Mr. Anil Aggarwal, President, Indian Transformer Manufacturers Association (ITMA)

The Indian transformer industry has since its inception grown considerably. Transformer manufacturers have also matured and demonstrated noteworthy technological advancements in recent years by developing transformers upto 1,200 KV ratings, the highest capacity power transmission system voltage in the world. Today, India’s domestic transformer market is valued at Rs 13,000 crore in which power transformers account for 45% while distribution transformers make up the remaining share of 55%.

Government of India has taken steps to resolve the power sector’s issues. There are signs of revival in the transformer industry. In 2014-15, 22,566 MW of power generation capacity was added, the highest in a single fiscal. Meanwhile, in the transmission segment, 22,000 ckt Km of transmission lines and 66,000 MVA of transformation capacity were added at the 220 KV and above level. This reflected in the improved GDP growth, lower inflation and easing of input prices and also gave boost to the capital goods sector. The market for power & distribution transformers in India is projected to grow at a CAGR of 10.5% during 2015-20. Growth of the country’s power transmission and distribution (T&D) sector remained sluggish during 10th and 11th five year plan due to inadequate investments. However, under the 12th five year plan, the Government is focused on expansion of the country’s T&D network with significantly higher investments compared to previous Five-year Plans, which is expected to result in robust growth of the power & distribution transformers industry over the next five years.

The Indian transformer industry is facing some key challenges, which restrict it from growing of its full potential and targets. Inadequate supply of prime quality Cold Rolled Grain Oriented (CRGO) steel is the biggest challenge faced by transformer manufacturers in the country. CRGO requirement is completely met through imports; it is in fact challenging to assess the true quality of the material that is used by the transformer manufacturers in India. India needs 3.0 lakh tonnes of CRGO every year and an appalling 70 per cent of this is scrap grade material even after the implementation of the Quality Control Order on Steel & Steel Products dated 12th March 2012 on CRGO electrical steel.

High failure rate of distribution transformers is a big concern for the transformer industry in India. The average operational life of a transformer is between 25 to 30 years; however, transformers in India are known to be recalled for repair in as early as three years. The failure rate of distribution transformers in India is estimated at 10-15 per cent (in stark contrast to the less than 2 per cent in developing countries). This is due to the low entry barriers in the distribution transformer market leading to unorganized players entering the market, and competing on the price factor. Discoms/Utilities historically follow the lowest bidder selection criteria, which has led to proliferation of many small players that compromise quality of transformers.

State power utilities have been facing losses due to the supply of subsidized power to agricultural farmers, theft of power, and inefficient T&D infrastructure. This has restricted private investment in the power T&D sector, thereby reducing the quality of service from Discoms. This, in turn, is affecting the capacity building program and transmission of power.

The growth in testing infrastructure has not kept pace with that of production, both, quantitatively and qualitatively. Testing infrastructure available at India’s premier agency, the Central Power Research Institute (CPRI) and Electrical Research Development Association (ERDA) is proving short of demand. Manufacturers of large power transformers at times need to send their equipment for testing to overseas facilities like Korea Electro technology Research Institute (KERI) and KEMA which is expensive. Apart from this, huge logistical costs and lead time are also involved. However with the commissioning of National High Power Test Laboratory at Bina there may be some relief.

One of the major concerns for the industry is the growing imports from China & South Korea. As per estimates, the Chinese manufacturers share in Indian electrical equipment imports has increased. The absence of a level playing field for the domestic industry poses a major threat to local manufacturers. Delay in release of payments by power utilities adversely effects top line & bottom line of the industry and is a concern.

Low investment in R&D and no structured long-term approach for basic research and lack of standardization of product specification, design parameters and ratings for generation & distribution equipment across different utilities are some other challenges facing the industry.

With developing economy, India is on the cusp of becoming an emerging power nation and for a reliable power supply whether for infrastructure systems, industry or households – transformers play a key role. Power and distribution transformer is an indispensable and important link in the power chain. The Indian transformer industry has for long been traditional but has now matured with the passage of time by adopting innovations for manufacturing best quality transformers at competitive prices to compete with the global players. The Indian power transformer industry is more than five decades old. Domestic manufacturers have developed capabilities to manufacture all types of equipment to meet the country’s demand for transformers.

