The Hindu Business Line : Reforms to narrow demand-supply gap

THE power sector, a crucial component of the country's infrastructure sector and a key element in enabling the Indian economic growth story unfold, is going through a crucial process of churning.

Having inherited a little over 1,300 MW at the time of independence in 1947, the country today has an installed generating capacity of over 1,15,000 MW.

However, an ever-increasing electricity demand profile, fuelled by the post-liberalisation boom in the economy, has led to a widening gap between the supply and demand.

Added to this is the predicament of technical and commercial losses that threatens to push the sector over the brink.

The situation has necessitated the augmentation of both the power generation capacity and a beefing up of the transmission infrastructure to carry the increased load across the country, while simultaneously making efforts to plug the losses at the distribution level.

On the policy front, the Government put in place a broad stroke legislative framework in the Electricity Act in 2003, which sets out the broad direction for the power sector in the years to come. To tide over the demand-supply gap, the Centre is implementing a `power-for-all' plan, under which 1,00,000 MW of new installed generating capacity is to be added by the year 2012, along with the sprucing up of the transmission network to ferry power across the country.

Also, in order to plug the leak at the distribution level, the Centre has kicked off the Accelerated Power Development and Reforms Programme (APDRP) aimed at revamping the losses at the distribution level and financial restructuring of select circles in various States. All of this action in the power sector offers a huge opportunity for the electrical and industrial electronics industry.

Opportunities aplenty: The electronics and power solutions industry is among the fastest growing sectors in the country, with scope for considerable amount of value addition and employment generation. At present, according to industry figures, the electronics production in the country is estimated at around Rs 50,000 crore.

The country's electrical and industrial electronics industry is closely linked to the success of the ongoing power reforms and capacity building programme. The electronics and electrical equipment sector will stand to gain from the heightened demand for power transmission towers, lines and other such equipment as private players increase their generation capacities in the `open access' regime.

The move by the Government to approve an expenditure of nearly Rs 40,000 crore to be spent over the next five years under the APDRP, which focuses on the upgradation of sub-transmission and distribution through 100 per cent metering, reducing aggregate technical and commercial losses of State electricity boards (SEBs), energy audits and power factor correction measures, is definitely a shot in the arm for the sector.

Besides the opportunities at home, there is also ample scope for India to emerge as a manufacturing hub in the power ancillary sector, with electronic manufacturing services or contract manufacturing emerging as the biggest area of potential. In the global market, performance of the Indian product is acknowledged as extremely cost-effective and technically on a par with the leading international companies. Driven by strong R&D initiatives, the country is advantageously placed to capture the opportunities abroad as well.

Market momentum: The retail electrical industry can broadly be divided into two sub segments, namely the power equipment segment and the household electrical power solutions segment. The household sector, which comprises domestic products such as gensets, lighting equipment and meters, is expected to see a surge in demand for newer and better products as the economy continues growing and the purchasing power of consumers moves northwards. In pure volume terms too, the domestic market is set to grow in size.

The power distribution equipment segment includes products such as switchgears, cables and wires, energy meters. The growth of this segment is primarily tied up to the growth of the power sector as a whole.

The momentum has now started picking up, aided by power sector reforms such as APDRP and the Electricity Act-related unshackling of the sector, the overall industrial recovery and increasing opportunities for exports augur better prospects for the sector as we go forward. Other segments that are expected to benefit from the Government's programme include the transformer and the switchgear segments.

There is a strong base of about 150-odd transformer manufacturers in the country. India is also exporting transformers to over 50 countries covering the US, Europe, South Africa, Cyprus, Syria, Iraq and other West Asian and Far East countries.

The country also has the technology and capacity to manufacture a wide range of power transformers, distribution transformers and other types of special transformers for welding, traction, furnace, etc.

Today, about 95 per cent of the transformers installed in the Indian power network have been made in the country. Besides transformers, switchgear and control gears, which are used at every switching point of any power system, are also seeing increased demand. The APDRP has benefited medium as well as high-voltage switchgear industry.

Energy conservation: In today's scenario, with the total cost of energy being one of the prime causes of concern for SEBs, industries, corporate houses and commercial buildings, the Centre has kicked off efforts in the direction of energy conservation. This move also provides huge opportunities for the electronics and power solutions sector to improve the efficiency of the present set of products in the market and develop energy-saving devices.

Key challenges: One of the main challenges before the power solutions and electrical equipment industry is to ensure satisfactory performance of products in varying environments — a pre-requisite for entering and strengthening the sector's position in the international market. This is important in the context of domestic sales as well since the improvement in production levels of electrical equipment and power solutions even in the domestic market can be attributed to robust export performance, in addition to strengthening demand in the local market.

The problem of having a variety of specifications has made it difficult for Indian manufacturers to offer standardised products, more so since test facilities to prove compliance with the specifications are not available. The Government needs to step in to ensure standardised specifications for the power solutions sector.