrestor, for PGCIL's Bina test station. Vijai Electricals Ltd: In July 2011, Hyderabadbased Vijai Electricals Ltd handed over a 1,200kV transformer to PGCIL. The 333MVA single-phase power transformer will be used in PGCIL's 1,200kV test station in Madhya Pradesh. The mammoth transformer was built by Vijai Electricals using in-house technology at its Rudraram works in Hyderabad, Andhra Pradesh. Vijai recorded this achievement within just four years of diversifying into power transformers. (Apart from these, there are companies like Transformers & Rectifiers (India) Ltd, Siemens Ltd and ABB Ltd that are expected to supply 1,200kV transformers to PGCIL in the near future.)

Replacement Market: Apart from replacement of inefficient transformers-mainly under RAPDRP-there exists a big market for replacement of transformers that have outlived their operational life. A transformer usually lasts for 25-30 years and going by this yardstick, transformers installed in the 1980s will now be due for gradual replacement. It is estimated that India would need to replace between 18,000 MVA and 20,000 MVA of transformers every year in the medium term. Given that the new transformers would be far more efficient that their predecessors, the gradual replacement will also contribute to efficiency in the power T&D chain.

Exports: India has always been an exporter of transformers and this avenue is set to becoming even more lucrative in the coming years. Exports from India are diverse including power transformers, distribution transformers and even specialpurpose transformers. It is estimated that around 15 per cent of India's production of power transformers is destined for international markets. With India proving its technological edge by producing even 1,200kV transformers, surpassing global standards, the country has a very bright future, experts feel. It is not only developing African and Central Asian economies that are importing from India, India-made transformers are even finding their way in developed markets like USA, UK, Canada, etc.

Taking into account all types of transformers, exports from India are estimated to have grown from 21,000 MVA in 2006- 07 to 30,000 MVA in 2008-09. The performance in recent years is not known. In physical terms, exports today account for less than 10 per cent of the total domestic transformer production. By 2011-12, experts believe that exports would even grow to over 55,000 MVA.

CHALLENGES
The Indian transformer industry does face serious challenges, largely relating to lack of enabling infrastructure. Here is a summary.

The CRGO Imbroglio: The biggest concern and also the most widely discussed is inadequate supply of prime quality electrical steel. Cold rolled grain oriented (CRGO) electrical steel is a key component that can account for between 40 per cent and 75 per cent of the manufacturing cost of a transformer. As of now, there is no domestic production of CRGO and the entire requirement is met through imports. World over, there are only around eight companies making CRGO and the technology is believed to be closely guarded. Industry players explain that the concern is not with scrap or prime CRGO, it is simply that there is no way to know the true quality of the material imported.

Will China "transform" the market?

A big speculation and apprehension in the Indian transformer industry today is the plausible entry of China in the medium term. Thanks to all the demand drivers discussed in this study, it is very clear that India will face an imminent shortage of transformers. China will be more than interested in bridging this shortfall. It happened in the case of main plant power equipment where China briskly penetrated the market for boilers and turbine-generators. As India's focus shifts from power generation to power T&D, so would China's. When it comes to power transformers of the most popular type (220kV to 400kV range), there is a dearth of domestic manufacturing capacity. Or rather, the envisaged demand would be much higher than the existing domestic capacity available. The demand for power transformers, which is expected to at least double over the next 3-4 years, will also be faster than any capacity addition effected by domestic manufacturers. It is reliably learnt that the combined current order book position of Indian transformer manufacturers is around 2.5 lakh MVA. This is likely to grow exponentially resulting in a wide demand-supply gap. China is very well placed to capitalize on the situation. Thanks to its government incentives, China is able to produce quality transformers at low costs. Also the capacity available with big Chinese players is much higher than in India. It is learnt that the top three transformer manufacturers in China alone have an aggregate capacity of 3.5 lakh MVA that is many times India's total installed capacity. In a very recent development, Tebian Electric Apparatus Stock Company Ltd (TEBA), a power transformer maker of China, announced its plans to set up a large transformer manufacturing facility in Gujarat, with an investment of Rs.2,500 crore. TEBA was the first transformer maker in China to go public. Reliable information suggests that way back in 2007-08, TEBA had a manufacturing capacity of around 1 lakh MVA. For a frame of reference, BHEL, India's largest transformer maker, currently has an installed capacity of 45,000 MVA.

