Electrical Monitor
 

Opportunities and challenges in the switchgear industry

Amitabha SarkarFriday, April 27, 2012, 17:13 Hrs  [IST]

Amitabha SarkarThe Indian electrical equipment industry, comprising of multinationals, large, medium & small players, is robust and capable of producing, supplying and exporting a varied range of electrical equipment including switchgear and control gear items needed for expanding industrial and power sector in India. This industry sector in fact manufactures the entire voltage range from 240V to 800kV. Besides, 1,200kV equipment is also under development. The technology level is contemporary.

The present size of the switchgear market (not including RMU, GIS & domestic switches which amounts to about Rs.3,000 crore) is estimated at about Rs.9,000 crore and the industry grew by 21 per cent in volume terms in FY11. Overall exports decreased by 15 per cent, whereas imports increased mainly for MV/HV switchgear by more than 50 per cent. Weightage of switchgear industry based on IEEMA electrical industry Index is 15.2 per cent. The population of IEEMA members from switchgear industry is around 140.

CHALLENGES & OPPORTUNITIES
Currently, the MV & HV segments are suffering from overcapacity due to lack of orders. Inadequate demand could be attributed to insufficient planning by the users and delay in finalizing tenders resulting in bunching of orders which also creates supply-delivery problems. Also L1 (Lowest Quoted Price) procurement system in utilities, which entails procuring products at lowest price, creates a hurdle for bringing in good quality material into the system. Further, the insistence by utilities on repeated type testing of products, despite there being no change in design, poses additional delays and adds to unnecessary cost. This is further impacted by inadequate type-testing laboratories.

The switchgear and control gear sector has slid into red with -1 per cent growth during the first three quarters of FY12. Except for MCBs, ELCBs and ACBs all other products showed a negative growth ranging from 3 per cent to 10 per cent.

On quarter-on-quarter basis the industry declined sharply to -6.6 per cent in Q3FY12 from a constant growth of 2.5 per cent registered in both Q1 and Q2FY12. MV switchgears have reported a decline of more than 10 per cent whereas HV and EHV switchgear continue to be in demand.

Imports of high voltage switchgear products also saw a jump of more than 50 per cent in value terms.

MARKET OPPORTUNITY FOR LV/MV SWITCHGEAR
Utilities Segment: HV and EHV demand mainly comes from the utilities. The Government is focusing on increasing the penetration of power supply in villages and schemes like APDRP and RGGVY are providing an excellent opportunity for the LV and MV switchgear market with about 10 per cent villages yet to be electrified.

Industrial Segment: India's industrial sector accounts for about 30 to 35 per cent of GDP, with most of the industrial divisions reporting growth in output in the fiscal. Investment in new infrastructural setup is set to increase the market for intelligent switchgears, RMUs, MCCBs, ACBs and C&Rs. Another indicator of sustainable growth is the increasing gross assets of organisations

Commercial and Infrastructure: Infrastructure sector is one of the most important thrust sectors in the Eleventh Five Year Plan of the GoI with an estimated investment of $475 billion over five years which has actually slipped; the demand figures were based on an average growth of 7.6 percent of GDP consequently, benefit for the RMUs, ISGs ACBs and MCCBs market for switching, control and general protection applications did not materialise fully.

Residential Segment: In the residential construction sector which has actually slipped, the demand for MCBs, ELCBs and MCCBs has clocked a growth about 12 per cent. However the revised NEC (National Electrical Code) has created some optimism for the segment.

Power Plant Modernization and Refurbishment: As in other parts of the world, numerous power plants in India are nearing the end of their service plan, thus requiring overhauling and modernization. This includes replacement of existing transformers, which are on average over 30 years old and the replacement of LV, MV and HV switchgear. Power plant modernization and refurbishment is expected to additionally support growth of the switchgear market.

Alternative Energy Sources: The Electricity Act 2003 also stipulates buying about 6 per cent of the total supply power from renewable sources on a mandatory basis, the concerned CERCs fix applicable tariffs. The India Government continues to financially incentivize investment in renewable energy sources such as wind, solarthermal and hydroelectric power.

