Insulators are deployed in power systems to prevent the unwanted flow of current to the earth from the supporting points, and are critical for conducting secure operations. The key application areas of these devices include transmission and distribution (T&D) networks, traction systems, telecom lines, and electrical equipment (such as surge arresters, circuit breakers and instrument transformers). Over the years, the Indian insulator industry has evolved significantly in conjunction with global developments. As of 2014-15, the market’s size is estimated to be around Rs 21 billion.
Domestic insulator manufacturers have the expertise to produce a wide range of insulators for low tension, high tension and extra high tension networks. As the voltage level increases, the insulator size increases as well. With the successful commissioning of Power Grid Corporation of India Limited’s Bina test station in Madhya Pradesh, the industry has also become capable of manufacturing insulators for 1,200 kV-level equipment.
Insulators are classified into three types on the basis of material: ceramic or porcelain, composite or polymer, and glass. While porcelain insulators have traditionally had a greater demand, composite insulators are gaining traction of late as they are made up of engineered polymers that provide higher strength, flexibility and durability.
As per the Indian Electrical and Electronics Manufacturers’ Association, the insulator segment experienced a 6 per cent decline in 2014-15 compared to 2013-14. This can be attributed to the power sector slowdown in the past few years owing to the coal shortage, delays in environmental clearances and land acquisition issues. In addition, the distribution segment’s deteriorating finances have had a ripple effect on the generation and transmission segments as the latter are among the key consumers of insulators. Cheap imports from China are another cause for concern for domestic manufacturers. However, the first half of 2015-16 has been good for the industry, mainly due to the central government’s reform initiatives. Between April and September 2015, there was a 5 per cent growth in the insulator industry over the corresponding period of the previous year. The key players are Aditya Birla Nuvo, Bharat Heavy Electricals Limited, Modern Insulators, ABB, Siemens and Goldstone Infratech. Domestic manufacturers are increasingly exporting their products to over 75 countries, particularly in Europe, North America and South America.
Cheap equipment imports from China have been a major issue for domestic insulator manufacturers, adversely affecting their market size and pricing margins. During 2014-15, the value of imported insulators was around Rs 4.83 billion, about 15 per cent higher than in the previous year. In the past five years, insulator imports have increased at a compound annual growth rate of 37 per cent. Chinese manufacturers offer substantial export subsidies, along with other benefits. This gives them an unfair price advantage over domestic manufacturers and leads to intense competition.
The insulator industry had appealed to the central government to impose an anti-dumping duty on insulators imported from China. The Ministry of Finance acceded to this request and imposed a provisional anti-dumping duty on Chinese insulators for a period of six months. In April 2015, it extended this to a period of five years from the date of imposition of the provisional anti-dumping duty (September 16, 2014). This amount ranges from $128 per tonne to $2,042 per tonne, depending on the manufacturer.
With the imposition of the duty, imports from China registered a decline but still constituted over one-third of the total domestic demand in 2014-15. Between April 2014 and January 2015, the industry’s domestic sales volumes declined by 12 per cent due to the increase in imports in anticipation of the duty.
The insulator industry’s other concerns are the increasing costs of raw materials, dollar fluctuations, and delays in payments from state T&D utilities. In addition, many generation project developers are opting for the engineering, procurement and construction model, which affects the order inflow of small and medium enterprises. Meanwhile, in anticipation of a massive demand from the power sector, several insulator manufacturers had doubled their production in the past few years, leading to an overcapacity situation. With several foreign manufacturers likely to enter the Indian equipment market, competition could increase in the near future.
The insulator market is likely to continue its growth trajectory with the government’s positive reform initiatives. The Power for All and Make in India programmes are expected to provide encouraging medium term- to long-term growth opportunities for electrical equipment manufacturers, including insulator manufacturers. For instance, generation capacity addition stood at 22,566 MW in 2014-15, the highest in a single fiscal. Meanwhile, there was significant capacity addition in the transmission segment, including 22,000 ckt. km of transmission lines and 66,000 MVA of transformer capacity at 220 kV and above levels. The improvement in the overall macroeconomic environment, reflected in the higher GDP, lower inflation and easing of input prices, has helped the growth of the electrical equipment industry.
During the Thirteenth Plan period (2017-22), generation capacity addition of about 93,400 MW has been proposed, comprising 63,400 MW of thermal, 12,000 MW of hydro and 18,000 MW of nuclear capacity. This, together with a concurrent growth in the T&D segment, will lead to an increased demand for insulators. The government’s ambitious renewable energy targets for 2022 also augur well for the industry as insulators are deployed for evacuating power from wind farms, solar plants and other renewable energy projects.
The central government has proposed significant investments of $50 billion in the transmission segment for the next five years as it plans to bid out several projects to public and private sector players. Meanwhile, the interregional power transfer capacity is targeted at 66 GW by the end of the Twelfth Plan period. The aim is to create a seamless national grid that can absorb renewables in large quantities. In addition, there are plans to develop the SAARC grid and expand cross-border electricity transmission interconnections with Bangladesh, Nepal, Bhutan and Sri Lanka. All these efforts are expected to boost the transmission segment’s demand for insulators.
Meanwhile, amendments to the Electricity Act, 2003 have been proposed to introduce competition in the distribution segment. There are plans to segregate the discoms’ power supply and wires businesses, a move that could prove to be a game changer and open up new avenues for the electrical equipment industry, including insulators. This is because wires business providers would be required to continually upgrade their sub-transmission and distribution infrastructure to ensure quality services.
The launch of the Ujwal Discom Assurance Yojana for the distribution segment is expected to tackle accumulated losses by giving discoms the fiscal space to invest in infrastructure augmentation. Flagship programmes like the Deen Dayal Upadhyaya Gram Jyoti Yojana and the Integrated Power Development Scheme will also help create long-term opportunities for insulator suppliers.
The way forward
The insulator industry is upbeat about the reforms in the power sector and their effect on order inflows. The anti-dumping duty for protecting domestic manufacturers is a significant step in this regard. Going forward, as the sector takes gradual steps towards voltages, the insulator industry must gear up with better technology to manufacture advanced equipment. This will require investments in the research and development of superior materials and seamless designs, as well as in the setting up of adequate testing facilities.