Transformers play a very critical role in efficient transmission & distribution of electricity. An efficient transformer ensures that electricity generated at the power plant reaches the end-consumption point with lowest technical losses. The Indian transformer industry is now at the threshold of an exciting future, thanks to the huge investment outlays planned in the power T&D sector. At the same time, the industry is plagued with serious concerns that have proved beyond resolution for years on end. This special story attempts to give an overview of the transformer industry, mainly focusing on power and distribution transformers. It also provides an insight into the main challenges antagonizing the industry, apart from discussing the industry's recent achievements.

The Indian transformer industry is estimated to be worth Rs.14,754 crore as of FY11, according to figures released by IEEMA. After two years of significant growth, the transformer industry grew by a feeble 1.2 per cent in FY12. In the first quarter of FY13, the transformer industry-mainly comprising power and distribution transformers-declined by 7.6 per cent. This fall was in line with the overall electrical equipment industry that shrunk-for the first time in ten years-by over 2 per cent. In value terms, the transformer industry accounts for nearly a fourth of the total electrical equipment space.

A. OVERALL STRUCTURE
With a large body of distribution transformer manufacturers in the unorganized sector, it is difficult to estimate the total transformer production in India. However, reliable estimates suggest that production in FY12 was 2.3 lakh MVA, with power transformers accounting for nearly 80 per cent. The average annual production in the XI Plan period has risen to 1.7 lakh MVA from 0.83 lakh MVA in the X Plan and 0.47 lakh MVA in the IX Plan period. The total manufacturing capacity of the Indian power transformer industry is around 2.5 lakh MVA.

Transformer capacity is measured in terms of MVA (mega volt amperes) and its rating is denoted in kV (kilo volts). In the Indian context, a distribution transformer is in the range 1.1kV to 11kV whereas anything higher than 11kV is referred to as a power transformer. Currently, the highest rating transformers are of 765kV using AC. There are also cases of 800kV HVDC transformers used in the Indian grid. India has embarked on a pilot project to transmit electricity at 1,200kV AC. Several Indian companies have supplied 1,200kV transformers for this project. (See section UHVAC Transmission).

Power utilities account for 70 per cent of the total transformers consumed followed by power-centric industrial consumers like steel, cement, fertilizers, etc that take up 20 per cent. An estimated 10 per cent of Indian transformers are exported.

B. DEMAND SUPPLY
The demand for transformers is directly linked to installation of new power generation capacity. There is also a constant demand arising from replacement of transformers that have outlived their useful life, which is estimated at around 25-30 years.

In the ongoing XII Plan period (FY13 to FY17), India is expected to add 88,425 mw of new power generation capacity that would be substantially higher than the 54,962 mw added in the XI Plan period. As a thumb rule, every megawatt of new power generation capacity needs 7 MVA of transformation capacity. However, with India now moving to higher kV levels of power transmission, experts estimate that the amount of transformation capacity needed is around 10 MVA per mw. Given this, the XII Plan period would require 8,84,250 MVA of transformation capacity that translates to an average of 1,76,850 MVA per year. This apart, India would need to replace ageing transformers set up during the early part of the 1980s. This would result in an additional demand of 25,000 MVA per year. Hence the total market for transformers in the XII Plan period is expected to be 2,01,850 MVA per year.

While this demand could be met from the existing transformer manufacturing capacity available, it is likely that power transformer manufacturers could undertake some capacity expansion or at least aim at producing transformers in the higher kV class. It must also be mentioned that around 10 per cent of India's transformer production is exported. Further, international players have also started supplying transformers to India. This could mean more competition for Indian players in the domestic market, especially in the power transformer segment.

Central transmission utility Power Grid Corporation of India is estimated to undertake capital expenditure of Rs.1 trillion in the XII Plan period. This would be 82 per cent higher than the Rs.55,300 crore invested in the XI Plan. It is estimated that 15 per cent of investment in a typical power transmission project is spent on transformers. Hence the demand for transformers from PGCIL alone is expected to be Rs.15,000 crore during the XII Plan period. An industry player said that PGCIL is likely to place orders for at least 350 transformers of 765kV class over the next 2-3 years.

