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The sluggish growth in the country’s power sector, delays in project execution and the precarious financial situation of many State power distribution companies continue to severely hit domestic electrical equipment manufacturers. In an exclusive interview with Sanjay Jog, Sunil Misra, newly appointed director general of Indian Electrical & Electronic Manufacturers Association (IEEMA) explains challenges and opportunities for the sector.
What are the key challenges faced by the electrical equipment (EE) industry?
The slowdown in the power sector has impacted domestic demand. Also, the competition faced from imported electrical equipment is a challenge.
To stimulate demand for the domestic electrical equipment industry, the government should expeditiously address the challenges confronting the country’s power sector, including the problems in fuel linkages, land acquisition, environmental and other clearances and precarious financial health of utilities. The power sector needs the highest priority attention of the government. In this regard, the Project Management Group in the Cabinet Secretariat is taking proactive and positive steps.
Imports of electrical equipment in the country have assumed very threatening proportions and have now captured 38.26% of the market for electrical equipment in India, whereas there is significant under-utilization of installed domestic capacity. Apart from other interventions, it is recommended the Government of India raise the basic customs duty (BCD) on all electrical equipment products to a uniform 10% (currently, BCD on T&D equipment is generally 7.5% and on generation equipment, including project imports, it is generally 5%).
How has the depreciating rupee impacted imports of critical raw material and inputs?
The depreciating rupee has made critical imports of raw material and inputs for electric equipment more costly, but given the continued threat from imports of electrical equipment in the Indian market, domestic manufacturers are being forced to absorb this additional cost to remain competitive.
IEEMA and EE industry players in general are repeatedly raising the issue of continued threat from imports of electrical equipments in the Indian market. What has the government done so far? What else should be done?
In the last one year, the Government of India has taken some steps - it has imposed import duties at the rate of 5% basic customs duty, 12% countervailing duty and 4% special additional duty, along with cess as applicable, on import of equipment for ultra-mega power plants (UMPPs) / mega power plants (MPPs). Based on the findings of the Director General (Safeguard) that the increased import of insulators from China have caused and threatened to cause market disruption to the domestic industry and producers of electrical insulators, the Government of India has imposed a safeguard duty of 35% in the first year and 25% in the second year on imports of electrical insulators from China.
But these measures are not enough. The Government of India needs to provide greater encouragement to indigenous manufacturing by only allowing domestic manufacturers to bid for tenders of domestically funded projects.
It should also put in place a requirement of setting up a manufacturing facility in India, within a specified time frame of the award of the tender, where foreign bidding is allowed, to provide for a level playing field.
Phased manufacturing process (PMP) should be made mandatory in the country for supply of major equipment, stipulating a minimum percentage of the total procurement by any utility to be of ‘Made in India’ products and stipulating some amount of price preference for Indian products in procurement by utilities.
These measures will support Indian manufacturers, who are not seeking protection but a level playing field, and provide necessary safeguards to the domestic industry that is facing non-market competition on account of cutthroat below-cost entry level prices offered by Chinese manufacturers.
The Centre has launched Indian Electrical Equipment Industry Mission Plan 2012-2022 to make India the country of choice for production of electrical equipment and reach an output of $100 billion by balancing exports and imports. How this can be achieved?
In the Mission Plan, five areas have been identified for strategic and policy interventions, both by the government and the industry, and these include industry competitiveness, technology upgradation, skills development, exports and conversion of latent demand. To carry forward the recommendations arising out of the Mission Plan, Inter-Ministerial Groups, comprising of representatives of the Department of Heavy Industry and other concerned Ministries / Departments, IEEMA, industry and other stakeholders have been constituted for monitoring the implementation of the recommendations and for periodic follow-up of its status.
