Interview – “Imports of Seconds and Defectives of CRGO Should & Banned”

Showcased on:- Electrical India Magazine

Dated:- 30th September 2002

Saif F. Qureishi CEO & MD at KRYFS

KRYFS of Mumbai started manufacturing transformer laminations and cores for power and distribution transformers in 1993. KRYFS is India’s first lamination company to achieve the coveted ISO 9002 accreditation. Managing Director of Rs. 25 crore company, Mr. Saif Oureishi, is revealing some setbacks of the industry in general and talking about his company’s progress to journalist P. K. Chatterjee. Excerpts…

1. Can you explain the importance of transformer laminations in the transformer and various factors that Influence the quality of the transformer lamination? How does it affect the quality of the overall transformer?

Transformer laminations constitute the core of a transformer and along with the conductor (either copper or aluminium) comprise between 60 to 70 % of the raw material cost of a transformer. The no-load or iron losses of the transformer, as well as the no-load current and the harmonics, depend upon the quality of transformer laminations used. As these are critical parameters of transformer performance, the importance of the quality of laminations cannot be overemphasised.

The total “no-load losses” of the transformer depending on the quality of transformer lamination and the core building procedure. Factors, which in our experience, affect this are:

• Grade of Cold Rolled Grain Oriented (CRGO) Steel used. Various grades of CRGO are available and the grade to be used is decided by the designer depending on the no-load losses specified and also the economics of the transformer.
• The accuracy of fabrication of the lamination, in terms of angles and dimensions. Inaccurate fabrication would lead to air gaps in assembly and therefore higher losses on the built-up core.
• The edge burr level and camber in the manufactured lamination. The higher the burr, the worse the stacking factor and the higher the losses.
• Whether the CRGO lamination has been stress relieved at the end of the fabrication process. Various stresses are induced in the CRGO whilst shearing, punching, holing and handling and this increases the losses of the material. CRGO MUST be stress relief annealed at 800 degrees to 820 degrees Centigrade, preferably by continuous roller hearth type of furnace to reduce the no-load losses and the no-load current. Though CRGO maybe steel in nomenclature, it is extremely sensitive and needs to be handled with care and attention, not to increase the losses of the material
• Core building method and procedure also impacts the total losses. It has been observed that in Indian transformer manufacturing facilities, though some of the most expensive CRGO materials in the world are used, to save labour hours in manufacturing core building is done with two to four plates at a time. This method may be acceptable in the West where labour is expensive, but in India, this is a criminal waste and really is penny wise pound foolish. This method of building the core increases the core losses by 3 to 7 %!

The operating 1lux density of the transformer, which is a design parameter, is directly proportional to the core loss of CRGO (i.e. higher the operating flux density, the higher the losses and vice versa).

2. Can you give us a brief background of your Company and your business philosophy?

With the exit of Guest Keen Williams (GKW) from the transformer lamination and core product categories in the mid-1990s, due to fierce competition from the unorganised sector, we saw the need for a trustworthy, reliable, quality conscious and competitive manufacturer for transformer laminations. We started our plant at Palghar in 1993, in a real small way and gradually grew from there to our present installed capacity of 3600 metric tonnes per annum.

In a market dominated by the unorganised sector and full of intrigue and uncertainty we decided to focus on product quality and systems to enable us to develop a competitive advantage over the un-organised sector, We put together a team of experienced veterans from GKW and youth with a total commitment to customer satisfaction and needs. This was the reason we were the first Company in India to achieve the coveted ISO 9002 accreditation in this industry.

Our progress from a small Company to one of medium size has been slow but steady. We have not sacrificed our values and ethics for growth and profitability, and never will. This is probably the reason that Corporates like Alstom, Bharat Bijlee, Crompton etc., find a high degree of comfort in dealing with us.

3. What are the problems faced by the transformer lamination Industry and how does It impact the transformer industry in turn?