The utility would largely be procuring power transformers to support its National Grid project that envisages synchronous transmission of power between the country's five regional exchanges-east, west, north, north-east and south. Currently, all the grids except the southern grid are interconnected. Connectivity of the southern grid is expected in the first quarter of 2014. As of March 31, 2012, the total capacity of the National Grid stood at 28,000 mw, with total addition in the XI Plan period amounting to 13,900 mw.

C. ENTRY OF MULTINATIONALS
The Indian transformer industry has succeeded in attracting some international names. China appears to be showing great interest in supplying to the Indian market. In the power equipment (BTG) market, China's involvement was only through imports and it found a big market from private power producers. China did not show interest in setting up a manufacturing base in India and this resulted in domestic manufacturers protesting against the import duty advantage that China enjoyed over India. It may be mentioned that this has now been resolved and a much needed level-playing field has been created between Indian and Chinese suppliers as far as power equipment is concerned.

In the case of transformers, China appears to have put into practice all the experience it learnt from the BTG episode. China is now showing more inclination to adhere to Indian ideologies and is showing keenness in having a local presence in India.

Two big names in the Chinese transformer industry- TBEA and Baoding Tianwei Baobian (known as TWBB)-are on their way to set up their manufacturing base in India. Incidentally, both of them have homed down their site selection to Gujarat. TBEA has formed a 100 per cent subsidiary TBEA India Pvt Ltd and is investing Rs.2,500 crore to set up a greenfield facility for power transformers at Karjan near Vadodara.

TWBB has selected Gujarat-based Atlanta Electricals Pvt Ltd to form a 51:49 JV called BTW Atlanta Transformers India Pvt Ltd. The manufacturing plant, also near Vadodara, is likely to go into production in May next year. Power transformers in the range from 220kV to 765kV will roll out from the plant with the possibility of making 1,200kV transformers in future.

Power Grid Corporation of India has already begun sourcing transformers (including shunt reactors) from Chinese companies. According to reliable information, in the first five months (April to August) of FY13, TBEA Shenyang Transformer Group Co. Ltd supplied 765kV reactors and shunt reactors worth Rs.170 crore to PGCIL.

India has also seen non-Chinese companies collaborating with local transformer manufacturers. Transformers & Rectifiers (India) Ltd, amongst India's biggest transformer manufacturers, has entered into a technical collaboration with ZTR, a leading transformer manufacturer based in the Czech Republic. The collaboration would essentially be used to enable T&R to produce 765kV transformers. In late 2011, the company won a major order to supply 33 transformers in the 765kV class to Power Grid Corporation of India.

In 2010, Raychem RPG Ltd, part of the RP Goenka Group, signed a technology transformer agreement with Hexaformer AB of Sweden, which permits Raychem RPG to design, manufacture and sell in India, the entire range of distribution transformers up to 2.5 MVA, using the patented Hexaformer technology. In addition, Raychem RPG also signed another agreement, wherein the Indian company would be the manufacturing hub for Hexaformer for the same range of transformers to be sold by them in the European markets.

In a case of foreign equity, US-based Hammond Power Solutions Inc picked up 70 per cent stake in Andhra Pradeshbased Pan Electro-Technic Enterprises Pvt Ltd, popularly known as PETE Transformers. PETE is now a subsidiary of HPS.

D. UHVAC TRANSMISSION
The Indian transformer industry is responding well to futuristic needs. At least four domestic transformer makers have already supplied equipment to Power Grid Corporation of India's pilot project of testing power transmission at the 1,200kV AC level. When deployed, it would be the highest voltage of AC power transmission anywhere in the world. Currently, according to reliable information, China has succeeded in commercial AC power transmission at 1,100kV.

During FY12, PGCIL test-charged one 1,200kV single-circuit line of 1 km along with one 1,200kV transformer and other equipment. The project is shaping up at Bina in Madhya Pradesh. Companies that have already supplied 1,200kV power transformers to PGCIL include Crompton Greaves, Bharat Heavy Electricals Ltd, Areva T&D India (now part of Alstom Grid) and Vijai Electricals Ltd. Apart from these, Transformers & Rectifiers (India) Ltd is also ready with its 1,200kV UHVAC transformer that is likely to be shipped to the transmission utility in the near future.

