The cables and conductors market has grown at a significant rate in the past few years on the back of investments in the power and infrastructure sectors. The current manufacturing base is well established with a large number of organised players. While low capacity utilisation has been one of the key industry concerns, the outlook looks bright based on the significant investments outlined by the government under various programmes and initiatives such as the Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and the Integrated Power Development Scheme (IPDS).
Power Line takes a look at the key trends in the cables and conductors market, new designs and technologies being used, as well as the industry outlook for the next few years…
Market size and growth
Based on the statistics by industry body IEEMA, the overall size of the cables industry reached close to Rs 392 billion in 2015-16 recording a growth of 35.17 per cent over Rs 290 billion in the previous year. In the first six months of 2016-17, 1.8 per cent growth was registered.
Across cable sub-categories, the power cables segment registered a growth of 7.2 per cent in 2015-16, while the control and special cables segment grew at 7.1 per cent. Meanwhile in 2016-17, the low voltage power cables segment grew by 4 per cent, high voltage cables grew by 27.8 per cent and control cables declined by 16.7 per cent.
The overall size of the conductors industry was Rs 81.25 billion in 2015-16, recording a growth of 17.1 per cent. However, in the first half of 2016-17 (April to September), the conductors industry reported a decline of 1.7 per cent.
With regard to exports, in the first six months of 2016-17, the total value of cable exports stood at Rs 13.48 billion, recording a decline of 0.7 per cent over the corresponding period of the previous year. In this period, the cables imports stood at Rs 17.39 billion, recording a growth of 6.2 per cent over the corresponding period of the previous year. During 2015-16, the exports stood at Rs 26.42 billion (growth of 16.8 per cent) and imports stood at Rs 34.97 (decline of 11.2 per cent).
Meanwhile, with regard to conductors, in the first six months of 2016-17, the imports of conductors stood at Rs 2.4 billion, recording a growth of 31.9 per cent over the same period in the previous year. Meanwhile, the exports of conductors in this period stood at Rs 6.44 billion, recording a growth of 39.1 per cent.
On the technology front, there has been an increased adoption of insulated overhead conductors as utilities face the increased pressure to address environmental issues and improve the quality of supply and network reliability. As compared to bare overhead cables that are prone to accidents, covered conductors are able to withstand severe weather conditions and are insulated to prevent faults, which occur due to phase-to-phase and phase-to-ground, and faults occurring due to contact with trees and animals. Such safety features are also available in underground cables; however, underground cables are more expensive than covered conductors. Typically, the additional cost of using covered conductors is around 25 per cent more than that of bare conductors. Cross-linked polyethylene (XLPE), high-density polyethylene (HDPE), aerial bunched cables and spacer cable systems are the most commonly used covered cables.
New conductor technologies help resolve the growing structural and capacity related problems of power networks. Therefore, there is a growing uptake of high performance conductors and high-tension low sag (HTLS) conductors. HTLS conductors allow more power flow per unit, addressing issues such as congestion, right-of-way (RoW) constraints and network losses. They can carry almost double the current as compared to the conventional aluminium conductor steel-reinforced (ACSR) conductors with size, maximum sag and maximum tension remaining the same.
Another emerging industry requirement is re-conductoring given the high capital costs and long gestation periods involved in new line constructions. To this end, super thermal aluminium conductors (STACIR), gap-type and aluminium conductor composite core (ACCC) conductors are being deployed.
The future growth of the cables and conductors market is expected to be driven by investments in the power transmission and distribution segments. On the distribution side, the government’s schemes such as the DDUGJY and the IPDS for network strengthening in power distribution and sub-transmission are expected to create significant growth opportunities. As per a recent power ministry report, demand of around 856,134 km of ACSR conductors and 13,387 km of all aluminium alloy conductors (AAAC) is envisaged under the DDUGJY. In addition, demand for nearly 122,535 km of low tension (LT), high tension (HT) and underground (UG) cables is projected under the scheme. Meanwhile, under the IPDS, 78,629 km of HT and LT cables, and 246,729 km of conductors (ACSR/ AAAC/all aluminium conductors) are envisaged to be procured by states. Apart from IPDS and DDUGJY, other government schemes such as the National Smart Grid Mission and the Smart Cities Mission involve significant capex, and open additional avenues of demand for cables and conductors.
Another growth driver for cables and conductors is replacement demand of the existing networks to improve the efficiency of power transmission and distribution by minismising losses. The utilities are increasingly shifting towards transmission of power at high voltage levels, by setting up new transmission lines and re-conductoring of the existing lines. The demand for cables and conductor at 132 kV and 400 kV levels looks particularly positive.
Another fast emerging avenue for demand of cables and conductors is the renewable energy segment. The 175 GW renewable energy capacity addition target by 2022 is expected to create significant demand for providing connectivity.
Moreover, the overall growth projected in urban infrastructure will provide a thrust to the demand for cables and conductors.
Issues and challenges
One of the key challenges facing the industry, especially manufacturers is low operating margins, given the price volatility in the input market. Further, the lack of a comprehensive price variation formula in the tender document has affected the profit margins of manufacturers. However, the situation is expected to ease in the near future as capacity utilisation increases with growing demand.
In order to overcome these bottlenecks, manufacturers are now expanding their scope of services and taking over the role of engineering, procurement and construction contractors. Manufacturers are increasingly taking up contracts that involve the entire process of installation rather than mere supply of products to discoms. Currently, this arrangement is more popular for high and extra-high voltage levels as it saves the manufacturers the hassle of providing the last mile connectivity.
Another challenge facing the industry is the lack of standardisation of the end product. The cables and conductors market comprises a number of unorganised manufacturers who do not comply with the product guidelines generally followed by the counterparts in the organised segment.
Another major challenge faced by the segment is the lack of a level-playing field for manufacturers under the tenders released by utilities. According to manufacturers, utilities often specify certain pre-qualification criteria related to a particular manufacturing process in the tender, which restricts wider participation especially from small size manufacturers. Further, it has often been seen that certain conditions in the tender do not have any influence on the quality of the end product.
With regard to the installation of cables and conductors, the legacy issue of RoW continues to hamper swift implementation. Although there have been several technological advancements to reduce the RoW requirements, it continues to remain a challenge.
Net,net, the outlook for the cables and conductors market looks positive owing to the growing demand under the government’s schemes and increasing renewable energy capacity additions. Given the large number of manufacturers both in organised and unorganised segments, streamlining of the manufacturing process and standardisation of the end product are likely to take place in the near future.