India’s ambitious plan to add 90,000 megawatt (Mw) capacity during the current five-year Plan (2007-12) may fall short of target, not only because of possible delays in commissioning of power plants but also due to supply constraints being faced by electrical and electronics manufacturers.
In addition, manufacturers are facing rising raw material costs.
Industry experts say projects with a total capacity of about 63,000 Mw are under implementation. Orders for the transmission and distribution (T&D) sector may start flowing within one-two years, including for the three ultra mega power projects that have already been awarded. This could cause bunching of orders. The resultant supply constraints could result in delays by electrical and electronics manufacturers. At present, T&D equipment such as 500-KV transformers require at least 20-25 weeks to be delivered.
“Urgent intervention by the government is a must to arrest the spiralling prices of key materials going into the production of power equipment and for a mechanism to ensure supplies of some key raw materials. Otherwise, the cost of our generation, transmission and distribution plans may escalate by 30-40 per cent,” said VV Paranjape, director, Siemens Ltd, and president of the Indian Electrical and Electronics Manufacturers’ Association (IEEMA).
Paranjape says in the last three years, prices of steel have gone up by 70 per cent, of aluminum by 55 per cent, of copper by 350 per cent, of zinc by 370 per cent and of fuel by 65 per cent.
The industry is facing a severe shortage of raw materials such as dynamo grade steel as there are only four-five manufacturers of this grade of steel globally.
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During the 11th Plan period, the government plans to create a pan-India transmission and distribution backbone through the Rajiv Gandhi Grameen Vidyutikaran Yojana at an investment of Rs 28,000 crore and the restructured Accelerated Power Development and Reforms Programme (at an investment of over Rs 51,000 crore).
The target is to add new inter-regional transmission capacity of 23,600 Mw at 220 kV and above during the Plan period to increase the total inter-regional transmission capacity of the national power grid from 14,100 Mw (by the end of the 10th Plan) to 37,700 Mw by end of the 11th Plan.
Though the electrical and electronics equipment manufacturing industry was growing consistently for the past five years, the last quarter of 2007-08 saw a slowdown, which continued in the first quarter of the current financial year, according to SC Bharghava, executive director of Larsen & Toubro (L&T), and immediate past president of IEEMA.
The electrical and electronics sector registered a turnover of Rs 38,920 crore in 2007-08, registering a growth rate of 15 per cent — the rate at which the industry grew for five years up to March 2007. The growth had declined to about 12.5 per cent during the last quarter.
The strongest growth was shown by the cable industry, which grew by 28.3 per cent to reach Rs 11,000 crore per annum, and the PVC cable sector, which grew by 21.2 per cent to reach Rs 7,500 crore. The transmission line industry also had an above-average growth of 18.2 per cent.
Factors like non-availability of raw materials and delay in release of funds for the projects were cited as the major reasons for the slowdown.
Another factor that could affect the electrical and electronics industry is the power utilities not being able to meet the target in the current Plan period. Against a target of capacity addition of 12,039.20 Mw in 2007-08, actual capacity addition was just 8,679 Mw in the first year of the current Plan period.
The cumulative capacity at the end of the 10th Plan was 1,32,329.21 Mw. According to a government strategy paper, of the 78,577 Mw, projects worth 48,955 Mw (62.3 per cent) are under construction.