Crompton Greaves in December 2010 dispatched a 1,200kV capacitive voltage transformer (CVT) for the Bina test station. CG has promised to deliver some more equipment including a 333MVA power transformer of 1,200kV rating and a 1,200kV surge arrestor for the same project.

In July 2011, 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. At around the same time, Hyderabad-based Vijai Electricals Ltd handed over a 1,200kV 333MVA single-phase transformer to PGCIL for the Bina test station. The transformer was built by Vijai Electricals using in-house technology at its Rudraram works in Hyderabad, Andhra Pradesh.

Alstom T&D India (formerly Areva T&D) shipped a 1,200kV capacitive voltage transformer (CVT) from its Hosur plant in Tamil Nadu to PGCIL, in October 2011. Apart from the CVT, Areva T&D India will support the project with disconnectors and digital current transformers.

E. CHALLENGES & WAY FORWARD
Despite the encouraging prospects, there are several concerns plaguing the transformer industry. The major ones are nonavailability of prime grade CRGO and the high failure rate of distribution transformers.

Last year, the steel ministry mandated that only BIS-certified electrical steel (which includes CRGO) could be used in India. The deadline for enforcing this guideline has been extended several times and it currently stands at March 31, 2013. Meanwhile, several global CRGO steel manufacturers are in the process of getting their products BIS-certified with a view to becoming eligible suppliers. With respect to CRGO the certification would be IS3024 and for CRNO, it would be IS648. It is also learnt that Central Power Research Institute is in the final stages of developing testing facilities for CRGO as per IS3024.

So far, licence has been granted to four international mills for CRGO under IS3024. These are JEF (Japan), two mills of Nippon Steel also of Japan, and ThyssenKrupp Electrical Steel India. It is also learnt that six mills are in the process of getting certification. These are Arcelor-Mittal (Czechoslovakia), Thyssen (Germany and France), Posco (Korea) and AK Steel (two mills based in USA). It is reliably learnt that there are not more than ten producers of CRGO worldwide and the technology is closely guarded.

India's current consumption of CRGO is estimated at 2.5 lakh tonnes per year, out of which only 32 per cent in of prime grade. The rest is secondary (used) material that includes inferior or scrap CRGO. It is estimated that CRGO could account for between 50 and 70 per cent of the total cost of a transformer.

The traditional use of inferior CRGO has resulted in deterioration in the quality of distribution transformers. The failure rate of Indian distribution transformers is around 25 per cent, as against the global metric of 5 per cent. With effect from January 2010, it has been made mandatory for distribution transformers to be certified for energy efficiency. This is being done by the star-labeling programme of Bureau of Energy Efficiency. Distribution transformers now need to carry at least "star", out of a maximum of five. Experts believe that this BEE directive has made demonstrable positive difference to the overall quality of distribution transformers.

The procurement policies of power utilities remain a matter of grave concern. Currently, most utilities base their purchases on the "L1" criterion resulting in the supplier quoting the lowest in terms of price, getting the purchase order. Industry players believe that this archaic procurement philosophy has inadvertently resulted in use of scrap CRGO and the proliferation of a big class of unscrupulous manufacturers.

Through the mandatory BEE rating and also the compulsory use of BIS-certified steel, the government is seen making a sincere attempt to rein in the long standing anarchy in the distribution transformer industry. This sincerity needs to be matched by sustainable enforcement.

Performance of Transformers: 2008-09 to 2011-12
	Weight	Market*	y-o-y % change
	(%)	(Rs.cr)	2008-09	2009-10	2010-11	2011-12
Transformers	24.9	14,754	-1.2	9.1	13.5	1.2
Power Transformers	10.7	6,181	25.8	17.2	13.2	7.4
Distribution Transformers	14.2	8,572	-16.9	3.0	13.8	-3.3
Total**	100.0	58,315	2.7	11.3	13.7	6.6
Source: IEEMA; *Estimated industry size in 2010-11;**For entire electricals industry

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