The electrical equipment industry appears to be on the threshold of a turnaround. Though there are no figures available to substantiate the phenomenon, the sentiment is definitely turning positive.
Recently, Power Grid Corporation of India announced its annual results for FY15 that were quite encouraging. Though its financial performance is not the point of discussion here, the company extremely positive outlook for FY16 is notable. Capital expenditure of Rs.22,500 crore has been outlined, maintaining the level of FY15. Given that around 70 per cent of this outlay would constitute electrical equipment, this is a big business opportunity for equipment suppliers. In the first two months of ongoing FY16, PGCIL has already approved capital expenditure of Rs.6,766 crore. At this rate, capex approvals are expected to surpass the Rs.20,228 crore level of FY15.
In FY16, the opportunity space for power transmission sector is very large, according to estimates provided by PGCIL. Apart from its own projects, PGCIL sees opportunities in interregional and interstate power transmission projects awarded on the tariff-based competitive bidding process. The overall market for power transmission projects in FY16 has been estimated at Rs.1 lakh crore. Electrical equipment makers, contractors and consultants should construe this as a diversified business avenue.
This edition of Electrical Monitor takes a closer look at intrastate power transmission projects coming up under the PPP mode. It is not too encouraging to note that despite the passage of over seven years since the mechanism was initiated, only a handful of states have been able to develop intrastate lines using PPP modalities like joint venture, DBFOT, BOOM, etc. It is also disconcerting to observe that few large projects have not been able to generate response from private entities. These projects have relegated to the cash-contract route.
State power utilities lack both financial wherewithal as well as technical acumen to build a technically sound and robust state power grid. The involvement of the private sector is indispensable. Newer PPP modalities need to be devised that can galvanize private entrepreneurship into the power transmission space. Thanks to largely underdeveloped state grids, private players have an excellent chance to groom from contractors into developers.