Indian electrical & electronics industry has been going through a rough patch even before COVID 19 struck the country. Compared to 2018-19, the industry was down by 13-14 per cent in 2019-20 due to the lull in the market as very few government projects in transmission and distribution were offered in 2019-20. Before COVID 19, the average capacity utilisation was about 70 per cent, which fell to 30-40 per cent during April-May 2020 (due to lockdown). From June, the industry has witnessed some pick-up with capacity utilisation now hovering around 50-60 per cent.

Adding to the industry's woe is the rise in low-cost imports, in particular from China that has grown drastically in the last couple of years hurting the local industry. Total imports increased significantly from Rs 556 billion in 2017-18 to Rs 716 billion in 2018-19, with direct Chinese imports accounting for over Rs 210 billion. Worrying part is that the quantum of imports of SCADA and other critical communication equipment from China has been increasing steadily.

The Ministry of Power, through its July 2 order, has put in place an effective ban on imports from prior-reference countries like China and Pakistan, which require permission. All other imports will be tested at government-approved labs. The Ministry has mentioned possibilities of cyber-attacks on power system through ‘trojans’ embedded in imported equipment, which can have catastrophic effects and the potential to cripple the entire country.

In addition, the government amended the General Financial Rules 2017 to impose restrictions on bidders from neighbouring countries (read China) sharing a land border with India.

Indian electrical and electronics equipment industry also responded to these government steps by cancelling orders of Chinese companies in the last few weeks. For example, the Chandigarh-based EPC company in conventional and renewable energy (RE) sector Hartek Group cancelled orders of a few Chinese companies for control panels. Similarly, Techno Electric & Engineering Co Ltd - a contractor of smart metering project in Jammu and Kashmir - dropped its Chinese supplier from the list of sub-contractors after the state-owned REC Power Distribution Corp Ltd (RECPDCL), an arm of Rural Electrification Corp (REC), asked it to do so.

IEEMA has been demanding a ban on imports for many years to protect and promote local industry. It has also urged the industry to source products, which are currently not manufactured in the country, from reliable and friendlier countries like Japan, Taiwan, Korea, Germany etc. For example, Deccan Enterprises has reduced offtake from China and is looking at other countries like the US, Germany, Norway, S Korea and Japan.

The Government has earmarked Rs 110 trillion for the National Infrastructure Pipeline (NIP) projects to be spent by 2025. Of this, Rs 28.56 trillion will be invested in 295 energy projects (that include solar, wind and power development projects). With investment cycle likely to kick start again, the Indian electrical and electronics industry can expect demand to come back especially with the imposition of restrictions on imports.

-Pratap Padode, Editor-in-Chief, Industrial Products Finder & IPFonline.com.