Journal of Manufacturing Excellence, December 2010 - CII

Journal of Manufacturing Excellence, December 2010 - CII

HighlightsAGENDAThe Skills Imperative Pg 13For manufacturing sector to move up the value chain, skills development andfocused human capital formation are crucial areas to be focused uponENERGYAutomation: Central to Power T&D Pg 17T&D automation can play a lead role in bridging the powerdemand gap and help Goverrnment realise the avowed `Electricity For All' goalSECTORIndian Minenomics Pg21Mining sector performance is central to the growth anddevelopment of the domestic manufacturing sectorJournal of Manufacturing Excellence, December 2010JobcreatIon:a ManUfactUrIngIMPeratIveSPecIal Story:IndIa & US:PartnerS In ProgreSSInside This IssueCHAIRMAN'S MESSAGE Page 2IN BRIEF Page 3INTERNATIONAL Page 6FOCUS Page 9AGENDA Page 13MANPOWER Page 15ENERGY Page 17SECTOR Page 21INDUSTRY DATA Page 23

In BriefInnovation is key to development: PMPrime Minister Dr Manmohan Singh has said that innovationin conservation methods is key to solving the criticalchallenges in providing food, water and energy security tothe people. "In India we have lived with the idea of being aresource-rich land, taking for granted the limitless bounty ofmother nature. In fact, the reality is that as a nation we arenot well-endowed with natural resources when measured ona per capita basis. We should, therefore, inculcate the traditionalvalues of thrift embedded in our culture and our civilisationand saving in the use of our scarce natural resources,"Dr Singh said.The Indian government has declared the present decadeto be the ÁDecade of InnovationÂ. Calling for support fromprivate sector, Dr Singh said: "If we are to give meaning to oursearch for new frontiers in Indian science, then a much largerparticipation of the private sector is also essential. We haveto leverage the private sector's strengths by creating highimpact collaborations. Let private enterprise partner publicscience and technology institutions in their translation andtransformational efforts. Let them join hands with our publicinstitutions in creating new manufacturing strategies for bothstrategic and non-strategic applications. Let there be publiclyowned and privately operated world class research and developmentfacilities."India to outpace China in 2011:Word BankThe World Bank is reigning in its initial forecasts of 2011 growth for East Asia, where the regionas a whole is expected to grow less than previous estimates. Surprisingly, this slowinggrowth in the region will help India attract capital and clout, as the prospect for growth therenow surpasses average regional estimates and even the Chinese growth rate next year. India’s2011 GDP is expected to grow at 8.7% by the official World Bank analysis, despite the total ex-China East Asian 2011 rate being downgraded from 8.0% to 7.8%. China’s is now expectedto grow at 8.5% in 2011, revised down from 8.7% and contrasting a 9.5% expansion in 2010.A net importer of goods, India has the ability to sustain itself by utilising domestic demand asa driver for growth, where competing net exporting countries (such as China) are dependenton the global consumer. Much of Asia has benefited from the global downturn by increasingtheir exports, such as in South Korea, but India has maintained its growth in both the importand export arenas. Still, India has yet to tap the full capacity of export oriented growth, whichmany analysts expect may allow the economy to surpass current estimates.Manufacturing labour costs risingManufacturing labour costs in India haverisen nearly 20% this year and will eclipsethose in China as Indian workers have seen theirwages increase sharply over the last year on theback of high inflation and a recovery in domesticdemand, according to IHS Global Insight inits latest ÁGlobal Manufacturing CompensationWatch study. ChinaÂs manufacturing labourcosts are expected to rise 10% this year despitea slowdown in exports to the West as a result ofthe recession, the study showed. Rapid growth,productivity gains and an explosion in outsourcinghave put increasing pressure on wages indeveloping economies like India and China. Formultinational companies, understanding the labourcosts associated with manufacturing facilitiesaround the globe is a key issue when makinginvestment decisions, the study noted. India andChina have long attracted foreign investmentsgiven relatively low risk profiles and their highlevels of surplus labour.Aerospace, defencefirms make beelinefor SEZEven as the approval from the Boardof Approval is yet to come for thedevelopment of the aerospace specialeconomic zone (SEZ) near the BengaluruInternational Airport, the Karnatakagovernment has already attractedaviation and defence majors to set uptheir operations there. The state governmentis moving forward to materialisethe aerospace SEZ, which will bethe second such SEZ in the state. TheKarnataka Industrial Area DevelopmentBoard (KIADB) has acquired 1,000 acresfor the SEZ. About 55% of the land willbe allotted to companies for setting upfactories. Units in the SEZ will cater todomestic demand as well as the exportmarket. The park will include aviationMRO (maintenance, repair and overhaul)activities too. This would be thesecond aerospace SEZ after aerospaceSEZ in Belgaum district, which is alreadyfunctionalMANUFACTURING MATTERS 3 dECEMbER 2010

