Babu Babel, President, IEEMA explains the key concerns of the power equipment industry, the growth prospects and industry’s expectations from Budget 2016, in an interview with Monica Chaturvedi Charna…
Is the power equipment industry growth in 2016 expected to surpass the growth rate of 13% (as on June 2015)? Which segments are expected to be the key drivers?
After years of low uptake across the industry, a few IEEMA product divisions have recently seen some order intake. The industry is cautiously optimistic about 2016 and expects larger infrastructural spent and also revival of industrial activities needing electrical equipment.
As far as the power sector outlook is concerned, the government has addressed the fuel shortage issues effectively. This will further improve in 2016. With lower coal and gas prices as well as cheaper renewable energy equipment,
the overall cost of generation is expected to reduce. However, evacuation and inter-regional transmission constraints still need to be addressed.
Several discoms are unable to pay for the purchased power and therefore, are resorting to power cuts in spite of adequate availability. This will mean under-utilisation of generation assets and cheaper power on the exchanges. Discoms with effective revenue management and collection systems and having low AT&C losses will benefit. Tariff revision is imminent in many states to reflect the true cost of power and delivery.
Is the power equipment industry ready to supply affordable smart meters that the government plans to install on a mass scale?
India was the second country after England to introduce electronic energy meters, way back in 1988. These were a lot smarter than the Ferraris disc meters. The meters of today are reasonably intelligent but, it is what we do with the intelligence that matters. So, we need to get smarter with the usage. Our key focus has to be at reducing revenue losses and looking at revenue completeness. Smart metering solutions used in the western world are not directly relevant for India. Our challenges and business drivers are different, and so, expensive solutions will not be justified. We need a combination of technology, a cadre of competent people to run the utilities (with continuity) and processes that will support the system. Working smartly is more relevant than using western style smart meters. It is not a magic bullet for our power sector ailments.
With more and more states vying to join the government’s Uday scheme, do you expect a major improvement in the discoms’ financial situation and performance?
The poor financial health of discoms has adversely impacted the Indian electrical and related electronics industry for the past several years. UDAY is an innovative scheme. It transfers 75% of the participating state discom’s liability to the state government, reducing the interest burden on the state and helping improve the discom’s balance sheet. Further, prudent power purchase will help reduce the input cost. The key to the success of UDAY, however, is reduction of AT&C losses by state discoms. The elephant in the room is rampant power theft. The industry fully supports UDAY and is optimistic that the improved financial health and the IPDA and DDUGJY will generate significant business growth.
What are your expectations from Budget 2016 for the electrical equipment industry? Any major announcements expected for the industry?
We expect Budget 2016 to be a growth-oriented one and in line with proclamations made by the Government of India.
The overall infrastructure and industrial growth should get support to speed up the process of economic recovery. A few major expectations are as follows:
1) Large investment in electrical transmission and distribution sector to match the generation growth
2) Support to grow exports
3) Some major steps to create a level-playing field against dumping
4) Rationalisation of taxes as promised.