As I mentioned earlier, the transformer core along with the conductor constitutes almost 60 to 70 % of the cost of raw material for transformers. These two items (core and conductor) are the only two “A” class items (input items having high value) required in the manufacture of transformers. The other items are all “B” and “C” class items.

In India, the Electricity Boards have adopted the practice of accepting the lowest quotation in tenders irrespective of the logical cost of good quality raw materials that are required to produce a good quality transformer. Most of the time the rates at which the orders for transformers are placed are lower than the raw material costs by 20 to 30 %.

So the transformer manufacturer obviously has to cut corners and reduce his input cost. As the price of Copper is fixed to London Metal Exchange and there is very little room for maneuver and for cost reduction the only item left is transformer lamination and core. Most manufacturers who quote for such tenders and get orders have no option but to use substandard cores materials which are basically secondary, detectives, or even used materials. There are of course some transformer manufacturers like Bharat. Bijlee, Alstom, and some others have preferred to let orders go rather than compromise on quality.

The requirement of these types of raw materials has led to a complex web of import of spurious and substandard core materials from all over the world, making India the largest market for Secondary CRGO materials in the world! All mills and traders in every corner of the world know this. Also, a lot of unscrupulous traders and importers are importing these materials as “melting scrap” thus, depriving the exchequer of its revenue as well as flooding the market with low-quality CRGO. Also as these imports are of low value, these importers cannot only afford to compete with the regular manufacturers and importers but also are able to give ”payable when able”terms to the transformer manufacturer as they have huge margins on these serious materials. Though this may seem lucrative to the transformer manufacturer in the short term, in the Long run, it has led to the downfall and eventual closure of many units as they quote very low rates and use these low-quality materials. As transformers start falling, they get blacklisted by the EBs and eventually lose their performance guarantee money and become sick. These transformer manufacturers eventually end up not paying money to the lamination manufacturers, spreading the sickness downstream. Therefore the main problem plaguing the transformer lamination industry today are low-value imports which are evading customs duties, leading to bad quality of transformer laminations and equally bad quality of transformers

4. What according to you, is then the solution to overcome this problem and improve the quality of laminations being used in the transformers manufactured In India?

The solutions are many, but the Electricity boards and the government have to act in conjunction. According to me, the imports of Seconds and defectives of CRGO should be banned in this country. But due to the opening up of the economy and the WTO restrictions, this may not be possible, so an anti-dumping duty equal to the duty of Prime material should be imposed on imports of seconds and defectives of CRGO.

At the same time, the government must be vigilant enough to ensure to desist some traders who are importing CRGO materials by misdeclaring them as ” Melting scrap” at various Inland container Depots and thereby evading customs duties totally ( scrap has an import duty of only 5 % and secondary CRGO an import duty of 46% ) Secondly, Electricity Boards must register vendors of laminations with them, who have certified manufacturing facilities of quality and follow stringent production procedures, as a one-time exercise. Transformers should only be manufactured from lamination procured from these pre-certified and registered (approved) vendors of laminations. As the performance of the transformer critically depends on the quality of lamination used, this would ensure that substandard core is not being used in the transformers being purchased. These registrations should be reviewed periodically and erring vendors (who compromise on quality) should be deregistered. I know this sounds somewhat like the license Raj, but the Japanese follow the system of working with several vendors on the supply chain to ensure that high-quality standards are maintained in the final product. Any quality initiatives for improvement of transformer quality will involve some additional work for the Electricity Companies, but in a few years, we will see the quality of transformers being installed improve in the country and also this will save several thousand crores in terms of No-load losses in the distribution system.

5. What are the future plans of KRYFS?

In the last few years, we have started exporting transformer laminations from our plants at Silvassa and Palghar to various countries. We always knew that there was a huge international market for transformer lamination but were never really confident that we would be accepted in the foreign markets. However, with the ISO 9002 accreditation, we found that confidence and now we plan to develop the export market aggressively and hopefully make some inroads into the European and American markets.