The Central Government is charting a plan to set up three large manufacturing zones for power equipment in different places in the country. These special manufacturing hubs will be spread over a 300-acre area at an investment of Rs 5 billion each. Incentives like land and 24x7 cheap electricity will be offered to companies who set up plants in those hubs.
Make in India is the new mantra for power equipment manufacturers. In the follow-up of the Aatmanirbhar Bharat Abhiyaan or self-reliant India programme announced by Prime Minister Narendra Modi, the government recently came up with a productivity-linked incentive scheme for 10 key sectors.
Power sector is one of them.
The Central Government is also drawing up a plan to set up three large manufacturing zones for power equipment in different places in the country. Incentives like land and 24x7 cheap electricity will be offered to companies who set up plants in those hubs.
These special manufacturing hubs will be spread over a 300-acre area at an investment of Rs 5 billion each. As per the details available in the public domain, the hubs would be located in a hill state, a landlocked state and a coastal state...
The locations will be finalised through a process of competitive bidding, where the selection of winners will be based on specifications, such as incentives for manufacturing, price of land and electricity, availability of water supply and presence of logistics for the movement of raw materials and finished products. The zones will be established by states under a special purpose vehicle (SPV) over the next three to four years.
Reducing Imports The measures were necessitated as the country currently meets a large share of its requirement of power equipment through exports, especially from China. Following the geopolitical realignments currently underway, the Government of India has been trying to reduce the import dependence over the next three years as well as make the country an export hub for such equipment. From the data on item-wise quantum of imports in the power sector shared by the Directorate General of Commercial Intelligence (DGCI), Department of Commerce, it is seen that many types of equipment like transmission line towers, conductors, industrial electronics, capacitors, transformers, cables and insulators and fittings, etc., for which domestic manufacturing capacity exists, are still being imported.
The figures speak for themselves. India imported $2.16 billion worth of solar photovoltaic (PV) cells, panels and modules for renewable energy, and Rs 710 billion worth of equipment for conventional energy. Imports from China accounted for Rs 212.35 billion.
In the past few months, the Ministry of Power and the Central Electricity Authority (CEA) have held over 20 meetings with various stakeholders from the power space. Referring to the interactions,...Anil Saboo,
President, Indian Electrical and Electronics Manufacturers' Association (IEEMA), said, 'To our collective surprise, a large number of public sector enterprises like NTPC, POWERGRID and NHPC were among their largest importers. The Ministry of Power and CEA are actively working to create hubs for the domestic production of such items that are not manufactured in the country." Shortlisted Items In consultation with industry bodies like IEEMA, the government has prepared two lists. Import of 239 items will be allowed under the first list or the mandatory list as the country presently has zero capacity to manufacture them. Their imports will be permitted till the special manufacturing hubs get operationalised. The second or embargo list contains 95 items that are being imported by the power sector despite being manufactured locally. Their import will be disallowed.Shortlisted Items Although the power sector has welcomed the move, insiders also caution that creating a robust manufacturing ecosystem will not happen without its share of challenges. One of the biggest issues in the Indian power sector is that of distribution companies having accumulated losses due to multiple reasons. Especially, an inefficient policy framework over the years has had an irreversible impact on suppliers because of prolonged non-payment of dues and delay in execution.
"Manufacturing of transmission & distribution equipment won't do as well if prospective customers are struggling to remain viable. There are other challenges in the segment such as land acquisition hurdles, clearance delays - including environmental ones - non-standardisation of design norms for power plants, shortage of domestic skilled human resources and more. Unless the core sector is itself viable, it will be difficult to attract investment," said-Latish Babu, Director, Power & Grid Segment, Schneider Electric India
Issues Raised Saboo mentioned a meeting where the industry raised their main concerns with the Ministry of Power, Ministry of Commerce & Industry and Ministry of Heavy Industry. "We apprised them of the issues with land acquisition, infrastructure, development of industrial parks, logistics, etc. We also told them that our government departments and electricity boards must adhere to the terms of the contract. We have been facing difficulties with the enforcement of contracts, be it about receiving timely payments or resolution of legal matters. These are some of the constraints that are under consideration by the government. These issues have to be resolved to improve the ease of doing business in our sector," he said.
