The power sector has witnessed significant growth in recent years. Generation capacity has increased by almost 50 per cent over the past five years. The transmission and distribution (T&D) network has also expanded considerably during this period. This growth has led to an increase in demand for power system equipment, including switchgear.
According to the Indian Electrical and Electronics Manufacturers’ Association (IEEMA), switchgear is the second biggest segment in the Indian electrical equipment industry. Switchgear is a combination of devices that are used to monitor, regulate, control, protect and isolate electrical equipment throughout the grid. These devices include switches, fuses, circuit breakers and relays. Together, this equipment helps in regulating power supply across the system while protecting against overload and short circuits. Switchgear is also used to de-energise the circuits for repair, maintenance and testing purposes. Based on the load bearing capacity, the market for switchgear in India is categorised into three segments – low voltage (LV), medium voltage (MV) and high voltage (HV).
The LV switchgear segment includes switchgear rated up to 1 kV. Apart from power distribution utilities, it caters to end-user segments such as industries, residential and commercial buildings, and agricultural consumers. This segment includes products such as air circuit breakers (ACBs), moulded case circuit breakers (MCCBs), motor protection circuit breakers (MPCBs), miniature circuit breakers (MCBs), residual current devices, switch fuse and fuse switch units, high rupturing capacity (HRC) fuses, thermal overload and protection relays, contactors, starters, distribution boards, and switches.
The MV switchgear segment consists of switchgear rated up to 33 kV. MV switchgear is of either indoor or outdoor type. While the indoor ones are always enclosed in a metal body, the outdoor type may or may not be enclosed. MV switchgear mostly uses oil, gas or vacuum as the interruption medium. The HV switchgear segment includes devices rated at 66 kV and above. The main component of HV switchgear is the circuit breaker. The most commonly used types of switchgear at the high voltage level include air-insulated switchgear, gas-insulated switchgear (GIS) and hybrid switchgear. MV and HV switchgear is often categorised as one owing to its usage and applications, which is mainly in power systems. State power utilities and independent power producers are the key consumer segments of MV and HV switchgear.
Industry size and growth
The switchgear industry in India is fairly well established and growing steadily. According to the IEEMA, switchgear accounts for over 18 per cent weightage (LV 12.8 per cent, MV and HV 5.3 per cent) in the overall electrical equipment industry in the country. It is the second biggest, next only to cables (41 per cent). In 2015-16, the Indian switchgear industry was estimated at around Rs 173 billion. The LV segment accounts for 71 per cent (Rs 122.6 billion) of the total switchgear industry, while the MV and HV segments account for the remaining 29 per cent.
In value terms, the overall switchgear industry grew by 11.6 per cent in 2015-16 over 2014-15. The LV switchgear segment grew by 9.4 per cent, showing remarkable recovery over 2014-15, when it grew by only 1.5 per cent. The MV and HV switchgear segment also grew at a significant rate of about 17 per cent.
In the first nine months of 2016-17 (April to December 2016), growth in the LV switchgear segment picked up pace, recording a growth rate of 26.4 per cent. Meanwhile, growth in the MV and HV switchgear segment witnessed a declining trend on a quarter-on-quarter basis, with a growth rate of 3.1 per cent. This was mainly owing to the slowdown in the MV segment, which recorded a negative growth rate of 2.8 per cent.
In terms of volumes, the LV segment grew by 14.8 per cent while the MV and HV segment grew by only about 5 per cent in 2015-16. The increase in the LV segment was mainly due to the growth in LV circuit breakers and switch fuse and fuse switch units. Other major products in the segment such as power contactors, power switches and overload relays showed negative growth. During 2015-16, MV circuit breakers witnessed a marginal growth, while the production of HV circuit breakers declined by around 5.2 per cent. Meanwhile, the volume of isolating switches (MV and HV segment) grew by almost 16 per cent.
Both imports and exports form a significant part of the switchgear industry in India. The major sources of switchgear imports for India are China and Korea, while the major importers of Indian switchgear products are the US, the Middle East and South Asian countries.
As per the IEEMA, the exports of LV switchgear products increased by about 5.6 per cent in 2015-16 over 2014-15 to stand at Rs 57.8 billion. Imports (including custom-built products) grew at a faster rate of 8.1 per cent to stand at about Rs 78.2 billion. In 2016-17 (April to December 2016), the trend has continued with the growth rates of imports and exports estimated to be 10 per cent and 8 per cent respectively. In the MV and HV segment, exports (Rs 18.7 billion) were higher than imports (Rs 14 billion) in 2015-16. In 2016-17 (April to December 2016), the imports of MV and HV products are estimated to have gone up by over 70 per cent, while exports have increased by only 4 per cent.
While studies have indicated that the impact of imports is not too high in the LV segment, for the HV segment, large-scale imports have led to the under-utilisation of capacity, especially in the HV GIS segment. Overall, imports continue to impede growth in the switchgear market.
The way forward
The switchgear industry has registered good growth in the past year. The key growth drivers in the LV switchgear segment have been the infrastructure sector and manufacturing industries. The MV and HV segment has grown in capacity on the back of various government schemes such as the Ujwal Discom Assurance Yojana (UDAY), the Deendayal Upadhyaya Gram Jyoti Yojana and the Integrated Power Development Scheme. However, the slow implementation of these schemes has resulted in overcapacity and strong competition in the industry.
Going ahead, these schemes are likely to continue to push the demand for switchgear. With UDAY, the financial position of discoms is expected to improve and therefore their spending on distribution networks is likely to go up. As per the Central Electricity Authority’s draft National Electricity Plan (Transmission), 2016, a line length addition of over 100,000 ckt. km and a substation capacity addition of about 290,000 MVA is envisaged during 2017-22. This will drive the HV switchgear market. Further, the government plans to add significant renewable energy-based capacity in the next few years. Given the intermittent nature of renewables, switchgear has an important role to play in the smooth operations of the grid. Meanwhile, the LV segment is expected to grow at a steady rate with overall infrastructure development, and growth in the residential and commercial segments.