ELECTRICAL MACHINERY

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SUMMARY
  • In 2016-17, the size of Indian Electrical Equipment Industry exceeded USD 25 billion.
  • The sector contributes about 8% to manufacturing sector in terms of value, and 1.5% to the overall GDP.
  • Estimated market value is expected to reach USD 100 billion by 2022.
  • To provide employment, both directly and indirectly to 3.5 million people by 2022.
REASONS TO INVEST
  • Indian Electrical Equipment Industry Mission Plan (2012-22), aims to make India, a country for production of electrical equipment achieving an output of USD 100 billion, and thus balancing the present trade deficit of the sector.
  • By 2022, domestic demand for generation equipment and transmission & distribution sector is expected to be in the range of USD 25-30 billion and USD 70-75 billion respectively.
  • Market-oriented reforms, such as the target of ‘Power for All’ plans to add 93 GW during 2017-2022, will further generate huge demand for power transmission & distribution equipment.
  • Incentives for capacity addition in power generation will increase the demand for electrical machinery.
  • Indian manufacturers are becoming more competitive with respect to their product designs, manufacturing and testing facilities.
  • A large pool of human resources and adequate workforce available, also the sector is projected to provide direct employment to 1.5 million people and indirect employment to 2 million people by 2022.
  • Increasing scope for direct exports to neighboring countries.
  • Investments in research and development in the electrical machinery industry are amongst the largest in India’s corporate sector.
  • A comparative advantage in terms of manufacturing costs, market knowledge, technology and creativity.
  • 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.
  • Rapid increases in infrastructure investment and industrial production will fuel further growth.
  • Government also plans to establish Electrical Equipment industry clusters, along with building strong support infrastructure.
  • With a robust supply chain, the sector has a diversified, matured and strong manufacturing base.
STATISTICS
  • Electrical equipment industry broadly comprises of two segments: Generation Equipment (boilers, turbines, generators) and transmission & distribution (T&D) and allied equipment like transformers, cables, transmission lines, switchgears, capacitors, energy meters, instrument transformers, etc. The T&D equipment sector, dominates the sector making up for 85% of the industry whereas generation equipment sector accounts for the rest 15%.
  • In 2016-17, the size of Indian Electrical Equipment Industry exceeded USD 25 billion.
  • For the period April-December 2016-17, electrical and industrial electronics industry witnessed 4% growth rate.
  • And, for 2016-17, Exports stood at approximately USD 6 billion.
  • The sector contributes about 8% to manufacturing sector in terms of value, and 1.5% to the overall GDP.
  • The subsector of heavy industry provides direct employment to 0.5 million persons, indirect to 1 million, and over 5 million across the entire value chain. Additionally, India has state of the art technology that is at par with the global standards.
  • Major export markets for the sector are United States of America, United Arab Emirates, Germany and United Kingdom. And, India is a major exporter of Switchgear and Controlgear, Transformers & Parts, Industrial Electronics, Cables, Transmission Line Towers, Conductors, Rotating Machines (Motors, AC Generators, and Generating Sets) & Parts, within the sector.
  • With Heavyweight sectors like Transformers, Cable and Transmission Line Towers registering a double digit growth , the Electrical Equipment industry witnessed a growth rate of 9.7% over the period April-September ‘2017. This was despite the industry being heavily engaged in GST preparations and alignments.
  • Within the sector, high output growth sub sectors are Power Generation Systems and Cables, having industry size worth USD 6.92 billion and USD 6.34 billion.
  • The demand for inter-regional transmission system (transmission lines and associated substations) is projected to have a peak demand of 226 GW in the 2021-22-time frame.
  • Making electricity accessible has been the key concern, and with various initiatives taken, India has managed to scale itself up to 26th position in terms of electricity accessibility, from 99th in 2014. Alongside, transmission lines witnessed a 26 % increase from 2, 91,336 circuit kilometres (ckm) in March 14 to 3, 66,634 ckm in March 17.
FDI POLICY
  • 100% FDI is allowed under the automatic route in the electrical machinery sector, subject to all applicable regulations and laws.
SECTOR POLICY

DELICENSING

  • The electrical machinery industry has been delicensed.
    • This has facilitated the entry of global majors into the electrical machinery industry in India.

VISION 2022 FOR THE INDIAN ELECTRIC MACHINERY EQUIPMENT INDUSTRY:

  • To make India the country of choice for the production of electrical equipment and reach an output of USD 100 billion by balancing exports and imports.
  • Areas of focus include technology and R&D, the lowering of customs duties on a range of equipment, the setting up of the Electrical Equipment Skill Development Council (EESDC), the establishment of electrical equipment industry clusters; the enhancement of product-testing infrastructure in the country; an increase of shares in the export market and financial support.
FINANCIAL SUPPORT

COMPANIES ENGAGED IN MANUFACTURE HAVING AN 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).

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, 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:

  • 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 EESDC (Electrical Equipment Skill Development Council), would help bridging the skill gap required for critical manufacturing, with a clear objective of enhancing exports.

AREAS BASED INCENTIVES:

  • The Government has approved 15 SEZ’s 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 and hence electrical equipment sector.
INVESTMENT OPPORTUNITIES
  • Generation Machinery: Boilers, Turbines, Generators
  • Transmission Machinery
  • Distribution Machinery
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
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