 In July this year, the government introduced the Steel & Steel Products (Quality Control) Second Order, 2011, which proposes that all CRGO/CRNGO steel used in India should bear the BIS (Bureau of Indian Standards) certification. This sincere attempt seeks to ensure that only prime quality CRGO is used in transformers. India needs 2.5 lakh tonnes of CRGO every year, and an appalling 70 per cent of this is scrap-grade material. While conscientious manufacturers try their best to use prime material, they end up using scrap (inferior) material inadvertently. On the other hand, there are reports of unscrupulous manufacturers intentionally using scrap CRGO, producing substandard equipment and then allegedly finding a market for these low-quality products in connivance with state power utilities. India is turning out to be a prolific market for scrap CRGO and there are even reports of importers turning into transformer manufacturers!

India being a very large and growing market for CRGO, international suppliers have agreed to have their CRGO "marked" to comply with the new regulations. Leading transformer players, in recent interactions with Electrical Monitor, have pinned their hopes on the timely implementation of the steel quality control order. This order is also seen bringing about much needed regularity in the distribution transformer industry that today has a very liberal sprinkling of unethical manufacturers.

In a related recent development, public sector entities Steel Authority of India, Bharat Heavy Electricals and Rashtriya Ispat Nigam have decided to set up a joint venture to manufacture special-grade steel including CRGO and CRNGO steel. To be set up with an investment of 3,000 crore, this is expected to be India's first unit for production of CRGO and CRNGO steel. The three companies are believed to be in talks with global suppliers of this technology. In the early 1990s, Steel Authority of India had made an abortive attempt to produce CRGO steel at its Bokaro plant in Jharkhand.

Posco of Korea that is building an integrated steel plant in India has indicated that it could also produce CRGO and CRNGO steel. It may also be mentioned that UK-based Corus Steel, which was acquired by Tata Steel in 2007, is amongst the world's select producers of CRGO steel.

Production of transformers
(MVA)
	2004-05	2005-06	2006-07	2007-08	2008-09	2010-11*
Power transformers	60,787	62,577	77,674	94,390	119,101	148,876
Distribution transformers	19,369	27,181	35,181	40,412	34,272	42,840
Total	80,156	89,758	112,855	134,802	153,373	191,716
*ERIL estimates

Testing Facilities: When it comes to testing of high-voltage equipment such as high-rating power transformers India is feeling the heat of inadequacies. The growth in testing infrastructure has not kept pace with that of production - both quantitatively and qualitatively. Testing infrastructure available at India's premier agency Central Planning & Research Institute (CPRI) is proving short of demand. Manufacturers of large power transformers at times need to send their equipment for testing in overseas facilities like KEMA, Netherlands.

Failure rate: One of the embarrassing realities of the Indian power sector is high failure rate of distribution transformers, mainly those deployed by state power utilities. Going by accepted technical standards, distribution transformers are meant to have an operational life of between 25 and 35 years. However, transformers are known to be recalled for repair in as early as three years. The failure rate of distribution transformers in India is estimated at 10-15 per cent as against 1-2 per cent, even in developing countries.

