The transmission and distribution (T&D) equipment sector, which comprises 76 per cent of the 1,10,000 crore electrical industry has decelerated to 6.6 per cent in 2011-12, compared to 11.3 per cent and 13.7 per cent in 2009-10 and 2010-11 respectively.
However the generation equipment sector which contributes to 24 per cent of the total industry and has grown at a CAGR of 31.4 per cent in the last four years. Many analysts say the fall in growth of the sector is attributed to increase in imports.
Domestic electrical equipment manufacturing industry suffers a cost disadvantage of about 14 per cent compared to imports due to sales tax/VAT, entry tax/octroi, higher financing cost, lack of quality infrastructure, dependence on foreign sources for critical raw material and components.
Import duties on most products are quite low and are being further lowered under the various FTAs signed by India.
All this has made imported electrical equipment more attractive to the Indian market, said Ramesh Chandak, president, Indian Electrical & Electronics Manufacturers’ Association (IEEMA).
Absence of a level playing field in India for the domestic industry to compete with imported electrical equipment is a clear and present threat. During the last five years, India’s imports of electrical equipment have increased at a CAGR of 28.28 per cent and were at $11 billion in 2010-11, he said.
There is a need of a holistic view and action plan required to enable the active growth of the industry. The government needs to address in a concerted manner the challenges being faced by India’s power sector which are impacting the industry ability to meet power generation capacity addition targets, which in turn, are adversely impacting the downstream T&D sector.
The government needs to provide fuel linkages and faster regulatory clearance for timely completion of power projects; bring out a clear and conducive land acquisition policy; improve fund availability to power sector; accelerate renovation and modernization activities and accelerate deployment of rural electrification schemes, said Ramesh.
There is need to setting up a domestic manufacturing facilities for several critical inputs used in the manufacture of electrical equipment which are not readily available domestically. The country is completely depending on imports for CRGO, which is a critical raw material for large generators/transformers.
The ambitious power development projects of the government necessitate setting up of a domestic CRGO manufacturing facility, he said.
To provide a level playing field, the government should immediately impose import duty on power equipment for mega and ultra-mega power projects over 1,000 MW (move recently initiated by PMO). There should be no further reduction in the present level of import duty on T&D equipment and generation equipment for non-mega projects.
Domestic electrical equipment industry’s interests should be protected under different FTAs being signed, he added.