Big Potential: Market size and growth of pumps in the country

Market size and growth of pumps in the country

The Indian pump industry is a significant contributor to the country’s growth due to the role of pumps as primary equipment in almost every sphere of the economy, including infrastructure and agriculture. On the basis of end use, the pump market can primarily be categorised into industrial use and agricultural (and domestic) use. Industrial pumps are mostly utilised in sectors such as oil and gas, power generation, metals and mining, water and wastewater, and chemicals, among others. Growth in the pump industry is closely linked to growth trends in the user industries with factors such as investments and overall economic growth directly influencing the pump industry. Pumps are generally classified into dynamic pumps and positive displacement pumps, based on the type of operating principle. Dynamic pumps can be sub-classified as centrifugal or special effect pumps, while positive displacement pumps can be rotary or reciprocating pumps.

Expanding market

The Indian pump segment has registered rapid growth in the past few years largely due to depleting groundwater levels, rapid urbanisation and various initiatives launched with the aim of improving infrastructure. The industry has matured significantly and has been growing at a rate of 10 per cent per annum, while the international pump market has registered an annual growth rate of 6 per cent. This trend can be attributed to the surge in domestic infrastructure development and other water-intensive industries.

While the domestic sales of pumps are increasing at 16-18 per cent per annum, there has been stagnation in the global growth rate. According to industry estimates, India produces about 4.5 million pumps per annum. As per the Indian Pump Manufacturers’ Association, the pump industry has a turnover of about Rs 200 billion. The segment has around 800 manufacturers making pumps of different capacities.

Indian pumps and valves are exported to more than 100 countries. In 2017-18, domestic pumps (for liquids) worth Rs 61.27 billion were exported, registering a growth rate of 21.59 per cent over exports in 2016-17 (Rs 50.39 billion). The top five export markets in 2017-18 were China, Germany, the US, Japan and Italy. Some international players with an Indian presence have arrangements, whereby pumps manufactured in their Indian facilities are sold abroad.

With regard to imports, pumps are sourced from the US, China, Germany and France. The increasing availability of low-cost models compels local manufacturers to be competitive and has led to reduced imports of Chinese pumps, especially in the agricultural sector. Besides, the lack of adequate after-sales service has restricted the acceptance of Chinese supplies by industrial sectors.

Industry structure

The market structure of the Indian pump industry is highly fragmented. It is characterised by the presence of a few big players and a large number of small- and mid-sized players. The market is highly competitive. The large Indian vendors compete directly with global players, and since they have a wide distribution channel, global players find it difficult to penetrate the market. In terms of product pricing, small regional players pose a threat to both the large domestic and global players as their prices are comparatively lower. Only some of the larger players have the capability of serving the industrial sector. The unorganised small players account for nearly half the supply to the price-sensitive agricultural and domestic segments. The main manufacturing clusters are located around Coimbatore, Ahmedabad and Rajkot.

Segmentation

Dynamic pumps (or centrifugal pumps) account for the largest share of the pump market (about 95 per cent), while the remaining 5 per cent are positive displacement pumps. Of centrifugal pumps, single-stage radial flow pumps and submersible pumps together comprise about 70 per cent. Rotary positive displacement pumps account for the major portion of positive displacement pumps. Agriculture and building services account for the major chunk of demand at 46 per cent of the market (in terms of value), while the rest of the infrastructure sector together accounts for the remaining 54 per cent. The industrial segment of the pump market is technology-intensive and hard for small and medium enterprises (SMEs) to penetrate. Almost 90 per cent of the country’s demand is met by domestic pump manufacturers and about 10 per cent through imports. Thus, both Indian and foreign players play a role in meeting local demand.

Major players

The domestic organised pump industry is dominated by a few players. Some of the larger Indian players that have a considerable footprint in the pump industry are Kirloskar Brothers, WPIL Limited, CRI Pumps and Flowmore. The domestic organised pump industry supplies 35 per cent of its pumps in the “standard pumps” segment (used for irrigation and building services), while supplying the remaining 65 per cent of its pumps to the industrial segment, which is technology-intensive in nature.

Foreign companies such as KSB Pumps, Wilo AG, Flowserve Corporation, Grundfos Pumps, Weir Minerals and Aquasub have manufacturing bases in India. The factors that have attracted these international players are low-cost manufacturing and increasing domestic demand. In India, KSB Pumps commands a market share of 7 per cent.

Focus on energy efficiency

In recent times, energy efficiency has been gaining attention from all quarters including the government and pump manufacturers. This has motivated the latter to enhance their products with sustainable design features. Despite several challenges, pump manufacturers in the country are undertaking continuous improvements to enhance productivity, quality and service.

There is significant engineering expertise in pump manufacturing, and, as a result, energy efficient pumps are gaining acceptance across sectors. In May 2018, CRI Pumps was awarded a Rs 1.5 billion contract order by Energy Efficiency Services Limited (EESL), a joint venture of four public sector undertakings under the Ministry of Power, to replace the inefficient agricultural pumps with Bureau of Energy Efficiency (BEE) five-star-rated energy efficient pumpsets coupled with internet of things (IoT)-enabled smart control panels. The project was awarded for the implementation of the Agriculture Demand Side Management Programme in association with the Andhra Pradesh government.

Currently, the average efficiency of inefficient, non-star-rated pumpsets is in the range of 25-30 per cent, while that of star-rated energy-efficient pumpsets is 40-45 per cent. However, there is huge room for improvement. Besides, there exists scope for 20 per cent savings by replacement of inefficient pump sets by star-rated ones, as per the Indian Pump Manufacturers’ Association.

Issues remain

While the pump segment is pervasive across all key segments, the market has mainly been dominated by a few large players. The level of penetration of medium- and small-sized manufacturers has remained relatively low. Besides, subsidised power to farmers acts as a deterrent to the adoption of energy efficient solutions. Another problem that players have been grappling with is the increase in input prices which has led to rising costs and declining margins. This has impacted SMEs in the segment severely. Moreover, the presence of the large number of SMEs in the sector, offering low-cost pumping solutions, has put immense pressure on the market share of the larger players in the agricultural and domestic sectors.

The way forward

There exists immense growth potential for the country’s pump industry given the government’s increasing focus on water management, the Make in India initiative and a renewed push to the infrastructure sector. With India’s minuscule share of 3-5 per cent of the global pump segment, the opportunity to grow is huge. To this end, several Indian pump manufacturers have started venturing into the global market. But the need of the hour is realignment of distribution networks aimed at cost optimisation, understanding customer needs and enhancing services. Going forward, emphasis should be laid on energy efficient solutions and innovative marketing strategies.