Energy Handbook 2011 - GBR

P o w e r S u m m i t - T h e E n e r g y H a n d b o o k 2 0 1 1
C o u n t r y P r o f i l e : I n d i a
‘‘
While we
started out as a
manufacturing
organisation, we
have now become
an innovation-driven
company. Last year
we spent almost
2.5 percent of our
turnover on R&D
and filed patents at
the rate of nearly
one a day.
B.P. Rao
Chairman &
Managing Director
of BHEL
‘‘
The Indian parliament
recently adopted overtly
protectionist measures,
including the reintroduction
of an a tax on imported
power equipment.
State-owned generators,
including India’s largest
generator NTPC, are obliged
to favour domestically
manufactured equipment
if the price is within
15 percent of the closest
foreign-made product.
These measures threaten
to undermine the country’s
generation capacity growth
objectives as well as
damaging the development
of a domestic industry.
For many years India’s power sector was
virtually a closed shop with privileged
status given to Bharat Heavy Electricals
Ltd. (BHEL), the Government-controlled
manufacturer of everything from turbines
to capacitors. Some 70 percent of
turbines in Indian power plants were built
by BHEL. Today, however, BHEL has
emerged from its protected position to
compete successfully in the open market,
and indeed has prospered in recent
years. “Over the last five to six years we
have grown at a rate of 20–25 percent
annually, our top line has tripled and the
bottom line quadrupled in a matter of
four years,” explains B.P. Rao, BHEL’s
Chairman and Managing Director. “In
2006 we had 6 GW/y capacity, in 2007
this was upped to 10 GW and in March
2010 we went to 15 GW.” It is a sign of
quite how fast the market is growing and
how well the old monopolist has thrived
in the free market that 15 GW/y is still not
enough for BHEL; by 2012 Rao is aiming
for an annual production of turbines and
generators totalling 20 GW.
and filed patents at the rate of nearly one
a day. The company followed the process
of acquiring technology through tie-ups
with many of the leading companies.
Today we have technology partnerships
with about 70 companies.”
Exports and international collaboration
have played a major part in the
development of many Indian companies.
Looking to the future, CEOs see that
participating in the world market will not
only widen their markets but also help
them create world-class products. “At
the end of the 1990s things were really
slow in India and the markets were not
doing very well, but we wanted to grow
the company and start exporting our
products,” says Aditya Knanna, Director
of the switchgear and busbar manufacture
C&S. “That was a significant point in the
company, and when we started getting
orders, we had to up our game in terms of
quality, delivery, logistics and aesthetics.
By the time the market opened in the early
2000s we were already there, which is
why C&S is an anomaly today: we are
a small company competing against
multi-billion-dollar companies and have
managed to establish a strong market
position in India.”
India on the World Stage
For many years Indian power service and
equipment manufacturing companies had
little option other than to look overseas
if they wished to grow. With a complex
and often corrupt tendering process
and only a few state-owned clients, the
domestic market was often stagnant and
impenetrable. Today the domestic market
is far more active and transparent, yet
many manufacturers still wish to increase
revenues and margins through exports.
Africa and the Middle East are the key
markets for most Indian export-oriented
companies, with neighbouring South
Asian countries such as Bhutan attracting
the attention of Indian generation
companies.
company,” says Khurshed Daruvala,
Managing Director of engineering and
contracting company Sterling and
Wilson. Daruvala notes that most African
countries take a pragmatic attitude to the
importation of labour and goods when
it comes to executing projects: “Most
African countries allow Indian labour to
come and work, and also accept material
coming from India. 75 percent of the cost
of a project comes from India, which is a
real advantage for us.”
Mohan Energy Corporation is an Indian
engineering firm established over 30
years ago specifically to target the
African market. Director Amitabh Agrawal
explains the Indian experience of Africa:
“In the African marketplace it is hard to
distinguish between an Indian company
and a European company. African clients
are very clear about what they want and
if you are able to give them this then they
are happy to work with you. Africa is not
as price-sensitive as India; in India people
are entering pricing wars, which are not
sustainable and have to compromise the
quality of the product. In Africa, people
understand that there is a minimum price
and they demand a higher standard.
Most of the time, the consultants and
supervising engineers come from western
countries and projects have to be executed
to the highest international standards.”
It is an indication of the international
standards that Indian firms achieve
that they tend to focus on privately or
internationally funded projects rather
than on large, government-to-government
deals. “Tata Consulting Engineers
has successfully carried out several
assignments overseas – in south-east
Asia, the Middle East, Africa, Europe,
Asia Pacific, Australia and the Americas,”
notes Vice President U.K. Hambarde.
“Some of our projects were sponsored by
the World Bank, Asian Development Bank,
UNDP and other international agencies.
Our focus at the moment is the African
region, as it is a growing economy and
we have a lot of experience there. There
are many opportunities, especially in the
T&D sector.” Indian firms have sometimes
struggled to overcome a perception that
they do not deliver to international quality
one of India’s “big three” construction
companies, is working across the world
in a vast array of technical areas.
Essar is a national champion in the
construction and engineering sectors
and one of the largest and best-equipped
construction companies in Asia. CEO
Alwyn Bowden explains: “There are a lot
of misconceptions around, and in the past
Indian construction companies have not
always been highly regarded overseas.
Most of the labour for the international
sites has come from India and the skilled
work base is originating from here. The
Indian market has been very chaotic in the
past, but the management of the various
groups realise that and are recruiting
trained people to make sure that they catch
up with existing management standards
elsewhere.” It is clear, however, that
India can produce world-class companies.
“We are currently running two sites with
25,000-person workforces and that
is quite rare anywhere in the world,”
Bowden says.
Conclusion
India’s generation and transmission
sectors are now open to private investment
and the nation’s leading companies have
rushed to fulfil the country’s burgeoning
demand for electricity. The country has
taken some time to develop a model of
private sector participation that works
and is respected by national and state
governments. The Indian experience for
international companies in the 1990s
and early 2000s has resulted in a muted
foreign response to the opportunities that
exist in the modern market.
The reforms of 2003 have gone a long
way to fixing early problems and foreign
private firms should look anew at India.
The country still has some way to go
before it can hope to attract investment
in the regions of the country where it
is most needed; it is not uncommon for
Indian power executives to define the
Indian market as just four states, ignoring
the 22 which are deemed uncreditworthy.
Many states still need to fully implement
open access legislation and ensure that
state-owned distribution companies pay
generators according to the terms of their
BHEL has placed great emphasis on
technological development, both as a
partner to foreign firms and more recently
through in-house R&D. “While we started Africa is the new frontier for many Indian
out as a manufacturing organisation, we companies who see that they have a
have now become an innovation-driven number of comparative advantages in
company,” says Rao. “Last year we spent that continent. “I believe that Africa
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almost 2.5 percent of our turnover on R&D will be the most exciting area for this
and time standards. Essar Projects, agreements.
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