ELECTRICAL MACHINERY

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SUMMARY
  • Electrical equipment market production is estimated to touch $100 Bn by 2022 from $27.3 Bn in 2017-181
  • The sector contributes about 8% to the manufacturing sector in terms of value, and 1.5% to overall GDP.2
  • India’s vision is to reach $100 Bn by 2022 is completely in-line with the current market forecasts2 
  • The sector is projected to provide employment, both directly and indirectly, to 3.5 Mn people by 2022.2
REASONS TO INVEST
  • Indian Electrical Equipment Industry Mission Plan (2012-22), aims to make India as a preferred destination for production of electrical equipment. It also aims to achieve an output of $100 Bn by balancing the trade deficit in the sector.3
  • By 2022, domestic demand for generation equipment industry is expected to be between $25 and $30 Bn. For Transmission & Distribution industry, it is estimated to be between $70 Bn and $75 Bn.4
  • Market-oriented reforms, such as the target of ‘Power for All’ plans to add 93 GW during 2017-2022. It is expected to generate huge demand for power transmission & distribution equipment.4
  • Incentives for capacity addition in power generation will increase the demand for electrical machinery.4
  • Indian manufacturers are becoming more competitive in terms of product designs, manufacturing and testing facilities.6
  • A large pool of human resources and adequate workforce available for the sector. It is projected to provide direct employment to 1.5 mn people and indirect employment to 2 mn people by 2022.4
  • Increasing scope for direct exports to neighbouring countries due to signing of Free Trade Agreements with members of SAARC as well as with Malaysia, Singapore, Japan, South Korea, in the region.5
  • Investments in R&D in the electrical machinery industry are amongst the largest in India’s corporate sector.6
  • A comparative advantage in some of the engineering sub-sectors in terms of manufacturing costs, market knowledge, technology and creativity. 5
  • Capacity creation in sectors such as infrastructure, power, mining, oil and gas, refinery, steel, automotive and consumer durables are driving demand in the engineering sector.5
  • Rapid increase in infrastructure investments and industrial production will fuel further growth.
  • The Government plans to establish Electrical Equipment industry clusters, along with building strong support infrastructure.6
STATISTICS
  • Electrical equipment industry broadly comprises of two segments - Generation Equipment like boilers, turbines and generators; and Transmission & Distribution (T&D) & Allied Equipment like transformers, cables, transmission lines, switchgears, capacitors, energy meters and instrument transformers.7
  • The T&D equipment sector, dominates the sector making up for 85% of the industry, whereas generation equipment sector accounts for the rest 15%.8
  • The industry registered a double-digit growth rate of 11.2% in 2018-19.9
  • With a CAGR of 13.7%, export of electrical machinery and equipment rose from $5.3 Bn in 2013-14 to $8.9 Bn in 2017-18.10
  • The sector contributes about 8% to manufacturing sector in terms of value, and 1.5% to the overall GDP.10
  • The heavy industry sub-sector provides direct employment to 0.5 mn people, indirect employment to 1 mn, and over 5 mn across the entire value chain. 10
  • Major export markets for the sector are the US, UAE, Germany and the UK.10
  • India is a major exporter of switchgear and control-gear, transformers and its parts, industrial electronics, cables, transmission line towers, conductors, rotating machines (motors, AC generators, and generating sets) and its parts.10
  • Energy meters, cables (both low and high voltage) and distribution transformers witnessed more than 20% domestic growth during 2018-19.11
  • Within the sector, high domestic output sub sectors are cables, transmission line towers, and LT switchgears (including panels), having industry size worth $7 Bn, $2.7 Bn and $2.3 Bn respectively.11
  • The demand for inter-regional transmission system, which comprises of transmission lines and associated substations, is projected to reach a peak demand of 226 GW during 2021-22.10
  • Transmission lines witnessed a 26 % increase from 291,336 circuit kilometre (ckm) in March 2014 to 366,634 ckm in March 2017.10
  • India managed to jump 113 places (from 137 in 2014 to 24 in 2018) in ‘Getting Electricity’ parameter of the World Bank’s Doing Business Ranking.12

 
FDI POLICY
100% FDI is allowed under the automatic route in the electrical machinery sector, subject to all applicable regulations and laws.29
SECTOR POLICY

DE-LICENCING

The electrical machinery industry has been de-licensed, along with 100% FDI allowed in this sector. This has facilitated the entry of major global players into the electrical machinery industry in India.30 