The Power Sector is the largest consumer of transformers. About 70% of domestically manufactured transformers are deployed by power utilities, followed by industries (20%), with exports accounting for the remaining. The technical skills of domestic transformer companies and state-of-the-art manufacturing facilities have improved their export demand. The export market has emerged as an attractive option, especially with the increasing competition in the home market. Major export destinations include the US, South Africa, Cyprus, Syria, Iraq and the European Union. However the industry expects that Government should ensure the level playing field by modifying the tax structure and by imposing anti-dumping duty to improve global competitiveness of the industry.

In the Twelfth Plan, Rs. 13.72 lakh crore is likely to be invested in the power sector for augmentation of power generation capacity and T&D infrastructure expansion to be in-line with power generation capacity addition. This spending on the power sector is expected to be equally distributed between generation and T&D system, and investment on power T&D infrastructure is expected to boost demand for transformers.

DDUGY scheme to improve rural electricity infrastructure and rural household electrification is expected to provide impetus to demand for distribution transformers. Increasing focus on Rural Electrification in order to minimize aggregate technical and commercial (AT&C) losses at the distribution level and improve the financial health of the Discoms/Utilities, industrial sector growth and replacement of ageing equipment reforms are expected to significantly affect demand for transformers over the next four- to-five years.

Over the past few years, even though power projects failed to pick up pace, transformer manufacturers continued to add capacity in anticipation of demand. As a result, capacity utilization levels dropped to around 65 %. Overcapacity in the domestic market has affected the margins of manufacturers. To achieve the government’s goal of providing 24x7 power for all by 2019 the industry is geared up to meet the increased requirement of the transformers on a timely basis.

The distribution segment is fraught with ageing infrastructure, high network losses and poor financial performances. To address these challenges, it is critical to strengthen the performance of the sub-transmission and distribution network. In November 2014, the Government launched two schemes, the integrated Power Development Scheme (IPDS) and Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), which respectively aim to streamline augmentation efforts in urban and rural sub-transmission and distribution networks. Given that the schemes entail a significant amount of equipment upgrades, IPDS and DDUGJY are expected to provide several opportunities to transformer manufacturers.

The Government has approved an outlay of Rs 43,000 crore for DDUGJY, which includes budgetary support of Rs 33,400 crore from the Central Government. In addition, rural electrification work under RGGVY with an additional outlay of Rs. 39,275 crore has been carried forward to the scheme. Specially, the outlay includes Rs 24,750 crore for feeder separation and the setting up of new feeders Rs. 1,515 crore for 33 KV/66 KV lines, Rs 4,045 crore for 33 KV/66 KV substations, Rs.5,350 crore for LT infrastructure work, and Rs 6,450 crore for the installation of meters at the consumer end, DTs and feeders.

Thus, IPDS and DDGJY have chalked out a roadmap for the augmentation of the distribution network, with a significant fund allocation. The schemes are expected to generate considerable investments towards the development of a robust distribution network. The power ministry has formulated two committees to facilitate and handhold states in mobilizing major equipment and material with standard technical specifications at competitive prices through a transparent bidding process under DDUGJY/IPDS schemes by the committee ‘A’ & committee ‘B’. Technical specifications of Distribution Transformer (DTs) have been finalized by the committee. DTs of higher energy efficiency level (minimum level- 2 as per IS: 1180 part 1/2014 or star rating 4 as per BEE) have been included. Association feels that with the improvement in the quality of the raw materials going into the manufacture of transformers and the technological advancement in manufacturing practices, more and more R&D is required for higher energy efficiency level. That would help conserve energy and save avoidable generation, thereby reducing carbon emission and helping in the fight against climate change.

“Make in India” concept is brilliant and helping the country unlock huge economic potential. The mission will also create unprecedented employment opportunities. From establishing and sustaining large-scale manufacturing projects to creating a robust power network, the Indian economy will achieve healthy growth levels. India has to become a manufacturing power house to drive the economy and generate employment opportunities for the large pool of skilled and unskilled labour available here.