The renewable energy market has grown from about 2,400 mw to 18,655 mw and this growth is likely to sustain at current/higher levels for the next 4-5 years. The MCCB and MCB markets are expected to benefit considerably from alternative energy expansion.

NEW INDUSTRY TRENDS
The switchgear industry continues to innovate and upgrade its products to meet the evolving/future needs of its customers. In recent years, the following products/trends have been noticed.

LOW VOLTAGE
Increased acceptance of electronic releases in circuit breakers;Embedded Intelligence and communication enabled; Improved materials for cost saving, environmental reasons and ROHS; Movement from motor starters to submersible pump controllers; Soft Starters; Increased use of modular device in building electricals;Vacuum contactors for higher ratings; More use of magnetic actuators; Field for Life-Maintenance free (IEC- M2 duty -10000 Operations);Shift from Electromagnetic to Numerical relays; Shift from Electrical sensors- CT/PT to electronic sensors; Ring Main Units; Intelligent switchgear;VCBs with higher ratings.

HV- EHV
Compact GIS; Compact AIS; Compact switchgear; Controlled switching; Solid State switchgear; Intelligent switchgear; VCBs with higher ratings (50kA-4000A); 800-1200KV circuit breakers under development; Substitute for SF6 gas; Harmonisation of protocol IEC : 61850; Package substation; Polymer of HV equipment;Smart Grid.

WEAKNESSES
The switchgear industry is largely dependent on the financially weak electricity boards for its sales. Moreover, the L1 procurement system in utilities, which means procuring products at lowest prices, creates a hurdle for bringing good quality material in the system. Some other weaknesses in the industry are:
  • L1 procurement system in utilities i.e procuring products at lowest price creates a hurdle for bringing good quality material in the system.
  • Uncertainty and slow pace of reforms and policy paralysis
  • Increasing Competition from unorganized sector and low cost and bad quality imports
  • Macroeconomic challenges which constrain public & private funding
  • Low investments in R&D & innovation
  • Integration/Assimilation of new technologies into development of new products in the sector needs improvement
THREATS
Major threats facing the switchgear industry can be summarized as follows:
  • Underutilization of installed capacity
  • Lack of HV switchgear testing capacity in the country
  • Increasing competition from unorganized sector in low end/low tech items/imports in LV segment and project imports.
  • One sided contracts by the user industries/price variation contracts not accepted by many users
  • Improper procurement planning/ bunching of orders
  • Entry of unproven contractors/ subcontractors with minimal technical knowledge.
  • Lack of standard specification and design parameters clubbed with increasing trend of customization is adversely impacting the delivery schedule as well as taking away benefits of economies of scale.
  • The new clause of consequential damages which in short means an organisation supplying equipment is not only responsible for the supply but also for the damages arising out of the equipment.
OPPORTUNITIES
The biggest opportunity for the switchgear industry comes from the upcoming power generation capacity. Power generation capacity is expected to be augmented by around 1,50,000 mw under the XI and XII Five Year Plan periods. More than 60,000 mw is currently under construction.

Centrally-sponsored nationwide schemes like R-APDRP (Restructured Accelerated Power Development & Reforms Programme) and RGGVY (Rajiv Gandhi Grameen Vidyutikaran Yojana) are providing an excellent opportunity for the LV and MV under the "Electricity for All" initiative.

Expansion of key industry sector (cement steel petrochemicals, telecom & others) and expansion of other infrastructure segments like telecom, railways, airports, ports, roads, hospitals, are also key opportunities for the switchgear industry.

Other opportunity areas could include replacement & retrofitting programmes, and 800 HVDC, 1,200kV AC transmission line development.

Moreover, after publishing of the revised NEC by BIS, the nation-wide awareness program to promote revised NEC 2011 should enhance the use of safety and protection devices like MCB, RCB etc.

(The author is Chairman, Switchgear & Controlgear Division, IEEMA)

 
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