Small In Brief WorldPlans afoot topromote electricvehiclesThe electric vehicle (EV) segment in theIndian auto industry holds tremendouspotential for the future as it is a sectorthat is clearly untapped till date. Now theGovernment is showing greater interest inadding leverage to this category by adoptingmeans to popularise it as an alternativemeans of transportation. This prospectivedevelopment spells well for manufacturingfirms in the domestic auto industry. Theauto is likely to see some of the emergingauto manufacturing firms focusing on theEV segment. Government is working on aplan to incentivise the development andpromotion of EVs.Green Investment Bank in the offingGovernment of India is planning to set up a green bank by leveraging the Rs5,000-crore National Clean Energy Fund expected annually through a cesson domestic and imported coal. The proposed bank will fund projects to generateelectricity from wind, solar, tidal and other renewable sources, which currentlycontribute about 6,000 MW in IndiaÂs power capacity of about 150,000MW. India has the potential to generate 80,000 MW from non-conventionalsources, according to estimates of the Ministry for New and Renewable Energy(MNRE). "Our ministry is working on a proposal to set up the green bank," Dr FarooqAbdullah, the Union MNRE Minister has said. The ministry plans to use onlypart of the Fund for its programmes. "A large part (of the fund) will still be availablewith other ministries involved in reducing India's dependence on fossil fueland protecting our environment," Dr Abdullah said. The MNRE-proposed bankwill be linked with the Indian Renewable Energy Development Agency (IREDA),a government-owned non-banking financial company.Manufacturing: Rate hikesto impact moderatelyThe recent rate hikes by the Reserve Bank of India is likely to have amoderate impact on the growth and capacity addition of Indian manufacturingsector in the third quarter (Q3) (October-December 2010), showsa latest survey on Indian manufacturing sector. The survey based on 404responses spanning across the sectors, observed that while 44% respondentsfelt the hike will have moderate impact on the cost of their borrowings,another 43% felt that the impact is not going to be significant. Thesurvey noted that over 46% respondents said they plan to add to their existingcapacities in the next six months as compared to 42% respondents inthe previous survey. However, the sector will see some moderation in thegrowth as 68% respondents in Q3 compared to 71% in Q2 reported thatthe growth will be more vis-a-vis last year for respective quarters.Manufacturing, key part ofIndian investments in USIndia Inc's investments in the US have been on the rise since the globaleconomic downturn and the country has swiftly emerged as the secondfastest-growing investor in the US, according to a report. The report'Direct Investments in the US by Indian Enterprises' reveals that therehas been a pragmatic shift in the US-India trade and investment relationshipover the years. India has matured from being the largest exportdestination to emerge as the second-fastest growing investor in the US,after UAE. In FY09 and FY10, Indian companies made 536 outboundacquisitions globally, of which 105 were in the US. "During the first quarterof FY11, Indian companies completed 101 outbound acquisitions ofwhich nearly one-fourth were in the US," the report says.India Inc. business confidencelevel up 4%: NCAERSlowdown blues are truly past us, says a survey conducted by NCAER-Master-Card Worldwide. As per the findings, the business confidence level in IndiaInc. in the April-August period has increased 4% over the previous quarter takingthe total points up to 162.1, its highest ever since 1993. "The results pointto continued optimism in the performance of the economy," the NCAER-MasterCardIndex of Business report. The survey was based on the performanceof the economy over the last five months, which included manufacturing andexport growth. During the first five months of the current financial year theannual growth rate for industrial production stood at 10.6%. Despite the globaldownturn, overall merchandise continued its upward trend primarily on accountof export diversification. During this period exports jumped 28% to $85.3 billioncompared to $66.3 billion recorded in the same period last year. Another factorthat saw business confidence increase was the healthy inflation rate which was8.51% during the period. "It is high but a significant decline from the double-digitrates in July 2010," the report noted.India emerging keyhub for wind turbinesIndia, with an installed wind generating capacity of 12,800MW, is emerging as a major manufacturing hub of windturbines. The annual wind turbine manufacturing capacity islikely to cross 17,000 MW by 2012-13, according to a backgroundnote on the wind energy industry, prepared for theDelhi International Renewable Energy Conference 2010. Thenote, prepared for a session on "Wind energy: Leapfrogginginto a new era", says that Indian companies are exportingwind turbines and turbine blades to Europe, the US, Australia,China and Brazil. Some of the foreign companies with subsidiariesin India are sourcing more than 80% of their componentsfrom Indian component manufacturers. The GlobalWind Energy Outlook 2010, prepared by the Global Wind EnergyCouncil, estimates the installed capacity in India to reach65,000 MW in the next 10 years, with investment of about$80 billion and employment of about 1,50,000 people.MANUFACTURING MATTERS 4 dECEMbER 2010

In BriefAfghanistan invites Indian investments in mining, cementMinister of Mines of Afghanistan Mr Waheedullah Shahrani, hasinvited participation by Indian companies to the global tenderfloated by Afghanistan Government for allotment of mineralconcessions. The tender is open till the second week of January2011. Afghanistan also suggested a consortium approach by Indiancompanies for investments in the mineral sector. He has said thatAfghanistan is having sufficient mineral deposits of iron ore, copper,etc. Mr Shaharani has said that they have created a specialisedMines Protection Unit which should be a key driver for investment inthe country. Mr Shaharani also sought Indian sponsorship of scholarshipsto Afghan nationals in the fields of geology and mining engineering.Mr Shaharani suggested that some Indian companies bepersuaded to set up cement plants in Afghanistan given that rawmaterials like limestone and coal needed for manufacturing of cementare abundantly available there.India likely to see 2.3 lakh new jobsSix sectors including healthcare andrealty are expected to create awhopping 2.3 lakh jobs in India in the lastthree monthsof 2010, accordingtoglobal consultancyErnst& Young.Boosted bystrong domesticeconomicrecovery andi m p r o v e dglobal sentiment,most local industries are expectedto increase their headcount in thecoming months, E&Y said. The six sectorsare healthcare, real estate, IT/ITeS,Lean manufacturing,response to hyper-inflationThe prolonged hyperinflation regimehas exerted maximum pressure on thecountry's manufacture sector. According toa study titled ’Indian Manufacturing in theEra of Hyper-Inflation, the continued hyperinflationhas forced the Indian manufacturingsector to resort to stringent cost-cuttingmeasures. Rising cost of manufacturingeducation & training, manufacturing andbanking, financial services and insurance(BFSI). Among them, healthcare industryalone is projectedto generate60,000 jobs infourth quarterof 2010. Realestate and IT/ITes sector, eachare expected tocreate 50,000jobs. Education &training industryis projected togenerate 30,000 jobs. Manufacturingand BFSI sectors would each be churningout 20,000 jobs in the 2010 fourthquarter, E&Y said.inputs like primary products, wages andfuel as compared to that of manufacturedproducts have been eroding the price costmargins of firms. Stimulus measures thatwere found helping the sector initially tocope up with this problem have lost muchof their relevance owing to their withdrawalto a large extent.NMP by year-endThe National Manufacturing Policy (NMP)is likely to be in place by this year-end.Mr Anand Sharma, Union Commerce and Industry,was quoted by the media as saying:"The draft of the policy is in the final stageof consultations with all the stake holders".He also said that encouraging the manufacturingsector was necessary to increase itsshare of GDP and to attract overseas investments.The minister said that the NMP, oncein place, is likely to double the productivityof the manufacturing sector in the nextfive years, while trebling employment. Thepolicy will facilitate integrated industrialdevelopment comprising greenfield industrialtownships with infrastructure facilitieslike roads, power, water, effluent treatmentplants, residential and educational facilities.High technology hubs will also be partof these zones.MANUFACTURING MATTERS 5 dECEMbER 2010

