Abstract
Superiority of Global Participants Combined with Fluctuating Raw Material
Prices Poses a Threat to Power and Distribution Transformers Market
The growing presence of global participants in the Indian power and
distribution transformers market is a cause for concern for local
manufacturers. Multinational manufacturers have expertise in segments such as
extra high voltage (EHV) power transformers and unitized substation
technologies. Moreover, low investment in transformer research and development
(R&D) in India poses a challenge to domestic participants that eventually
tie-up with multinational giants for high-end technologies. In addition, the
global price hike in transformer raw materials such as copper, aluminum, and
oil resulted in the increase in transformer prices in India. Also, shortage of
cold rolled grain oriented (CRGO) steel is further escalating the price of
this essential 'transformer core' material. With growing demand and prices
correspondingly rising, manufacturers are finding it difficult to maintain
margins in the long term, thereby transferring the burden of increased costs
to end users.
This Frost & Sullivan research presents a comprehensive analysis of power and
distribution transformers used in power generation, transmission, and
distribution. It also includes an exclusive in-depth discussion of market
trends, end user preferences, market drivers and restraints, as well as
industry challenges, and covers products incorporated into systems with power
ratings from less than 100 kVA distribution transformers to over 100 MVA high
power transformers.
Modernization and Urgent Need for Power Drive Demand in the Market
"The increasing electrification ratio in India acts as a driving force in the
demand for power generation; also, the increase in load growth and high
transmission and distribution (T&D) losses is highlighting the need for more
substations," notes the analyst of the study. "Due to rapid economic
development, the power demand by 2012 is expected to be so phenomenal that the
Indian power sector will need to replicate what has been achieved during the
last 50 years in the next 10 years."
Other than the central and state utilities' plans for power capacity addition,
private sector participation is also expected to have a profound influence on
the development of the power industry. Moreover, ageing equipment is creating
potential for a booming replacement market. This demand is expected to be
sustained by the growth in industrial demand.
Government Support and Growth of Other Industries Encourage Demand and Improve
Profitability in this Market
Understanding the importance of private participation for the growth of the
market, the Indian Government is actively taking steps to encourage increased
private investment. With measures such as the Electricity Act of 2003, the
government has made the unbundling of State Electricity Boards (SEBs) and open
access to power distribution compulsory by 2009, thereby erasing the
uncertainties of private investors. Power sector reforms and the enlargement
of the distribution network under the Accelerated Power Development and
Reforms Programme (APDRP) is driving the growth and strengthening of
sub-transmission lines. In addition, the increase in transmission grid
reliability is expected to indirectly result in increased demand for power
transformers.
"The transformer industry is expected to record significant growth with the
growing construction industry, expanding export market, and growth in
electricity consumption," explains the analyst. "Also, factors such as power
generation capacity additions, economic growth of the country, and the
Government's keen interests in developing the power infrastructure are
augmenting the growth and revenue potential of this market."
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