There has been a sharp deceleration in the growth rate of the electrical industry in the July-September quarter, indicating that the sector is unlikely to be immune to the slowdown gripping the rest of the economy.
According to the data compiled by the Indian Electrical and Electronics Manufacturers Association (IEEMA), the electrical industry, which comprises manufacturers of cables, switchgears, transformers and other such equipment, posted a growth of 6.6 per cent in the second quarter of this year (in volume terms), down from 11.8 per cent recorded in the first quarter.
Growth in the first half of the year was down to 8.57 per cent from 19.6 per cent in the previous financial year.
India’s electrical and electronics industry is estimated to have an annual turnover of over Rs 65,000 crore with numerous players in the organised and unorganised sectors.
Industry sources said the low growth was mainly due to increase in input costs of raw materials such as aluminum and copper, liquidity crunch and stoppage of work on sanctioned and new projects in the pipeline.
“So far, we have not been informed of any severe crisis or liquidity issue by our customers. But if the situation deteriorates further, proposed projects may be affected, say in another six or eight months,” said Sudhir M Trehan, managing director, Crompton Greaves.
According to Rakesh Sarin, managing director of gensets maker Wartsila India, the recession could cause delay in implementation of large-scale power projects. “Wartsila is working out a strategy to sensitise project developers on the advantages of our generation equipment, which can be speedily installed as a cluster, instead of going for large-scale projects,” he said.
Sources said the power utilities had started facing a liquidity crunch, affecting their payment cycle. Due to delayed release of payments by the government utilities to the electrical industry, the working capital is blocked, which leads to a cascading affect on the suppliers.
| GROWTH RATE OF ELECTRICAL INDUSTR (in volume terms) | ||||||
| Product Group/Sector | 1st Qtr 2007-08 | 2nd Qtr. 2007-08 | 3rd Qtr. 2007-08 | 4th Qtr. 2007-08 | 1st Qtr. 2008-09 | 2nd Qtr 2008-09 |
| Rotating machines | 21.6 | 15.5 | 10.4 | 14.8 | 17.3 | 8.4 |
| Switchgears | 20.21 | 19.49 | 20.56 | 12.07 | 8.92 | 1.95 |
| Cables | 4.76 | 25.32 | 5.04 | 21.38 | 15.06 | 7.16 |
| Transformers | 16.57 | 44.82 | 9.49 | 2.26 | 7.28 | -5.91 |
| Capacitors | -18.67 | 0.57 | 13.23 | 36.38 | 14.09 | 55.63 |
| Energy meters | 3.52 | 17.52 | 9.64 | -8.82 | -16.24 | 9.05 |
| Transmission lines | 21.52 | 12.76 | 19.61 | 12.24 | 14.86 | 22.46 |
| Overall index | 14.53 | 24.55 | 11.80 | 12.55 | 11.58 | 6.62 |
About 80 per cent of the capacity addition planned under the current Five-Year Plan is in the public sector.
The sources said the reduction in demand for electrical equipment was unexpected and most of the manufacturers had enhanced their capacity in view of the government announcements of a massive power generation, transmission and distribution sector investments under the Eleventh and Twelfth Plans.
India aims to add about 78,000 Mw to 90,000 Mw of power during the Eleventh Plan, with an investment of over Rs 11 lakh crore in generation, transmission and distribution.
The Indian industry also fears that recession would lead to dumping by China in the Indian market.