InternationalIndia and US:Partners in ProgressThe state visit of US President Barack Obama to India has set the stage for boththe counties to promote bilateral cooperation in the manufacturing sectorThough the services sector inIndia has brought faster economicsuccess, the manufacturingsector plays an importantrole on the plank of long-termsustainability. In 1990, after the introductionof liberalisation, privatisationand globalisation, the manufacturingsector took strident steps. This sectoris critical in improving the efficiency ofthe Indian workforce and also servesas a potential employment generator.The growth rate of manufacturing sectorin a country truly reflects its economicpotentiality.India on the trotThe UNIDO©s report titled Yearbook ofIndustrial Statistics 2010 says Indiahas emerged as one of the world©s topten countries in industrial production.India surpassed Canada, Brazil andMexico in 2009 to reach the 9th positionfrom the 12th position it held in2008. The Index of Industrial Production(IIP) quick estimates data for April2010 shows a growth of 19.4 per cent inthe manufacturing sector as comparedto April 2009. The cumulative growthduring April-March 2009-10 over thecorresponding period of 2008-09 is10.9 per cent, according to data by theMinistry of Statistics and ProgrammeImplementation. Moreover, as per datareleased by the Ministry, manufacturingsector posted a 16.3 per cent growth inJanuary-March 2010.The HSBC Markit Purchasing ManagersIndex (PMI), based on a survey of500 companies, recorded a 27 monthhigh in May 2010 to 59 from 57.2 inApril 2010. A figure above 50 meansUS President, Mr Barack Obama (extreme right), with (L-R) Mr Chandrajit Banerjee, Director General,CII; Ms Kiran Pasricha, Deputy Director General, CII; and Mr Hari Bhartia, President, CII.activity is expanding. The new ordersindex increased to 63.7 in May from61.9 in April 2010, on the back of strongdomestic demand, according to thePMI report. It was the 14th consecutivemonth when new orders expanded.Exports from special economic zones(SEZs) grew by over 122 per cent to$49.5 billion in 2009-10 as comparedto 2008-09. IT, IT hardware, petroleum,engineering, leather and garments arethe leading exports from SEZs.Besides, a report by Deloitte hassaid that India has been ranked second,ahead of the US and South Korea,in terms of manufacturing competenceglobally. China, followed by India andSouth Korea has been ranked first, secondand third respectively in the 2010Global Manufacturing CompetitivenessIndex; a result of the collaboration betweenDeloitte Touche Tohmatsu andthe US Council on Competitiveness.Indo-US HandshakeIndia has endorsed the US as its primesource of investment and an importanttrading partner and reposed confidencethat increased spending on infrastructurealong with a fresh impetusto manufacturing would take its mutualengagement to a higher plane. CumulativeUS foreign direct investment (FDI)in India stands at $8.2 billion, makingit the third most important investor inthe country.MANUFACTURING MATTERS 6 dECEMbER 2010

InternationalUS President, Mr Barack Obama, with Mr Chandrajit Banerjee,Director General, CII, at a meeting.Mr Chandrajit Banerjee, Director General CII in discussion with US President,Mr Barack Obama, as Mr Hari Bhartia, President, CII, looks on.Meanwhile, various reports say thatIndia has emerged as the second fastestgrowing investor in the US afterthe UAE between 2004 and 2009. IndianFDI in the US has been growing,and totaled $6.6 billion for the period2000-2010. The bilateral economic relationshipbetween India and the UnitedStates has been expanding exponentiallyover the last ten years. Tradein goods and services have jumped almost300% from $18 billion in 2000 toover $68 billion in 2008.India has invited US companies totake advantage of its rapid growth andhelp shape the country into a worldclassmanufacturing hub with greaterinvestment in its infrastructure. Just asour strategic partnership has maturedand grown, Indo-US trade and investmenthas increased dramatically overthe past 20 years, Union Commerce andIndustry Minister Mr Anand Sharma hasbeen quoted saying. It has also beenreported that Mr Sharma also askedthe private sectors of both countries toestablish partnerships and commencenew ventures that will demonstrate themutually beneficial nature of the US-India commercial relationship. We nowseek collaboration focused on investmentin India's manufacturing sectorand the build-out of the country's infrastructure,shaping the country intoa world-class manufacturing hub, headded.To facilitate this India is issuing anew foreign investment policy and anew manufacturing policy document,consolidating policy pronouncementsin 177 areas. Mr Sharma said India isalso creating national investment andmanufacturing zones to attract moreforeign interest. The first of these willbe in Rajasthan, alongside the Delhi-Mumbai industrial corridor. We wantthese manufacturing zones to be incubatorsof new innovations and newtechnologies.During the US President BarackObama's state visit, Finance MinisterMr Pranab Mukherjee has been quotedby the media saying: Economic policy,finance and trade constitute importantplanks of our bilateral relations. Forus, the US remains a prime source ofinvestment, technology and an importanttrading partner.Mr Mukherjee stressed that as Indiamakes efforts to increase investmentin infrastructure, and give a fresh impetusto the manufacturing sector, theimportance of our partnership with theU.S. will increase. This mutually beneficialengagement would stimulate innovation,spur job creation, and promotesustainable and inclusive growth in ourcountries, he said.Apart from this, the bilateral investmenttreaty being negotiated with theUS would improve flow of investmentto India. We are now negotiating a bilateralinvestment treaty with the USand are committed to take further initiativesthat will contribute to creatinga more conducive environment for investmentflows, he said.Mr Mukherjee has highlighted thefact that India had emerged as an attractiveglobal investment destinationin that investments required in the infrastructuresector alone would total$514 billion during the XI Plan (2007-12) and of this, nearly 30 per cent wasexpected to come through private sectorfunding. Moreover, for the XII Plan(2012-17), spending on infrastructure isenvisaged at $1 trillion and this wouldcall for innovative financing.The development relationship betweenthe US and India has evolvedfrom traditional donor-donee to peerto-peer,according to a top US official.The partnership, announced during USPresident Barack Obama's India visit,is intended to be cast in the sameway that the previous partnership fora Green Revolution that reached hundredsof millions of people, Mr RajivShah, Administrator of the US Agencyfor International Development hasbeen quoted by a news agency.The development relationship betweenthe two countries has alreadyevolved to a peer-to-peer partnershipand will look for opportunities whereIndian innovators, scientists and entrepreneurscan create solutions thatapply all around the world, the highestranking Indian American in the ObamaAdministration told the foreign media.The first thing is this shift to real technicalcooperation and, instead of thinkingof it as a traditional developmentMANUFACTURING MATTERS 7 dECEMbER 2010

