A4 Report Template - CII

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Exhibit 3a. Power and freight cost account for high proportion of product costBreakdown ofproduct cost for acement manufacturer in India1%oftotal production cost /ton of cement100145331100.0801760234034200Outboundfreight 2FuelsRawmaterial 3PowerMaterial(wear parts,distribution material,consumables)Source: Company annual report; BCG analysis and interviews.Note: Cost are for Jan – Dec 2008, except Freight cost which is for Sept 07 – Aug 08.1Excluding provisions and depreciations and amortization cost.2Weighted average of rail and road transport costs adjusted for distance from plant.3Inclusive of Mining royalties and taxes.4Includes administrative workforce.LabourownLaboursubcontractedOthers 4TotalThe good news is that the average cost of industrial powerin India is nearly 9 cents per kWh, which is comparableto that in other developing countries. For instance, theaverage cost of industrial power in China is nearly 8 centsper kWh 2 . However, inconsistent and insufficient supplyforces companies to rely on alternative sources of backuppower like generators which are much more expensive.A similar story exists with respect to ports infrastructure.Overall port capacity is constrained with most majorports running at close to full capacity utilisation. Averageturnaround time in India is 3.5 days as against 10 hoursin Hong Kong and 16.5 hours in Colombo (as shown inExhibit 3b). Port connectivity to hinterland is often poor.Given that most of our trade is routed through sea ports,their poor efficiency has a direct impact on the competitivenessof Indian exports.India’s road infrastructure also needs substantial improvement.A significant part of the country’s roads areunpaved. National Highways which account for 2% ofroad length but carry 40% of the traffic are under tremendouspressure. The speed of an average truck onIndian roads is about 40 kmph compared to 60 kmph inChina and nearly 100 kmph in USA and Europe, leadingto significant increase in turnaround time and transportationcosts 3 . Recent policy initiatives in this regardshould go a long way in improving the road infrastructurein India.Huge Investments Planned for InfrastructureDevelopmentGovernment of India has recognised the need for massiveinvestments in physical infrastructure and planned forthe same in the 11 th and 12 th Five Year Plans. Exhibit 3cshows that the government has planned an investmentof Rs 750 thousand crore in the 11 th plan (2007–12) acrosspower, ports and roads, more than doubling the actualexpenditure in the 10 th plan (2002–07).A substantial part of this investment is expected to bemade by the private sector. Exhibit 3d shows that as perthe government’s plans, the private sector will contributealmost 33% of all spend on roads, power and ports developmentprojects.2. JETRO report May 2009.3. NHAI statistics.18 The Boston Consulting Group • Confederation of Indian Industry
Exhibit 3b. India faces significant disadvantages due to inadequate infrastructurePer capita electricitythconsumption 1/4that of ChinaMWh/capita15105013.5USA8.2Japan6.96.22.12.12.0Denmark Thailand China0.5UK Brazil IndiaPort turnaround timenearly 5times thatin Sri LankaTurn around time (hrs)10080604020084India17Sri Lanka10ThailandAverage truck speed inUSA nearly twice thatin IndiaAverage speed (km/hr)10080604020055India65China100USASources: IEA Statistics 2008, IBP Statistical Tables–2009, Office of Freight Management & Operations, Performance Measurement Programs 2008 andFederal Highway Admn, NHAIExhibit 3c. Large increases planned in infrastructure spendInfrastructure spend (‘000 Rs Cr)1,000800256%710th10 plan actualsth11 plan expert estimatesth12 plan expert estimatesTotal investment(‘000 Rs Cr)~800~1600~27006004002000125%20045061%150175%240400133%125272%30046571%120277%21046040%102%16011523090%216%12570Power Roads Telecom Railways Irrigation Watersupply/sanitation2101900%1300%85604606%312%30507248%335%35 4010Ports Airports Othersth th% increase from 10 to 11 planth th% increase from 10 to 12 planSources: Planning comission; Analyst reports; Expert interviews; BCG analysis.Note: 10 th plan 2002–07; 11 th plan 2007–12; 12 th plan 2012–17; Conversion rate: 1 US$ = Rs 45; All figures rounded–off for ease of representation.Indian Manufacturing: The Next Growth Orbit 19
Page 6 and 7: PrefaceIndian manufacturing industr
Page 8 and 9: Exhibit 1b. Indian manufacturing se
Page 10 and 11: We should also understand the start
Page 12 and 13: These three growth opportunities to
Page 14 and 15: Exhibit 2a. Comparison of RDEs on m
Page 16 and 17: over the next five years. In 2007-0
Page 18 and 19: This trend is expected to continue
Page 22 and 23: Exhibit 3d. Private sector needs to
Page 24 and 25: -called “demographic dividend”
Page 26 and 27: Exhibit 3h. Wide variation in labou
Page 28 and 29: lengthy and cumbersome process and
Page 30 and 31: Exhibit 3k. Overall FDI flows into
Page 32 and 33: Exploring New Avenues ofGrowthThe s
Page 34 and 35: However, it is important to recogni
Page 36 and 37: geous. For example, though power co
Page 38 and 39: chains will become more globally in
Page 40 and 41: ◊ New countries entering the carb
Page 42 and 43: “Green Products” Emerging as an
Page 44 and 45: Exhibit 4l. India already competing
Page 46 and 47: Exhibit 4n. Globally, Next Billion
Page 48 and 49: Exhibit 4p. Several players have su
Page 50 and 51: Exhibit 5a. India lags China in man
Page 52 and 53: Exhibit 5c. Example: Effect of clus
Page 54 and 55: Leadership in Innovation and NewTec
Page 56 and 57: portant source of differentiation i
Page 58 and 59: Exhibit 5f. Lean 2.0: An integrated
Page 60 and 61: ing a critical lever for manufactur
Page 62 and 63: Policy Priorities for IndianManufac
Page 64 and 65: Exhibit 6a. Expected RDE role in gl
Page 66 and 67: Exhibit 6c. Range of policy levers
Page 68 and 69: the DVD market was only US$ 1 bn do
Page 70 and 71:
to do so. An analysis of China’s
Page 72 and 73:
◊◊◊◊Providing preferential
Page 74 and 75:
Exhibit 6k. Top ten elements of Wor
Page 76 and 77:
Since India’s economy was liberal
Page 78 and 79:
has taken several steps to develop
Page 80 and 81:
ment and capital invested in manufa
Page 82 and 83:
strong logic to bring these differe
Page 84 and 85:
Note to the ReaderAbout the Authors
Page 86 and 87:
84 The Boston Consulting Group •
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