VISION 2022 FOR THE INDIAN ELECTRIC MACHINERY EQUIPMENT INDUSTRY

To make India as a preferred country for production of electrical equipment. It also aims to achieve an output of $100 Bn by balancing the trade deficit.31

Areas of focus include: - Technology and R&D - Lowering of customs duties on a range of equipment - Setting up of the Electrical Equipment Skill Development Council (EESDC) - Establishment of electrical equipment industry clusters - Enhancement of product-testing infrastructure in the country - Provide credit support to economically less-developed export markets.32

FINANCIAL SUPPORT

TAX DEDUCTION FOR IN-HOUSE R&D CENTRE

A weighted tax deduction of 200% under Section 35 (2AB) of the Income Tax Act for both capital and revenue expenditure incurred on scientific research and development. Expenditure on land and buildings are not eligible for deduction.33

STATE INCENTIVES

Apart from the above, each state in India offers additional incentives for industrial projects. Incentives are in areas like subsidised land cost, relaxation in stamp duty, exemption on the sale/lease of land, patent subsidy, power tariff incentives, a concessional rate of interest on loans, investment subsidies/tax incentives, backward areas subsidies, special incentive packages for mega projects, etc.

EXPORT INCENTIVES

Various incentives are provided under Export Promotion Capital Goods scheme, Duty Remission scheme, Focus Product scheme, Special Focus Product scheme, Focus Market scheme.

SKILL DEVELOPMENT

Steps taken for Skill Development, such as setting up of Electrical Equipment Skill Development Council (EESDC), would help to bridge the skill gap required for critical manufacturing. It has a clear objective to enhance exports.34

AREA-BASED INCENTIVES

The government approved 15 SEZs for the engineering sector, and electrical machinery is a part of the sector. Further, development of Delhi –Mumbai Industrial sector is expected to provide a big boost to the engineering sector.35

INVESTMENT OPPORTUNITIES
  • Generation Equipment: Boilers, Turbines, Generators
  • Transmission Equipment: Transformers
  • Distribution Equipment: Switch Gears, Controls
  • Others: Electrical Motors, Wires and Cables
FOREIGN INVESTORS
  • MHI (Japan)
  • Hitachi (Japan)
  • Babcock (UK)
  • Alstom (France)
  • Toshiba (Japan)
  • Ansaldo (Italy)
  • Colfax Corporation (USA)
  • Schneider Electric (France)
  • Legrand (France)
  • GE (USA)
SOURCES
  1. “Indian Electrical Machinery & Equipment Industry,” EEPC India website, https://www.eepcindia.org/download/IndianElectricalMachinery-EquipmentIndustry-190312114534.pdf, accessed on 31 May 2019
  2. “Indian Electrical Machinery & Equipment Industry,” EEPC India website, https://www.eepcindia.org/download/IndianElectricalMachinery-EquipmentIndustry-190312114534.pdf, accessed on 31 May 2019
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  4. “Indian Electrical Machinery & Equipment Industry,” EEPC India website, https://www.eepcindia.org/download/IndianElectricalMachinery-EquipmentIndustry-190312114534.pdf, accessed on 31 May 2019
  5. “Vision 2022 for Indian Electrical Equipment Industry,” Department of Heavy Industries website, https://dhi.nic.in/writereaddata/UploadFile/indian_electrical_eq_mission_plan_2012-2022.pdf, accessed on 31 May 2019
  6. “Indian Electrical Machinery & Equipment Industry,” EEPC India website, https://www.eepcindia.org/download/IndianElectricalMachinery-EquipmentIndustry-190312114534.pdf, accessed on 31 May 2019
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  12. “Frequently Asked Questions (FAQs) on Free Trade Agreements (FTA) -Engineering Sector,” Ministry of Commerce & Industry website, https://commerce.gov.in/writereaddata/uploadedfile/MOC_635851104240906967_FAQ_on_FTA_28July2015.pdf, accessed on 31 May 2019
  13. “Frequently Asked Questions (FAQs) on Free Trade Agreements (FTA) -Engineering Sector,” Ministry of Commerce & Industry website, https://commerce.gov.in/writereaddata/uploadedfile/MOC_635851104240906967_FAQ_on_FTA_28July2015.pdf, accessed on 31 May 2019
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  27. “India at 77 Rank in World Bank’s Doing Business Report,” PIB website: Ministry of Commerce & Industry, http://pib.nic.in/newsite/PrintRelease.aspx?relid=184513, accessed on 31 May 2019
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