FocusJob Creation: AManufacturing ImperativeGrowth and expansion of the Indian manufacturing sector is key to efficient job creationin the country, which is central to the Government's goal of achieving inclusive growthManufacturing sector plays adecisive role in the Indianeconomy and has beenrecognised as the crucialvehicle for job creation and inclusivegrowth. The CII-BCG Report on Manufacturingunderlines that fact that theIndian manufacturing sector has recordedan average growth rate of 6.8%between FY1998 and FY2008, which isone of the fastest growing manufacturingsectors in the world, with only Chinahaving a higher growth rate (10.3%).However, Indian manufacturing is at animportant crossroad today.In the last decade, the sector was oneof the best performing manufacturingeconomies across the globe. Yet contributionto the overall GDP was one ofthe lowest signaling a strong potentialfor faster growth. Over the next decade,the performance of the Indian manufacturingwill be crucial toward achievingIndia's overall growth aspirationsand employment generation. Accordingto the CII-BCG report, should the sectorrecord about 11% annual growth,that will make India the fourth largestmanufacturing economy in the world by2025 from its current ranking of 13th.Importantly, if the Government has torealise the avowed goal of inclusive growthincluding widescale employment generation,India's manufacturing sector will haveto board a higher growth trajectory.Naukri Dot ComThe manufacturing sector has to carrythe major responsibility of increasingemployment opportunities in the comingdecades, directly or indirectly. Thisis particularly valid for the unemployedcoming from rural areas and agricultur-‘Manufacturing sector will achieve double digit growth'Mr Jagdish P Nayak,President ± Operations, Larsen & ToubroManufacturing sector will achieve a double digitgrowth. However this may not necessarily translateinto large scale job creation as it will primarilydepend on the type of industry driving the growth inmanufacturing sector. Industries which have a highlevel of automation like process industry will notcontribute significantly in job creation whereas hardcore manufacturing industries like capital goods,automotive, light & heavy engineering industrieswill create large scale job opportunities.It is necessary to revamp the existing educationsystem, provide vocational training at very youngage , encourage PPP model to build scalable forprofitvocational training institutes like NationalSkill Development Corporation.MANUFACTURING MATTERS 9 dECEMbER 2010

Focusal sectors. Growth of the manufacturingsector will provide greater support toagriculture through more intensive effortson agro-based industries. It willcreate strong multiplier effects in theservices sector in areas like traditionaltrading, financial services, transport,etc. Therefore, the overall employmenteffect of manufacturing includes the indirectgeneration of employment in theservices sector.Besides, within the service sectorthose of the sub-sectors that are linkedto the manufacturing directly will needto be concentrated upon as they providesubstantial job opportunities. It is,therefore, necessary that robust growthof the manufacturing sector is ensuredfor creating overall growth and employmentpossibilities in the economy.The backlog of unemployment in themanufacturing sector is estimated tobe more than 34 million in 2005, saysa National Manufacturing CompetitivenessCouncil report. It is expected thatover the next twenty years, the totalproportion of workforce involved in agricultureis likely to decline from 56% toabout 40%, and this would call for findingsubstantial non-farm employmentopportunities. While the service sectorwould provide high quality employmentopportunities which are, indeed, essentialin the growth process, it is likely tobenefit only a fraction of the job seekersentering the market. From the year1990 or so the employment intensity ofthe growth process of the Indian economyas well as of manufacturing hasbeen declining. The employment elasticityfor manufacturing which was at0.59 between 1983 to 1987 had fallento 0.38 between 1983 to 1993 and furtherto 0.33 in the period 1993 to 1999.Increases in capital intensity as well asincrease in labour productivity are theimportant causes for this phenomenon,says the National Manufacturing CompetitivenessCouncil report.According to the CII-BCG study, themanufacturing sector employed 58 millionpeople in 2008. By 2012, it is estimated,based on current economicprojections, this sector will employ afurther 12-13 million out of nearly 89million additional people who will enterthe workforce. It is well known thatmanufacturing provides a transition tolarge numbers of agricultural labourmoving from low-skilled to more valueadded jobs. Studies have estimated thatevery job created in manufacturing hasa multiplier effect, creating 2-3 jobs inthe services sector. In a country likeIndia, where employment generation isone of the key policy issues, this is acritical factor to consider as plans arelaid out for the sector.Toward this, the policies will have tobe aligned in a manner that a balanceis achieved between worker rights andflexibility and productivity imperativesof today's business environment.Demand & Supply CurveThe manufacturing sector has an importantrole in creating employment for theburgeoning workforce. The CII-BCG estimatessuggest that for every additional1% point growth in manufacturing, 20-30million additional jobs can be created.In this regard two aspects are to beconsidered. On the demand side, the focusshould be on those industries that willdrive employment. Labour requirementsvary significantly by industry. Hence, focuson labour-intensive industries liketextiles, paper and wood products, andfood processing can generate faster employment.These industries contribute30% of manufacturing output but constituteover 60% of the manufacturingworkforce. For every 1% point growth inlabour intensive industries, 15-25 millionadditional jobs can be created.On the supply side, attention could bedirected towards those states that willgenerate surplus employable manpower.Demographic projections indicatethat five states (Uttar Pradesh, Maharashtra,Bihar, Madhya Pradesh, Rajasthanand West Bengal) will account foraround 65% of the additional workforcein the next decade.Other than Maharashtra and UttarPradesh, none of these states are cur-‘Power deficit, archaic labour laws need to be addressed'Mr T Kannan,Managing Director, Thiagarajar Mills Pvt LtdFor sustained manufacturing growth, three key areasneed to be addressed, namely, power deficit, archaiclabour laws and draconian laws. Power should beuniformly available and at uniform rates in all states.Further, there is need for more flexibility in the labourlaws that creates a win-win situation. And, the problemof land availability for putting up manufacturing unitsshould be tackled by creating large land banks.With regard to skills development for thesector, a PPP approach to revitalise the numerouspolytechnics and other technical institutes in thecountry will prove beneficial. However, the currentsteps to adopt ITIs are still at a nascent stage.Also, manufacturing units should not get concentratedin the peripheral areas of cities. The interiors should bedeveloped as manufacturing hubs. This will promotebalanced development and check urban migration.MANUFACTURING MATTERS 10 dECEMbER 2010