Problems faced by transformer manufacturers

The vast and diversity fraternity of domestic transformer manufacturers is represented by its apex body Indian Transformer Manufacturers' Association (ITMA). Although the association is very upbeat about prospects of the transformer industry, it has strived to draw government's attention to the genuine problems faced by its members. In an exclusive interaction with Electrical Monitor, ITMA shared some of the most pressing problems that transformer manufacturers are coping with. Much of the woes revolve around procurement policies and inconsistency in tendering procedures of government-owned power utilities-the biggest transformer purchasers. Here is a gist of the problems faced. Different power utilities stipulate different criteria of sales turnover for registration of vendors. Due to this, quality-conscious but small suppliers end up in getting disqualified. ITMA feels that CVC guidelines should be followed uniformly, and fresh entrants should be encouraged by reserving 20 per cent contract quantity in their favour. Power utilities and discoms tend to specify minor changes even if the transformer to be sourced is of BEE-star rating. This leads to unnecessary type-testing of prototypes in order to receive star-labeling. ITMA feels that utilities should uniformly follow one set of specifications certified by a competitive body like BEE, for instance. Utilities tend to place orders on L1 fully aware that the price quoted by the lowest bidder is not viable. This results in manufacturers resorting to use of inferior material and hence end up supplying substandard products. ITMA feels that utilities should devise realistic procurement policies and should not blindly select L1 bidders. ITMA also feels that utilities tend to change technical and commercial specifications even after opening of the tender. This can have a big impact on the selected bidder. ITMA suggests that alteration of terms should be avoided but if inevitable, utilities could go in for fresh short-term bids. Sometimes utilities stipulate that manufacturers would be blacklisted if the equipment fails during testing. This practice should be stopped and it could lead to closure of units and stifling of enterprise. ITMA has observed that after transformers are dispatched, the procurer (power utility) is sometimes found to carry out tests unilaterally. False results are reported to manufacturers and they are debarred for future orders. ITMA strongly protests against such unilateral testing and its adverse consequences on suppliers.

This disconcerting failure rate has two aspects - technical and commercial. The technical reasons are purely those of overloading. As power demand has outpaced transformation capacity, old distribution transformers (designed to operate at the then prevailing load conditions) tend to get overworked and fail.

It is however the commercial aspect of transformer failure that is more disturbing. State power utilities are bound by the L1 procurement practice that requires them to purchase equipment at the lowest quoted bid. Small-scale distribution transformer manufacturers, with a singular objective of winning the order, quote an incredulously low figure. The L1 guidelines are objective, leaving no room for subjective matters like quality. It is learnt that the rates quoted by manufacturers, in a desperate attempt to win the mandate, are sometimes much lower than the cost of the bare components. Qualityconscious manufacturers are known to keep away even from bidding, making room for more substandard product suppliers to enter. One reputed transformer manufacturer noted that in an attempt to comply with L1 guidelines, power utilities end up incurring much higher lifecycle costs, apart from being responsible for higher downtimes in the power grid.

All said, BEE's "star labeling" guidelines for distribution transformers, in force since January 2010, should see a gradual but significant improvement in the situation.

Power transmission project
(Cost break-up)
Component	per cent
A. Transmission Line
Towers	17.5
Conductors, insulators, etc	15.0
Construction cost	17.5
Sub-total (A)	50.0
B. Substation
Transformers	15.0
Switchgear, breakers, etc	20.0
Others	15.0
Sub-total (B)	50.0
Total (A+B)	100.0

CONCLUSION
India has a challenging road ahead with respect to the transformer industry. All the same, the country would do well if it considers this is a big opportunity to reform, grow and prosper. India has the distinction of producing the world's largest transformer-and that too through indigenous technology. On the other hand, we also have the dubious distinction of a shamefully high rate of distribution transformer failure that even lesser developed countries could scoff at. In all power sector-related ambitions, be it power for all or lower T&D losses, the role of transformers is critical. The transformer industry has been coping with challenges, many of which are the creations of a debilitating policy framework and lack of political will. India has many questions to ask itself: Despite being a leading steel producer in the world, why is that India cannot still produce electrical steel? Why do state power utilities still buy cheap and worthless distribution transformers just to adhere to archaic L1 procurement policies? Why haven't state power utilities been able to standardize technical specifications that can help manufacturers achieve better economies of scale and reduce repeated type-testing? Much can and needs to be done in the transformer industry; on it depends the quality, reach and reliability of India's future power transmission network.

Top Transformer Manufacturers
Capacity*
(MVA)
BHEL	45,000
Crompton Greaves	27,000
Emco	20,000
ABB	17,000
Siemens	15,000
Areva T&D	15,000
Bharat Bijlee	13,280
Voltamp Transformers	11,000
Indo Tech Transformers	7,450
*Indicative, as per reliable sources

Printer-Friendly Version E-mail This Article