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The electrical equipment industry recorded a 2.4 per cent fall in output
during the first quarter of FY13. This was the most dismal performance
over the past decade, going by IEEMA statistics. The debacle needs to
be studied carefully as it portrays a paradox of sorts.
Given that the power sector has an investment outlay of around Rs.13 trillion
in the XII Plan, there should be no reason why a key beneficiary and influential
segment like electrical equipment needs to turn out such a plebeian
performance. The investment outlay is undisputable but what is worrisome is
that the policy mechanism to transmute this outlay into active projects is
limping. Across the electrical equipment sector, manufacturers and service
providers are lamenting that "nothing is moving." There is very little being done
in terms of new policies that could spur investment, especially in the wake of
recessionary pressures being felt across the globe.
Much needs to be done on the policy front to galvanize the domestic electrical
equipment industry. Firstly, government-sponsored projects need to take off.
There is a marked slowdown in finalizing of government projects-right from
ultra mega power projects right down to village electrification. Private
participation must be brought in more actively in all segments of the power
T&D chain. While there is some private sector involvement in power
generation, the same cannot be said about power transmission & distribution.
Privatization of power distribution, for instance, has not seen much success,
much of it attributed to lack of political will.
The electrical equipment has had a long-standing grouse against the
absence of a level-playing field between Indian and foreign players. In the
main plant equipment (BTG) for power plants, China could make significant
inroads thanks to a skewed import duty structure. It is only recently that
there was a correction made in the duty structure. The problems do not end
with BTG, they span the entire gamut of the electrical equipment industry.
Take the case of insulators; the local industry is struggling to stay afloat
thanks to the onslaught of cheap imports, mainly from China. In
anticipation of a big demand, all segments of the electrical equipment
industry undertook capacity expansion. However, this capacity today
stands grossly under-utilized. Urgent steps are warranted to put the
electrical equipment back on track.
The XII Plan, with its huge investment outlay, can be a very prosperous phase
for the electrical equipment industry. It can offer an unmatched opportunity to
manufacturers and service providers to not only serve the Indian market but
also to turn globally competent. This sluggishness in capital investment is not
limited to the power sector, other quarters of infrastructure segment also find
themselves in a similar quandary.
It is time that the government wakes up to the reality and takes growth promoting
measures.
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