Focusdeal with labour. In addition, there areother acts that deal indirectly with labour.There is a need to harmonise rulesacross all these acts. The key policyagenda for the government would be tosimplify and refine the labour laws keepingthe need for flexibility and efficiencyof the manufacturing sector, while atthe same time protecting and managingthe interests of the labour. At the sametime, existing labour laws are seen asoutmoded and many experts claim thatthey have adversely impacted labourproductivity by discouraging large-scaleoperations and encouraging use of lessproductive informal workers.Indian manufacturing on the other handhas sustained extremely low nominal wagerates; in fact, on inflation adjusted basis India'sreal wage rates have decreased in thesame period. Of course, it is important torealise that this wage rate is a blended averageacross industries hence while wage ratesmight have increased in individual industries,the workforce mix could have shiftedmore towards lower wage rate industries.Focus on Higher ProductivityIndia needs to focus on higher productivity,recognising the fact that wage costswill also need to grow at a faster pace toattract and retain a more skilled workforcefurther exacerbating the need foran increase in productivity. The productivitychallenge will have important implicationson Indian manufacturing's employmentand workforce requirements.Manufacturing industries will need toproactively develop, attract and train relevantskilled workers already an importantgap in India's talent pool today. Atthe same time, growing productivity todrive competitiveness would mean loweroverall incremental workforce requirements.Manufacturing would, therefore,need to grow at an even higher pace inorder to generate more employment opportunitiesand address India's overallemployment challenge.Several situations will shape the futureof competitiveness in the years to comeincreased volatility in factor costs, shiftingdemand patterns and a more awareand educated labour force. Labourforces are becoming more discerningand with rising education and awarenesslevels, individuals are more conscious oftheir options, aspirations and rights. Labourunions have become more demandingthan ever before. Workers, driven byan increased awareness of their ownrights as well as rapidly growing aspirationsfor themselves and their families,are less willing to settle for managementdriven decisions.In the manufacturing sector India holdsa comparative advantage in many respectswith its experienced work force, large poolof scientists, engineers and managers, reasonableendowment of natural resources.And India has the potential to emerge asa major manufacturing hub for the globalmarket. This can materialise quickly onlywith improvement in the competitivenessof its Industry. Rising productivity is thekey to maintaining and improving competitivenessof manufacturing.Skillful MovesHowever, the situation of the manufacturingsector in India is a cause of concern especiallywhen seen in the context of transformationregistered in this sector by other Asiancountries in similar stages of development.While the dramatic shifts in globalmanufacturing bases over the last fourdecades have brought these economiesin focus, India has not been able to fullyleverage the opportunities provided bythe dynamics of the world economy.Isolation of education (even training)from the production sector is thebasic flaw of the Indian system. A seriousmismatch is observed between theneeds of the Industry and the availabilityof skilled engineers and techniciansfor manufacturing industry. In spite ofsurplus graduates in popular engineeringstreams, deficits were witnessed incomputer, metallurgy, mining, sugar,paper, leather and rubber technologybetween 1997 and 2002, says the reportby National Manufacturing CompetitivenessCouncil. Skill development is importantespecially for the manufacturingsector. Strengthening education &skill building need the attention of boththe government as well as the industryin association with the academia.If India wants to change the trajectoryof growth of its manufacturing sector andachieve its aspirations, government supportwill have to play a crucial role in the form ofsolid manufacturing policy initiatives.ConclusionIndian manufacturing has grown at a robustrate over the past 10 years and thecountry has been one of the best performingmanufacturing economies. Indianmanufacturing has the potential to bea major employment hub. However, forthat it requires strong commitment, carefulplanning and willingness to make boldmoves from both governments and industry.They alike will need to acknowledgethe constraints holding back the sectorand take joint responsibility for driving theimportant agenda. It will enable India toenter the next growth orbit and squarelyplace itself as a leading player on the globalmanufacturing spectrum.‘A holistic approach needed'Mr Sachit Jain,Executive Director, Vardhman Textiles LtdA holistic approach to manufacturing is the needof the hour. This is particularly true in the caseof textiles. Currently, the export norms applydifferently to different segments of the industry,such as, on cotton and yarns. This createsimbalance. On the HR front, the disincentives foremployment in the manufacturing sector shouldbe ironed out by revisiting social programmeslike NREGA that tend to draw the labour awayfrom this sector. If this is not addressed,manufacturing firms will increasingly opt forlabour-saving automation.MANUFACTURING MATTERS 12 dECEMbER 2010

AgendaThe Skills ImperativeFor manufacturing sector to move up the value chain, skills developmentand focused human capital formation are crucial areas to be focused upon.Both Government and industry endorse the PPP model to step up skillsdevelopment initiatives in this sectorIf Indian manufacturing has to growat around 12% per annum, it willbe necessary for the education andtraining system to produce at least 1.5million technically skilled workers everyyear. According to the CII-McKinsey reportÁMade in IndiaÂ, the country will havean incremental requirement of about 20million skilled technicians by 2015. As thecountry moves up the technology ladderand begins to produce more complexproducts in greater volumes, manufacturerswill require workers able to use judgmentand other thinking skills in the operationof advanced manufacturing processes andin the maintenance and repair of complexproduction equipment. Hence, qualitativegrowth in skilled manpower is essential.India's comparative advantage lies in itslarge workforce. About 800 million personswill be in the productive working age groupof 15-59 by 2015, with about 12 millionpersons expected to join the workforceevery year, says a report by the Ministry ofCommerce & Industry, Government of India.Over the last few years, however, industryhas encountered shortage of personnel withshopfloor skills. Industry estimates haveshown that only about 50% of the studentsfrom various technical and vocationalstreams are actually employable. This is nowemerging as a major constraint to industrialexpansion and growth.With this learning and keeping theobjective of developing the Indianmanufacturing sector to reflect its truepotential, the Department of IndustrialPolicy and Promotion (DIPP), Ministry ofCommerce and Industry, has embarkedupon creating a policy environmentsuitable for the manufacturing sector toflourish in India.Manufacturing Policy InitiativesGreater availability of technically skilledpersonnel can only be achieved by involvingprofessional institutions where necessarytraining and skills building infrastructureis available or where they can be createdat an incremental cost. Upgradation of theIndustrial Training Institutes (ITIs) can beensured through a well designed publicprivatepartnership.In view of this, Government has initiatedschemes for upgradation of ITIs through theiradoption by industry; setting up of new ITIsand skill development centres in the publicprivatepartnership mode. Government hasalso set up the National Skill DevelopmentCorporation as a Public-Private PartnershipMANUFACTURING MATTERS 13 dECEMbER 2010

