TO MATCH the mega investments in power generation being planned, there should be a boom in power equipment sector. But the Indian transmission and distribution (T&D) electrical equipment industry, which reported a 20% growth in quantity and 35% in value in 2006-07, continues to be entangled in regulatory uncertainties, posing a serious threat to the plans to add a record 78,000mw capacity addition in the 11th Five-Year Plan.
India, which inherited a little more than 1,300 mw at the time of its independence in 1947, today has an installed generating capacity of around 1,14,000 mw. In the last 60 years, the government’s interest in adding power was not consistent. Similarly, the transmission and distribution sectors also pulled back due to the lack of initiatives from the government. The electrical equipment makers were totally in dark as they were not sure about the plan of the major investor in the sector — the central government. Thus they delayed their expansion plans.
“The power sector was not getting consistent support from the government. The transmission projects such as Accelerated Power Development and Reforms Programme (APDRP) and Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) have been delayed as the government has been slow in sanctioning fund. Thus, the companies have lost confidence to invest heavily in the equipment manufacturing,” said Indian Electrical and Electronics Manufacturers Association (IEEMA) secretary general Sunil More.
APDRP and RGGVY are being implemented by the government with a view to improving the transmission and distribution systems in the country. This, along with the restructuring of the distribution sector in the states, has led to an increased demand for downstream products such as meters, power factor correction devices, distribution transformers and switchgear.
Despite the repeated requests from various organisations and institutions in power sector, the government has not yet awarded infrastructure status to the transmission sector. The status will mean lesser tax burden for companies in the sector. Currently, roads, ports and airports, which have the infrastructure status, are enjoying income-tax concession under section 80 1(a) of the I-T Act.
Unfortunately, some of the electrical products for the power industry falls under the Packaged Commodities Act. As these products are not directly used by consumers, the system creates operational problem. Under the Act, it is mandatory that the products should be packaged, weighed and priced. The additional efforts will increase the cost of the products, said an official in a power equipment company.
As India has free trade agreements with countries such as Thailand, Nepal and Sri Lanka, the electrical equipment can be imported from these countries at zero duty. Indian companies, without the benefit of tax waivers, are facing unfair competition from the products imported at zero duty. The government has already noticed re-routing of electrical products through the countries with agreements to claim zero duty.
“Our duty structure is still not streamlined. In addition to the excise duty, we have central and state taxes such as sales tax, octroi and entry tax, which make Indian products expensive and uncompetitive,” said Mr More.
“The well-conceived APDRP programme and passing of Electricity Act 2003 have provided a ray of hope to the industry. Almost all sectors of electrical equipment industry are indicating fast growth now. The Rs 50,000-crore Indian industry is now finding a good response for its products in the international markets. The companies are improving the design and capabilities of Indian products to make them more worldclass,” said IEEMA senior consultant Avinash Barve.
The bulk transmission infrastructure in the country has increased to more than 300,000 km now. For supporting the generation growth plan and the ambitious mission of the government ‘power for all by 2012’, the electrical equipment industry needs to be equipped with the support of policy changes