After giving stiff competition to power plant equipment manufacturers in India, China is once again posing a threat to the Indian transformer makers.
As the demand for transformers in the country is expected to rise substantially over the next two years, capacity constraints and technological limitations prove advantageous for the Chinese rivals in the transformers business.
According to industry estimates, currently transformer makers in the country have a combined order book of about 250,000 Megavolt Ampere (MVA), which is expected to double over the next 2-3 years.
The sector experts believe that the planned capacity addition of 60,000 Mw to the India's power sector during the 11th Five Year Plan (FYP) (2007-2012) would encourage Chinese power transmission equipment makers to look to India as a potential market.
"Given the fact that they can offer technologically sophisticated transformers at a lower cost. There is a potential threat to India's transformer making companies from their rivals in China as they are economically and technologically more competitive. China has a surplus production of transformers and it will be convenient for them to export to Indian market since there is a huge deficit," said Chirag Shah, analyst at ICICI Securities.
The industry insiders feel that the companies making lower capacity transformers up to 220 kilovolt (kv) and 400 kv will be badly affected due to Chinese competition.
"There is a limited number of transformer makers in India. While the industry is growing at an annual 15-18 per cent, the demand is rising at a much faster pace. The demand may double in next two-three years. So in two years from now, we will be short of capacities to produce transformers," said Jitendra Mamtora, chairman and managing director, Transformers & Rectifiers (India) Ltd (TRIL).
"Chinese companies are posing a major threat for Indian companies. Chinese players have lower production cost. Also, the top three transformers makers in China hold a combined manufacturing capacity of about 350,000 MVA, more than the India's total capacity," he said adding that it was a right time for capacity addition.
In order to counter Chinese competition the industry is required to start investing for capacity addition as early as possible. In the recent past, imports of power equipment from China posed a major challenge for the policy makers in India. In the last 2-3 years, India's private sector power producers have imported Chinese equipment that would help to generate about 35,000 Mw of power. Experts believe that domestic industry lost huge business due to cheap Chinese imports.
After the power generation, the transmission sector is considered to be the next target for the Chinese companies to compete with India.
"The Indian industry has to upgrade itself to manufacture high capacity transformers, otherwise it would be difficult for the small manufacturers to compete with China," informed a senior analyst from Unicon Wealth Research.