Agendainitiative to undertake projects in this area.The special purpose vehicle (SPV) forthe National Manufacturing & InvestmentZones (NMIZ) will continuously review therequirement of skilled manpower and takenecessary steps to meet the demand forskills at three broad levelsÐa very large poolof minimally educated human resource, alarge pool of skilled persons, and a smallyet significant pool of personnel with highlyspecialised skills.A training centre for the zone would be setup as a public-private partnership initiativewith courses being tailored to the demandof specific industries in the zone. Trainedpersonnel would then be placed suitably inthese units. Appropriate technical assistancetie-ups for the centre with agencies abroadwould be facilitated for state-of-the-arttraining infrastructure and curricula.Skill-building among the minimallyeducated workforce: Skill-building in thissegment would include Áfarm to workÂ, andÁschool to workÂprogrammes targeted atthe minimally educated workforce enteringthe non-agricultural sector for the first timeand seeking seasonal employment.The group will be taught generic skillssuch as skills of basic operations on thefactory shop-floor, basic machine operations,and compliance with safety and qualityrequirements. Skill-building will also coverbehavioural aspects, such as those pertainingto work culture — timeliness, reporting, andability to work in an organised set-up.Efforts towards enhancing employabilityof the skilled workforce: It would coveraspects such as certification of prior learning,providing modular training for manufacturingand service sectors such as stitching skillsfor those involved in garmenting, CNCmachine operations for operators seekingemployment in an engineering set-up,training shop-floor executives in retailand imparting selling skills for executivesinvolved in sales of financial products.It would include such initiatives as upgradingthe technical and vocational curriculum, joborientedtraining programmes, maintaining askills registry to ensure market linkages, andbuilding additional capacity. Skill-buildinginitiatives should be performance-orientedand outcome-based.Building specialised skills: Initiativesin this area would include setting up ofinstitutes of specialised learning such asa specialised institute for the automobilesector, or an institute focused on high-techmanufacturing and semi-conductors forthe electronics sector, or one that fostersinnovation and product development in theIT/ITES sector. These institutes would be acrucible for specialised skills in the workforceat an entry level as well for upgrading skillsin the existing workforce.According to the discussion paper publishedby Ministry of Industry & Commerce onNational Manufacturing Policy, Governmentwill ensure that these endeavours by the SPVwill contribute to national goals by ensuringthat the building blocks of the solution reston the following aspects:• Ensuring inclusivity: Skill-buildinginitiatives should be inclusive and cover allsections of the human resource supply pool,that is, those from varied socio-economicbackgrounds. Government, industry, andeducational institutions would have to playan active part in these measures.• Driving alignment: The need is toalign interventions of various stakeholders,namely Central and state governments,industry, academia, and others spearheadingskill development measures. The alignmentwould stem from national and regional-levelobjectives and boil down to the specificrequirements of the zone. Possible ways ofintegrating some of these measures withexisting schemes, will be explored.• Focusing on standards: The curriculumwould focus on developing a set ofstandards that are recognised by employers.Standardization in areas such accreditation,testing and certification to ensure skillbuildingactivities will be supported bylinkages with existing government andprivate agencies.• Linking incentives to outcomes:Outcome-based measurements should serveto evaluate the effectiveness of skill-buildingprogrammes and serve as an input to coursecorrection. Outcomes will be measured toprovide appropriate incentives for such skillbuildingprogrammes.Industry LeadershipAny effort to improve human capital hasto take into account the needs of not onlythe domestic market but also the increasingopportunities in the global market. It canbe done only when the technical personnelare equipped to produce products of globalstandards. The upgradation of the IndustrialTraining Institutes should therefore bepursued vigorously through public-privatepartnerships, with training authorities delinkedfrom certifying ones.The private sector should be encouragedto establish and operate demand driventechnical training centres throughfinancial and other incentives, under acarefully designed industry-managed, andgovernment supported, quality controland accreditation system. Accordingto a study by National ManufacturingCompetitiveness Council, there is a needfor developing a comprehensive NationalVocational Education Qualification Systemand setting up a vocational education &training institute in each state. Large privatesector manufacturing organizations must beencouraged to adopt vocational educationinstitutes through appropriate schemes.In pursuant of these goals, Governmentis extending financial support for theupgradation of ITI's through Public - PrivatePartnership. 1396 Industrial TrainingInstitutes (ITI) have been proposed tobe upgraded into Centers of Excellencein specific trades and skills under PPP.Under the proposed scheme, the StateGovernment, as the owner of the ITI,continues to regulate admission and feeswhile the new management will be givenacademic and financial autonomy and theCentral Government will provide financialassistance by way of seed money.With CII's mission of "Making India theSkills Capital of the world" the upgradation ofITI has become a movement of 237 ITIs with138 members. In addition, CII members havetaken up the responsibility of ensuring thatthis scheme is a success and all stakeholdersparticipate actively and responsibly.MANUFACTURING MATTERS 14 dECEMbER 2010

