Conductors Industry in India

A Bright Future

India plans to invest ~USD 1 trillion in the power sector by 2030 to achieve its goal of providing 24/7 electricity to all citizens. This will generate enormous demand for power conductors in India.

The State of India’s Conductors Industry

  • The estimated market size of India’s Conductors industry in FY 2014-15 was ₹9,500 crores
    (~USD 1.5 billion)
  • The Indian conductors industry produced around 4.2 Lac (420,000) MT of conductors in 2010-11
  • Production figures peaked in 2012-13 to around 5.5 Lac (550,000) MT
  • The conductors industry witnessed production at around 4 Lac (400,000) MT in the last two years (i.e. 2013-14 and 2014-15)
  • This trend is largely a reflection of PowerGrid conductor contracts until 2011-12 and bulge in its inventory levels in the following years
  • A significant change India’s conductors industry underwent in the last 2-3 years is that of large manufacturers reducing their dependence on PowerGrid1 to broader cross-section of customers to exports generally
  • India exported more than ₹4983 crores of conductors over the last 5 years
  • More than 42% of Indian Conductors were exported to African countries during FY14
  • Kenya has consistently remained amongst the top 10 Indian conductor importers over the last 5 years
  • Total exports to Kenya were around ₹580 crores, amounting to about 12% of the total conductor exports by India during the last 5 years

Reasons to Invest in India’s Conductors Industry

  • Market-oriented reforms to achieve Power for All and plans to add 93 GW by 2022
  • Capacity addition incentives will increase the demand for electrical machinery
  • Indian manufacturers are becoming more competitive in terms of product design, manufacturing and testing facilities
  • A large pool of skilled human resources, as well as technology advancements
  • Increasing export opportunities to neighbouring countries
  • R&D investments in the electrical machinery industry are amongst the largest in India’s corporate sector
  • Domestic procurement norms have been changed to favour local procurement through domestic competitive bidding to stimulate domestic supplies (and reduce imports)

Investment Opportunities – Why Make Conductors in India?

Major Growth Drivers

  • Capacity creation in core sectors such as infrastructure, power, mining, oil and gas, refinery, steel, automotive and consumer durables are driving the demand for conductors in India
  • Expansion of nuclear capacity will generate additional business opportunities for conductors
  • India has a competitive advantage in terms of
    • manufacturing costs
    • market knowledge
    • technology
    • creativity
  • Other market drivers
    • On the supply side: energy efficiency and innovation
    • On the demand side: power development programme, skill development, minimization of power T&D losses and export opportunities

Foreign Direct Investment (FDI) Policy

  • 100% FDI3 is allowed under the automatic route for electrical machinery
    (subject to applicable regulations and laws)

Sector Policy3

  • Delicensing
    • The electrical machinery industry has been delicensed to encourage global majors to enter the electrical machinery industry in India
  • Tariffs and Custom Duties
    • Customs duty on power transmission and distribution equipment is 7.5% and on power generation equipment is 5%

Vision 2022 for the Indian Electric Machinery Equipment Industry3

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
    • Technology and R&D
    • Lowering of customs duties on a range of equipment
    • Setting up of the Electrical Equipment Skill Development Council (EESDC)
    • Establishment of electrical equipment industry clusters
    • Enhancement of product-testing infrastructure throughout India
    • Boost exports and financial support

Financial Support3

  • Key Provisions of the 2O15-2O16 Budget:
  • Benefit of additional deduction of 15% of the cost of new plant and machinery exceeding ₹250 million (~USD 3.8 million) that is acquired and installed during any previous year ending on 31.3.2017
  • Tax Incentives
  • R&D Incentives: industry/private sponsored research programmes
  • Weighted tax deduction under Section 35 (2AA) of the Income Tax Act of 200% – granted for any sum paid to a national laboratory, university or institute of technology, or specified persons with a specific direction – provided the said sum is used for scientific research within a programme approved by the prescribed authority
  • State Incentives
  • Aside from the above incentives, each state in India offers additional incentives for industrial projects – such as subsidised land cost, stamp duty relaxation, exemption on the sale/lease of land, power tariff, concessional interest rates 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
  • Area Based Incentives
    • Incentives for units in SEZ/NIMZ specified in respective Acts or the setting up of projects in special areas such as the North-east, Jammu & Kashmir, Himachal Pradesh & Uttarakhand

Market Size1

    • The estimated market size of the Indian Conductor industry in FY 2014-15 was as follows:
      • Domestic Market Size: ~₹9,500 crores (~USD 1.5 billion)
      • Exports: ~ ₹1,972 crores (~USD 315 million)
      • Imports: ~ ₹356 crores (~USD 57 million)

Principal Agencies

    • The Department of Heavy Industries, The Ministry of Heavy Industries & Public Enterprises
    • Indian Electrical and Electronics Manufacturers Association (IEEMA)
    • Engineering Export Promotion Council (EEPC)

1 68th Annual Report – IEEMA – 2014-15

2 Power Grid Corporation of India, India’s state-owned electric utilities company, which transmits about 50% of the total power generated in India through its transmission network.