Indian transformer industry expects a strong demand coming from government programs and investments that support the growth of the T&D grids….
Growing population coupled with increase in industrialisation and urbanisation has led to increase in capacity utilisation across sectors resulting in a surge in demand for power in India. Currently through reforms such as ‘Power for all’, government plans to add 93 GW by 2022, this would require a sound power sully infrastructure base in the country which is set to fuel the demand for power transmission and distribution equipment.
Backed by government’s on-going reform and financial restructuring drive in the energy sector, India is now witnessing fiscal discipline in utilities, sufficient coal availability and an unprecedented growth in the green energy market. Thus, on account of these initiatives – Indian power and distribution transformer market is expected to witness significant growth over the coming years.
As per various researchers, the Indian power and distribution transformer industry is going to increase by more than 10 per cent CAGR in the next 5 years and the market is forecasted to reach $2.9 billion by 2022.
The Indian transformer industry has since its inception grown considerably. Transformer manufacturers have also matured and demonstrated noteworthy technological advancements in recent years by developing transformers upto 1,200 KV ratings, the highest capacity power transmission system voltage in the world. Today, India’s domestic transformer market is valued at Rs 14,000 crore in which power transformers account for 45% while distribution transformers make up the remaining share of 55%. As there is a demand upswing for reliable power in the country, the transformers market is witnessing a growth trend.
The transformer industry which had more than doubled its capacity over the past years anticipating huge domestic and overseas demand was witnessing the situation of overcapacity. However, with a shift in the government’s focus to strengthen the power transmission and distribution system has unleashed abundant opportunities for the power and distribution transformer market.
Although the market size of the medium power transformer segment is large, yet the growth of the large power transformer segment is higher. This is due to the increase in HVDC transmission projects mainly in the Asia-Pacific region. HVDC, EHV, and UHV projects being undertaken for reducing transmission losses during transmission over large distances is the major growth driver of the large power transformer market.
The industry has been going through technological evolution and now the focus is on raising energy efficiency, given the urgency to fight climate change. Indian Transformer Manufacturers Association (ITMA) has been working with the government to usher in technological changes and globally acceptable energy efficiency norms.
On the Growth Path:
The Indian transformer industry has been stagnant over the past 1-2 years due to slowdown in projects both in the power transmission and distribution sectors. In addition, ambiguity around GST rates for capital goods products has added further to the business slowdown. It has also been observed that the number of projects, especially in the transmission sector which have been initiated have been put on hold due to delay in approvals and lack of funds.
Presently the government is taking major steps to strengthen the power transmission and distribution network. Both power as well as distribution network is getting strengthened all across the country. The government initiatives like DDUGJY, IPDS and growing FDI in power industry are few growth drivers in the industry. Further, the government has projected an investment of INR 146,000 crore in the country’s transmission sector by FY 2019 which is bound to result in giving boost to demand for distribution and power transformers.
Most importantly government has undertaken imitativeness such as UDAY for financial turn-around of power distribution companies who are one of the main end users for the industry. With implementation of UDAY and other discom schemes there is a huge acceleration of infrastructural amendment in India. Also the discoms are instructed to reduce losses to the tune of 10 to 12 per cent which means they have to go for efficient transformers. This has influenced invitation for bids for refurbishment and up-gradation of existing T&D network.
Moreover a recent BIS circulation has issued strict norms on transformer losses. It is expected that in next 3 years’ time – discoms will have to replace all existing transformers with level 3 transformers (5-Star Rated Transformers). Transformer manufacturers have to manufacture and supply these new transformers in millions to the discoms in a maximum period of 3 years.
The demand from these schemes is expected to continue and in addition new schemes such as Saubhagya scheme which aims to provide last mile connectivity to rural consumers should increase future demand. Infrastructure segment (especially Metro Rail Projects) are witnessing increase in demand for distribution transformers and increased government spending in this segment is set to drive demand in future.
In addition, intra-state transmission projects (400 kV and below) are expected to drive demand for power transformers. State TRANSCOS will majorly drive this demand and float new transmission projects through the TBCB model. PGCIL, which is mainly into executing and implementing interstate projects, is planning to aggressively enter intrastate projects by forming joint ventures with state utilities.
The power transformers hence also needs replacement or relocation to less populated demand centre. Most of the solar power generation built last year are now almost connected to the national grid and often throwing huge power flow in the cycle which is meeting country 23 per cent power demand in few demand centres during peak hours. The solar boom has crashed a new demand of Inverter duty special transformers.
The prevalent scenarios suggest an optimistic growth potential within the organised sector of the industry as only efficient and quality focused organisation can be benefited from such drivers.
In spite of the recent slowdown, we are confident that the Indian transformer industry will benefit from the strong demand expected from government programs and investments that support the growth of the T&D grids.
As the government aims to increase the renewable energy generation capacity to 175 GW by 2022 and to have renewable energy account for 40 per cent of installed capacity by 2040.
In this scenario, solar transformers in particular are expected to see a sharp rise in demand.