ManpowerManufacturingManagersKey HR challenges faced by the manufacturing sector are production andworkforce efficiency and skill deficit.India is fast emerging as a globalmanufacturing hub as it has all therequisite skills in product, processand capital engineering, thanks toits long manufacturing history and highereducation system. Manufacturing sectorcontributes around 15% of nationalgross domestic product (GDP). Further,India exports manufactured productsworth about $50 billion, and a studyon Indian manufacturing industry hasforecast an annual growth of 17% by theend of year 2015. And India's manufacturingexports is predicted to cross the$300 billion mark in the same period.Besides, according to the first nationallevelhousehold survey conducted by theLabour Bureau under the Labour andEmployment Ministry, out of 1,000 employed89 are employed in the manufacturingsector.Role of PSUPublic sector enterprises have playeda significant role in contributing to India'seconomic growth right from postindependenceto this era of liberalisation.According to the study Strategiesfor Attraction and Retention of Talent inCPSEs by Confederation of Indian Industry(CII)-Hewitt Associates, as on March2008 there were as many as 242 centrepublic sector enterprises (CPSEs) with atotal investment of Rs 4,55,409 crore.The contribution of public enterprisescan be gauged from the fact that theycontribute 11.12% of India's GDP at marketprices and have close to 27% contributionto the total industrial output. Theperformance of PSEs has ensured a sustainedgrowth in business.However, the post liberalisation erahas also brought about various businesschallenges for the CPSEs, asthere has been increased competitionfrom private and multinational playerswhich has impacted market share.The way forward to stay afloat in tightglobal market and to increase its contributionto GDP is to optimise the returnin the workforce investment, andalso ensure that the investment madeis driving the expected output. Peopleare the biggest assets has become thebuzzword for all organisations and howthese great assets managed remains amillion-dollar question.HR Challenges of PSUsAccording to the CII-Hewitt Associatesstudy, most of the CPSEs have faced thefallout of these changes in the employmentmarket both from attraction aswell as retention of talent perspective.The report reveals, CPSEs today employclose to 15.7 lakh employees, excludingcasual labour, and this number has beensteadily decreasing over the last fewyears due to superannuation, employeesopting for VRS and attrition. With the increasein business activity and the effortto fill up the vacancies created, the recruitmentactivity has also seen a gradualincrease over the past few years. However,this has mostly been at the entrylevel given the compensation constraintsMANUFACTURING MATTERS 15 dECEMbER 2010

Manpowerfaced by CPSE at higher middle managementlevel onwards.The CPSEs are already getting impactedwith succession issues given thetop management is nearing retirementand the second line is either not readyor has not been identified. The challengeis accentuated with the growth expectedin the next few years, which will requiremore leaders and decision makers withinthe organisation. While the degree andcomplexity of challenge is different forvarious CPSEs in the sectors, HR is undoubtedlyone of the most critical variablesin the growth of business.HR Challenges in ManufacturingSectorAccording to the study, key challengesfaced by the manufacturing sector interm of HR management in employmentmarket are: production and workforceefficiency and skill deficit.With the recessionary conditions thatare prevailing in most of the westerncountries there will be an attempt todump the Indian market. The Indiancompanies need to respond with greaterconsciousness towards maintaining thecost advantage and focusing the energieson improving efficiencies. Besides,India is seen as a vast pool of talent withgreat diversity and with a demographicadvantage. However, the industrial sectorfaces acute shortage of skills. Theswiftness with which this skill deficit isbridged will be critical in determiningwhether India can move up the valuechain in manufacturing.HR Priorities of ManufacturingPSUsSuccession Planning & Leadership Development:According to CII- Hewitt Associatesreport, many of the organizationshave not been recruiting for many yearsand this is now coming back to hauntwith the lack of availability of a secondline.Performance Management System:The performance management systemhas been following the ACR route whichis very transactional in its design and approach.The report says the focus has tobe across the key elements of the processincluding performance planning,performance review, performance differentiationand linkage with rewards.Increasing workforce productivity: Themanufacturing sector is labour intensiveand hence staff cost is a critical line itemin the cost structure of the organisation.There is a need to focus on planning workaround business expectations. Workforceproductivity is gaining significance in thecurrent context of increasing cost pressure.Career Progression: Slow career progressionand the lack of system around it have beenidentified as the key constraints in attracting andretaining talent. The attrition during the first fewyears of joining the organisation has been notedto be high, and the key reasons given for leavinghas been attributed to career progression.Way ForwardThe study Strategies for Attraction andRetention of Talent in CPSE's has drawnroadmap to retain the human resourcetalent and embark on the growth planfor the manufacturing sector.Develop Leadership Pipeline: Themanufacturing sector has some of theoldest CPSE's and also has one of thehighest prevalence of an ageing workforce.A lot of senior executives andmiddle management executives are superannuatingeach year and the trendis likely to continue in the near future.Almost all of the recruitment is happeningonly at the entry level which does notgive a solution to the problem at hand.In this context developing a second lineassumes a lot of importance.Strategic Workforce Planning: The elementsof long-term workforce strategyshould highlight manpower numbers andskills for each function based on businessplans. A strategy then must be put inplace to achieve that state through tacticalmeasures of a targeted VRS, redeployment,lateral hiring, outsourcing and profilealteration. Besides, graduate traineeprogrammes should be seen as a strategicinitiative to build a talent pipeline, notmeans to fill in current vacancies.Build the Organisational Fundamentals:Manufacturing organizations in CPSEs onan average have 12 to 15 levels betweenthe junior most employees and the CEO.However, the study says that in most ofthe cases promotions are a mere changeof designation as the job does not significantlychange from one level to the other.There is merit in re-visiting these bandsand identify means to cluster these designationsinto bands across the junior,middle and senior management.Performance Oriented Organization: Mostof the CPSEs today have MoUs signed withthe government. This is a great opportunityto closely align the rest of the organisationto these performance measures. The MoUpractice is based on balanced scorecardprinciples and hence should have a properrepresentation of measures to track HR effectivenessas well.Contact CII for the full versionof the report "Strategies forAttraction and Retention of Talentin CPSEs"MANUFACTURING MATTERS 16 dECEMbER 2010

