Slowdown blues for electrical equipment industry as Saubhagya ends

Negative growth is stalking the electrical equipment industry as the mega electrification drive under Saubhagya comes to an end.

In the April-June quarter this year, sale of electrical equipment grew negatively compared to the same period last year. Growth in sale of transformers fell 7 per cent, of transmission lines by 8 per cent, and of capacitors by 29 per cent, according to data compiled by the Indian Electrical and Electronics Manufacturers’ Association. Sale of power cables grew 1 per cent in this quarter, while it had grown 42 per cent in the same quarter last year.

The government announced the Saubhagya scheme in September 2017, with a target of electrifying all households in the country. About 99 per cent of the target was met till March this year.

In the last financial year, growth in sale of major electrical equipment was at a three-year high. The main reason for this was government schemes for accelerating power connectivity.

Along with Saubhagya, the Ujjwal DISCOM Assurance Yojana (Uday) to turn around power distribution companies reeling from losses and the Integrated Power Development Scheme (IPDS) increased the number of power connections.

But the central schemes are coming to an end and the states have not initiated any investment in transmission and distribution (T&D) infrastructure. As a result, electrical equipment makers are unsure of any big spurt in sales in the near term.

“Sale of T&D equipment is declining. They will not be able to reclaim the same rate of growth as last year,” said a senior executive of an electrical equipment maker.

He added that delay in payment from state governments was also adding to their woes. “No big state has a pipeline of projects either besides schemes being funded by the Centre.”

The executive said tenders for power transmission projects, which create demand for T&D equipment, were also in the slow lane.  

In 2019, five mega transmission projects were offered. The total deal value was Rs 1,500 crore. The central government in January had said it would offer transmission projects to the tune of Rs 16,000 crore through the bidding process.

The reason states are unable to offer more projects is because their power distribution companies are in a weak financial state, despite reforms under Uday. In FY19, their cumulative loss stood at Rs 28,369 crore — up 88.6 per cent — according to the website of Uday.

Launched in 2018, Uday wanted to make power discoms financially and operationally viable. The states took over their losses and issued bonds. But, the operations part is still facing several challenges.

Several agencies have declared Uday to be unsuccessful. Distribution companies in Uttar Pradesh, Madhya Pradesh, Bihar, Haryana, Jharkhand, and Tamil Nadu are back in the red. Finance Minister Nirmal Sitharaman in her Budget speech in July this year said the scheme needs to be reviewed.

Also, while the Centre has successfully provided power connections, it is doubtful if the supply chains can be sustained by the finances of the states.

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