Saboo was, however, optimistic that with enhanced synergies in place between the government departments and proactive steps being taken to improve the ease of doing business, there was likely to be an improvement. In agreement with Saboo, Schneider Electric's Babu opined, "With the Ministry of Power considering plans to support import substitution by establishing a dedicated wing dealing with areas to promote domestic manufacturing, we are hopeful. Nonetheless, if relevant measures are taken for supporting transmission & distribution equipment manufacturers, there is every reason to believe they will take up such opportunities. We also see very positive action by the government to ease the ecosystem of power distribution."
Emerging Opportunities The industry sees several opportunities emerging for manufacturers in areas of both clean energy and conventional energy. At the same time, the manufacturers will have to produce equipment that is not only cost-competitive but also meets global standards.
Hemant Goyal, Chief Financial Officer, Tata Power Delhi Distribution Ltd (TPDDL)-said, "We need to work on two fronts. Firstly, if we can increase the plant load factor (PLF) of solar panels. Presently, that is practically around 16-17 per cent. Ideally, it must be around 19-20 per cent. Secondly, if we can manufacture solar panels at rates that are competitive with China there is tremendous scope to utilise the package made available under Aatmanirbhar Bharat."
With power distribution moving from the analog to the digital, there is an increased requirement for geographical information system-supervisory control and data acquisition (GIS-SCADA) and smart metering. But one of the biggest opportunities exists in the area of network replacement by power utilities in several states that continue to manage with antiquated systems and operational protocols.
Once the utilities start modernising, a huge demand for cables, transformers and conductors will develop in the market.
"Once they get the target to minimise losses, it means they will have to manage the network from three points of view: reliability, growth and reduction in the aggregate technical & commercial (AT&C) losses.
Broadly, these three Capex will give a big boost to the Indian manufacturers in terms of transformers, cables, conductors, poles, underground wires, etc.," TPDDL's Goyal remarked.
Strategic Importance But power is also a sensitive and strategically important sector. Services like communications, manufacturing, data management and all essential services depend on the power supply and any malware may bring down the system. Owing to the growing digitalisation in the industry, the Ministry of Power has taken a serious view of the matter. It has decided to not only prepare its own designated laboratories for testing of imported power equipment but also devise references and protocols for other countries. This is essential as malware embedded in imported equipment can be activated anytime by the country where it was manufactured.
"Most importantly, when we import the software part for the GIS-SCADA and other systems, there is a threat from malware in the software. If these solutions are developed in India, that threat will also get minimised," Goyal pointed out.
To boost their export potential, Indian power equipment manufacturers will also have to ensure that the cutting-edge technologies that have disrupted the market are incorporated in their products.
"The energy and infrastructure sector are undergoing a rapid transformation globally as well as in India. With consumerisation of energy as the key focus, technology, automation and analytics will play a key role in paving the way forward. Growing adoption of hybridised power models will see a huge emphasis on intelligent control systems, virtual power plants, internet-enabled applications and smart grid technologies," averred...Shruti Bhatia, Vice President, Corporate Communications & Corporate Social Responsibility, Indian Energy Exchange Limited (IEX).
Major Challenge But this is a major challenge. Most Indian equipment makers, however, continue to lag in research & development. This fact was even admitted by IEEMA's Saboo. He felt that the Central Government could encourage innovation by providing lucrative tax benefits to manufacturers as it would help expand that culture among manufacturers in the micro, small and medium enterprises (MSMEs). The other way of bringing high-end technologies was through foreign collaborations with government support, felt Saboo.
"We have suggested to the Central Government that we can work as partners to explore the right technologies that are available across the world. We can approach those companies together to ask them to provide the technology by setting up their manufacturing facility in India in collaboration with an Indian partner. Once the government is involved, it will become easier for us to get those people to come to India for manufacturing," he pointed out.
The COVID-19 pandemic and the subsequent push to local manufacturing by India could prove to be an opportunity for power equipment makers to not only overhaul their work culture but also manufacture and sell their products globally. Aspirants can take inspiration from companies like Kalpataru, KEC and Sterlite that have proved their mettle by producing world-class transmission lines.
- MANISH PANT