Local orders pick up in electrical equipment sector

Second quarter saw a 9,8% growh in production, even as Q1 growth was subdued at 2%, according to IEEMA

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Signs of a recovery have started emerging in the stressed electrical equipment sector, with domestic demand rising after a long and dry spell.

The quarter ended September saw 9.8 per cent growth in production, against subdued growth of two per cent in the quarter ended June, according to data released by the Indian Electrical and Electronics Manufacturers’ Association (IEEMA). Growth in the June quarter followed four quarters of contraction.

For the September quarter, the growth was attributed to a “welcome rise in domestic demand”, primarily due to progress in power transmission and sub-station projects, renewable energy power-generating stations, and projects under the restructured accelerated power development and reform programme. Orders from core sectors such as construction and real estate increased, too.

“The Indian electrical equipment industry has shown some revival in the first half of this financial year, after negative growth of 7.8 per cent in production in 2012-13. Domestic demand, coupled with an increase in exports, has managed to keep the industry afloat. The industry needs to build a robust export portfolio to optimally utilise its built-up capacity, which is currently under-utilised across all sub-sectors,” said Raj Eswaran, president of IEEMA.

The sector, however, continues to see losses due to a severe cash crunch. This is due to severe credit availability, delays in project execution, piled up receivables from power utilities, continue to haunt it. Rupee depreciation also played its part in stressing  the sector. It made imported raw material inputs for electric equipment expensive. This costs had to be absorbed by companies as they had to stay competitive due to cheaper equipment imports. 

 

Most of the turnaround seen in the sector was seen in the transformers business both power and distribution transformers. It showed a growth of 18.76% as compared a negative growth of 4.5% in  the last quarter. 

 

“Power cable, capacitors, energy meters, transmission line towers, high-voltage switchgear have also improved their growth. However, segments like conductors, low-voltage switchgear and rotating machines have further declined in the second quarter,” IEEMA said. 

 

Though overall imports of electrical equipment showed a negative growth, imports of power transformers, insulators, cables and AC motors and generators have continued to increase. “In 2012-13, imports had captured 38.26% of the market for electrical equipment in India, whereas there was significant under-utilisation of installed domestic capacity,” IEEMA said.