 "Power")
As the power generation business goes through a dull phase, the construction and capital goods industry is looking at the power transmission and distribution (T&D) space for enhanced business. With the government also deciding to tender out transmission projects worth Rs 1 lakh crore and given the huge untapped potential in state-level power distribution, engineering, procurement and construction (EPC) companies are turning to the T&D sector.
In the last financial year, EPC companies had suffered due to tepid demand from generation business. By shifting gears to T&D, the companies expect to make up for the revenue loss.
Alstom India, one of the largest EPC players in the sector, said certain roadblocks should be cleared and a lot of investment needs to be done in the T&D space. "Since the past three years, we haven't been seeing growth in capital expenditure in the power generation from the private sector. T&D is the backbone of India's power sector and has huge growth potential. Investment is needed particularly in the states to improve the transmission, sub-transmission and the distribution networks," said Rathin Basu, managing director, Alstom India.
Kolkata-based Skipper Limited is gearing up to expand production. "We'll increase our power transmission tower manufacturing capacity by 25,000 tonnes, which is right now around 175,000 tonnes per annum. The new expansion will be completed by the end of this fiscal (FY16) at the existing manufacturing facility," said Devesh Bansal, director, Skipper Limited.
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For this expansion, the company is foreseeing an investment of about Rs 30 crore. With three manufacturing plants in West Bengal, Skipper gets orders for transmission towers and poles from PowerGrid and other transmission companies. The company claims the current order book is sufficient to fully utilise the capacity for the next two years. Bansal said, "We have strong order book of Rs 2,400 crore for the current financial year and bids for future orders worth Rs 2,000 crore are also under process."
The EPC companies — state-owned BHEL and private companies like Alstom India, Larsen & Tourbo, Lanco Infratech and Bharat Forge — are witnessing subdued demand from the power generation sector, and their order pipeline is running dry.
Power Finance Corporation, the key lender to the power sector witnessed a decline of 20 per cent of loan disbursement to the generation sector during the past fiscal.
While the annual results of major EPC companies for 2014-15 reflected a decrease in demand, their annual reports made due mention of the depressed state of affairs in the power sector and need for revival.
“At the central level there is an urgent need to improve the inter regional power flow capacity across India’s five electrical regions by investing in extra high voltage 756kv ac and HVDC technologies. The states need to catch up a lot by rapidly accelerating their investment in the State T&D networks,” said Basu.
Most of the states in their annual budget this year, have announced increased investment in their power distribution and sub-transmission sector. Large states such as Uttar Pradesh, Rajasthan and Madhya Pradesh have made separate provisions for strengthening last mile connectivity for power supply.
Citing the example of southern grid, Basu said India achieved the world’s largest single frequency grid in December 2013 by connecting the southern grid to the rest of India grid. “However, this has not been supported by significant increase in the volume of power transfer to the Southern grid due to low capacity of power flow between these regions,” said Basu.
