Indian Boiler Market

Boiler

A boiler is an enclosed vessel that provides a means for combustion, and heat to be transferred into water or other liquid until it becomes steam. The steam under pressure is then used for transferring the heat to a process.

Boiler belongs to the “Heavy Electrical Engineering Sector”, and forms a part of the BTG (Boiler-Turbine-Generator) island of power projects.

Overview of The Indian Boiler Market

The boiler market in India is growing fast at a CAGR (Compounded Annual Growth Rate) of 24.53%, courtesy the ever increasing energy requirement of the nation. The thermal power sector, ie- coal and gas based generation are the key driver of this growth of Indian boiler market. Other than them, it’s the biomass power plants which drives the small segment boiler market.

The outlook of the segment is positive as the nation is poised to increase its installed capacity, thus creating new business avenues for the equipment manufacturers.

Driving Factors of The Indian Boiler Market

The phenomenal growth of the boiler market of the nation is the result of some key driving factors which are- Growing demand The electrical energy demand for FY 2021–22 is expected to be at least 1915 TWh (Tera Watt Hours), with a peak electric demand of 298 GW (Giga Watt). Foreign participation Moving Towards Advanced Technology - The indigenous players are setting up or expanding their super-critical boiler manufacturing capacity - On the ultra super-critical technology section a pilot project is under consideration with the collaboration of IGCAR (Indira Gandhi Centre for Atomic Research), BHEL (Bharat Heavy Electricals Ltd.) and NTPC (National Thermal Power Corporation). Construction of the plant is expected to commence by 2018. Large opportunity size - For green field projects during 12th & 13th FYP (Five Year Plan) - For brown field projects in the form of replacement as larger share of the nation’s installed capacity comes under projects older than 20 years, Attractive Policy Support - 100% FDI (Foreign Direct Investment) is permitted - Significant numbers of SEZ (Special Economic Zone) have been approved.

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FY 2011-12 FY 2016-17 Fy 2021-220

100

200

300

400

500

600

700

195

290

585

Boiler Market Demand Projection (in INR Billion)

Boiler Market Demand Projection (in INR Billion)

Indian Boiler Market Size

The market size for boilers in India stands at USD 6 Billion on FY 2013-14. And it will easily grow beyond the anticipated USD 11.7 billion target by FY 2021-22.

AS already has been highlighted that the market demand for boilers would be directly depending upon the thermal capacity addition of the nation.

12th FYP 13th FYP0

10

20

30

40

50

60

70

80

30.473

43.64

63.4

Sub-critical (in GW) Super-critical (in GW)

Planned Thermal Capacity Addition During 12th & 13th FYP

Source: CEA, Indian Electrical Equipment Industry Mission Plan 2012-22

Challenges To The Indian Boiler Market

As the sector is dependent upon project installations in the thermal power sector, the problems faced by the project developers directly affect the market of equipment manufacturer. The developers of the nations are facing the problem of raw material availability, ie- coal & gas.

The coal block re-allocation and fuel pooling is anticipated to turn the tide again in the favor of the project developers and hence the equipment manufacturers.

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- import duties on Chinese equipment. Increasing FDI inflow - The FDI inflows to the segment has grown with the CAGR of 28.5% amounting USD 3 billion during FY (Fiscal Year) 2012-13.

Source: DGCIS, Indian Electrical Equipment Industry Mission Plan 2012-22

Import v/s Export Scenario of Boiler Market in India

Between the period of 2000-2014 the imports of boilers in India has grown at the rate of CAGR 29.63%, whereas the exports grew at the CAGR of 20.79% which currently accounts for only 0.8% of the global traded volume. But in terms of the cost associated India’s import is almost double its export.

China is the leading boiler import destination of the nation with its market share of almost 45%, whereas USA is the major boiler exports destination of the nation.

45%

10%7%

6%6%3%2%2%2%

2%15%

% of Market Share in Imports

China

Germany

Japan

USA

South Korea

Italy

Singapore

France

UK

UAE

Rest of the World

3%5% 3%

15%

3%4%

3%2%

4%5%

53%

% of Market Share in Exports

ChinaGermanyKenyaUSASaudi ArabiaNigeriaSingaporeFranceUKUAERest of the World

Electrical Equipment Import Hubs For India

Electrical Equipment Export Destinations For India

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The boiler market size in India till 2022, will be governed by the planned capacity addition or the green field projects and the probable market size for export. But as the quantum of export of entire mix of electrical equipment accounts for only 0.8% of the global trade, hence the opportunity size of export of boiler can be overlooked.

For the calculation of opportunity size of boilers from FY 2015-16 to FY 2019-20, the cost of boiler per MW of capital cost of project has been considered as- INR 1.07 crore for the 660 MW unit size- INR 1.02 crore for the 500 MW unit size

Indian Boiler Market Size Forecast

FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-200

5

10

15

20

25

30

35

40

-50

50

150

250

350

450

550

650

6 6

8.68.6

12.6 12.6 12.6

153

306

440

574608

Planned Thermal Capacity Addition Under the Super-Critical Technology (in GW)

Planned Thermal Capacity Addition Under the Sub-Critical Technology (in GW)

Market Size (in INR Billion)

Source: Planning Commission, Working Group Report on Power

Year-on-Year Planned Thermal Capacity Addition Between 2015 to 2020 and The Boiler Market Size of India (in INR Billion)

Boiler Market Size of India for Exports Between 2015 to 2020 (in INR Billion)

FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-200

5

10

15

20

25

30

10 10.9 11.7 12.2 12.7

21 22.1 23.3 24 25.2

ExportsImports

In IN

R Bi

llion

Source: Indian Electrical Equipment Industry Mission Plan 2012-22

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Competition in Indian Boiler Market

The Indian boiler market is dominated by the PSU electrical equipment manufacturer BHEL with almost 59% of the market share. The other notable players are- L&T, Siemens, ABB, Doosan, Crompton Graves. The sector has also witnessed key interest from foreign players and their foray to the domestic market in the form of JVs (Joint Ventures), list of these have been represented in Table 1.

JVShare Pattern (in %)

Indian Partner Foreign Partner

L&T – Mitsubishi Heavy Industries 51 49

BGR - Hitachi 70 30

Thermax - Babcock 51 49

Bharat Forge - Alstom 51 49

Table 1: Major JVs in Indian Boiler Manufacturing Industry

The indigenous manufacturer are having a tough time in competition with the Chinese players. GoI (Government of India) has tried its fare bit to shield the domestic players by floating bulk tenders of super-critical units for the projects of NTPC and DVC (Damodar Valley Corporation) with the eligibility clause for bidders specifying mandatory domestic manufacturing presence with a valid technology transfer agreement.

But the same doesn’t hold applicable for projects developed by private sector, and as the share of installations of private sector is on the higher side in the 12th & 13th FYP, the competition between the domestic & Chinese equipment manufacturer will intensify.

Factors Affecting Competitiveness

Domestic Players Chinese Players

Cost Competitiveness Comparatively Costly 15-24% Cheaper

Delivery Time Comparatively Higher Less, usually in the range of 36-40 months

Technology, ie- Super-critical Range of Boilers

Comparatively lower manufacturing capacity

Huge manufacturing capacity of super-critical boilers

Access to Key Raw Materials

Indian players still have limited access of some key raw material like boiler quality plates of 63 mm limiting their production capabilities.

Chinese manufacturers don’t face the similar problem.

Key Factors Affecting The Competition Between Domestic and Chinese Equipment Manufacturer

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