ELECTRICAL MACHINERY

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SUMMARY
  • Total production of the Electrical Equipment industry in India stood at US$27.3 bn in 2017-18.1
  • The sector contributes about 8.1% to the manufacturing sector in terms of value, and 1.35% to the overall GDP.2
  • The Electrical Machinery industry in India is expected to value US$100 bn by 2022.3
  • The Electrical Machinery industry is projected to provide employment, both directly and indirectly, to 3.5 million people by 2022.4
REASONS TO INVEST
  • Indian Electrical Equipment Industry Mission Plan (2012-22), aims to make India as a preferred country for production of electrical equipment. It also aims to achieve an output of US$100 bn by balancing the trade deficit.5
  • By 2022, domestic demand for generation equipment industry, is expected to be in the range of US$25-30 bn. For transmission & distribution industry, it is estimated US$70-75 bn.6
  • 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.7
  • Incentives for capacity addition in power generation will increase the demand for electrical machinery.8
  • Indian manufacturers are becoming more competitive, in terms of product designs, manufacturing and testing facilities.9
  • A large pool of human resources and adequate workforce available for the sector. It is projected to provide direct employment to 1.5 million people and indirect employment to 2 million people by 2022.10
  • Increasing scope for direct exports to neighbouring countries due to signing of new trade agreements and increasing effectiveness of SAARC.
  • Investments in research and development in the electrical machinery industry are amongst the largest in India’s corporate sector.11
  • A comparative advantage in terms of manufacturing costs, market knowledge, technology, and creativity. 12
  • 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.13
  • 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.14
  • The sector, with a robust supply chain, has a diversified, matured and strong manufacturing base.15
STATISTICS
  • Electrical equipment industry broadly comprises of two segments - Generation Equipment like boilers, turbines, generators; Transmission & Distribution (T&D); and allied equipment like transformers, cables, transmission lines, switch gears, capacitors, energy meters, instrument transformers, etc.16
  • The T&D equipment sector dominates the sector making up for 85% of the industry, whereas generation equipment sector accounts for the rest 15%.17
  • The industry registered a double-digit growth rate of 11.2% in FY 2018-19.18
  • With a CAGR of 13.7%, exports of electrical machinery and equipment rose from US$5.3 billion in 2013-14 to US$8.9 bn in 2017-18.19
  • The sector contributes about 8% to manufacturing sector in terms of value, and 1.5% to the overall GDP.20
  • 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.21
  • Major export markets for the sector are United States of America, United Arab Emirates, Germany, and United Kingdom.22
  • 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, within the sector.23
  • Energy meters, cables (both low and high voltage), and distribution transformers witnessed more than 20% domestic growth during 2018-19 in India.24
  • Within the sector, high domestic output sub sectors are cables, transmission line towers, and LT switchgears (including panels), having industry size worth US$7 bn, US$2.69 bn, and US$2.26 bn respectively.25
  • The demand for inter-regional transmission system, which comprises of transmission lines and associated substations, is projected to have a peak demand of 226 GW during 2021-22.26
  • India managed to jump 113 places (from 137 in 2014 to 24 in 2018) in ‘Getting Electricity’ parameter of World Bank’s Doing Business ranking.27
  • Transmission lines witnessed a 26 % increase from 2, 91,336 circuit kilometre (ckm) in March 2014 to 3, 66,634 ckm in March 2017.28
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 US$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
  3. “Indian Electrical Machinery & Equipment Industry,” EEPC India website, https://www.eepcindia.org/download/IndianElectricalMachinery-EquipmentIndustry-190312114534.pdf, accessed on 31 May 2019
  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
  7. “Indian Electrical Machinery & Equipment Industry,” EEPC India website, https://www.eepcindia.org/download/IndianElectricalMachinery-EquipmentIndustry-190312114534.pdf, accessed on 31 May 2019
  8. “Indian Electrical Machinery & Equipment Industry,” EEPC India website, https://www.eepcindia.org/download/IndianElectricalMachinery-EquipmentIndustry-190312114534.pdf, accessed on 31 May 2019
  9. “Vision 2022 For Indian Electrical Equipment Industry,” EEPC India website, http://ingineering-brands.com/catalogue/product_sector_overview/em, accessed on 31 May 2019
  10. “Indian Electrical Machinery & Equipment Industry,” EEPC India website, https://www.eepcindia.org/download/IndianElectricalMachinery-EquipmentIndustry-190312114534.pdf, accessed on 31 May 2019
  11. “Vision 2022 For Indian Electrical Equipment Industry,” EEPC India website, http://ingineering-brands.com/catalogue/product_sector_overview/em, accessed on 31 May 2019
  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
  14. “Vision 2022 For Indian Electrical Equipment Industry,” EEPC India website, http://ingineering-brands.com/catalogue/product_sector_overview/em, accessed on 31 May 2019
  15. “Division - International Business,” IEEMA website, https://ieema.org/division/international-business/, accessed on 31 May 2019
  16. “Industry Intelligence - Industry Update,” IEEMA website, https://ieema.org/industry-intelligence/industry-update/, accessed on 31 May 2019
  17. “Industry Intelligence - Industry Update,” IEEMA website, https://ieema.org/industry-intelligence/industry-update/, accessed on 31 May 2019
  18. “India’s Electrical Equipment Industry,” IEEMA website, https://ieema.org/division/international-business/, accessed on 31 May 2019
  19. “Indian Electrical Machinery & Equipment Industry,” EEPC India website, https://www.eepcindia.org/download/IndianElectricalMachinery-EquipmentIndustry-190312114534.pdf, accessed on 31 May 2019
  20. “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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  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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  30. “Favourable Policies,” EEPC India website, http://ingineering-brands.com/catalogue/product_sector_overview/em, accessed on 31 May 2019
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  33. “EY Tax Alert- Delhi High Court upholds weighted R&D deduction for recognized inhouse R&D facility from the date prior to recognition and approval,” EY website, https://www.ey.com/Publication/vwLUAssets/RDfacility/$FILE/RDfacility.pdf, accessed on 31 May 2019
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  35. “Strategies Adopted,” EEPC India website, http://ingineering-brands.com/catalogue/product_sector_overview/em, accessed on 31 May 2019
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