EnergyAutomation: Centralto Power T&DT&D automation can play a lead role in bridging the power demand gap andhelp Goverrnment realise the avowed `Electricity For All' goalPower losses in transmission anddistribution are endemic to thesector. Reports say that powerT&D loss in India accounts for30-35% of the total power transmittedfrom the power plants. This is very highcompared to that in the European countries.Technological obsolescence is citedas the root cause of T&D losses.Hence, the power industry needs torenovate and modernise its power transmissionmodules. Over the last few years,automation technologies have been exploredto find a suitable solution. Automationof power transmission and distributionneeds to be effectively implementedfor total distribution automation, urbanpower distribution automation, electricsupervisory control and data acquisition(SCADA), and distribution managementsystems (DMS) for power utilities. Automationsystems can be also implementedto monitor power transmission lines forfault detection and load demand.The plant load factor (PLF) is anotherimportant factor which needs to be understoodbetter, and controlled and optimisedaccording to the individual requirementsof power stations. In a power plant or apower generation facility, proper monitoringand control of the PLF can play asignificant role in rectifying the problemof power generation and increasing theefficiency of the power plant.Automation and control systems canplay a significant role in bridging the demandand supply gap the Indian power industryfaces in terms of power generationand T&D. While automation systems playa great role in optimising resources at apower plant and enhancing the efficiencyMr S K Chaturvedi, CMD, Power Grid Corporation of India Ltd addressing the audienceof power generation, the integration ofautomation systems with power plantsneeds equal attention.Automation plays a major role in integratingall the mechanical components ofa power plant and monitoring operationsat all the sections to ensure that the powersupply does not vary much. An automationsystem integrates boiler control, turbinecontrol and generator control logicsseamlessly in a single unit. From the hardwareand software aspects of an automationsystem, a distributed control system(DCS) is employed for the purpose of executingcontrol over the units, namely, theboiler or steam generator, steam turbineand electricity generator.At the ‘National Seminar on Challengesin Transmission & Distribution - And Roleof Automation‘ organised by Confederationof Indian Industry (CII) in New Delhirecently, Mr Gireesh B Pradhan, AdditionalSecretary, Ministry of Power, Governmentof India, said that while capacity additionin the power sector is the glamourousside of business, efficient T&D is what willmake a bigger difference to industry andpeople across the country. He said thatwhile demand for and resources availablefor power transmission are rather unevenlyspread across the country, the guidingobjective lies in the optimal utilisation ofthe national grid through automation.Mr Pradhan said that keeping in viewthe critical role of the power sector inpromoting the overall development ofMANUFACTURING MATTERS 17 dECEMbER 2010

Energythe country and consequent poverty alleviation,the role of automation in powertransmission and distribution is key tofurthering the goal of ‘Electricity For All‘and in reaching electricity to the unelectrifiedvillages.While automation has found applicationin the power T&D segment, he urged theindustry to adopt automation on a widerscale to take full benefit of the opportunity.In this, technologies like GIS will proveto be useful, he said.Standardisation of processes and practiceswill be equally important for thesector, he said, adding that all statesshould seek to follow specific industrystandards while pursuing the power T&Dprogrammes.Mr Pradhan said the power ministry iskeenly focused on enhancing the domesticcontent of equipment and servicesemployed in the sector. Excess relianceon overseas suppliers is seen to lead tobottlenecks in the after-sales services,availability of spares, etc.He said that ‘Right of Way‘ is anotherbig challenge for the sector. He said theway out would be to increase compensationor, better still, augment capacity andutilisation through automation.A smart grid will be of essence to theindustry. The power ministry has constituteda task force as well as a smart gridforum to address the issues pertaining tothis. In building the smart grid, Mr Pradhansaid that the stakeholders should notlose sight of the entire chain of T&D.With the entry of renewables, there willbe greater challenges in power T&D whichhe said can be addressed with the adoptionof appropriate infotech applications.He also focused attention on the issueof skills deficit, stating that a large trainedmanpower base should be developed tocomplement the modernisation of thesector. The ministry has encouraged theadoption of Industrial Training Institutes(ITIs) for developing a cadre of appropriatelyskilled manpower for the industry.He urged the power sector players toadopt or create ITIs that can provide thecritical manpower for the sector.Earlier, Mr Vimal Mahendru, President,Indian Electrical and Electronics ManufacturersAssociation (IEEMA) & Executive Director,Indo Asia Fusegear Ltd, said in hisaddress that major events like ELECRAMAhave demonstrated the robust characterof the power industry. The growing useof gensets, voltage stabilisers, and otherelectrical appliances is an endorsement ofthe vibrancy of the sector.The challenge lies in ensuring 24x7quality power supply to all, he said, whileadding that over the next two decades,the Indian power sector will occupy thecentre-stage of development and attractthe world's attention.Mr S K Chaturvedi, Chairman and ManagingDirector, Power Grid Corporation ofIndia Ltd. (PGCIL), in his address said thatthe focus on sustainable development willpose both challenges and opportunitiesfor the power sector.He said that the sector is coming underincreasing pressure with regard to obtainingvarious clearances for projects. At thesame time, getting land for projects fromadministration is also getting more difficult.He said that adoption of appropriatetechnologies and designs will help the industryto overcome these barriers. Automationis key to the solutions.Among the other issues that he touchedupon, Mr Chaturvedi directed attentionon the need for proper identification,development and retention of talent forthe industry, robust communication withall stakeholders, enhanced customer servicestandards and commercial viabilityof projects.Mr Ramesh Chandak, Chairman, CIITransmission Line Division & ManagingDirector, KEC International Ltd, said in hiswelcome address that for India to becomea major powerhouse in the global economy,the power sector will have to becomethe powerhouse of the economy. In termsof power transmission, he said that bulktransmission has increased from 3,700 cktkm in 1950 to over 165,000 ckt km, whichis a 40-fold growth.From 3,000 electrified villages in 1951,there are 498,000 electrified villages today,which demonstrates the governmenteffort for rural electrification throughvarious schemes including Rajiv GandhiGrameen Vidyutkaran Yojana.In relation to T&D, he said the key challengesare (i) non-availability of price preferenceto domestic industry in domesticallyfunded projects having international competitivebidding; (ii) bunching of orders leadingto sub-optimal utilisation of manufacturingcapacities; (iii) lack of standardisation intechnical specifications; (iv) absence of pricevariation clause; (v) lack of adequate coldrolledgrained oriented steel manufacturingcapacity; (vi) lack of adequate testing facilities;(vii) limited trained manpower base;(viii) taxation related issues; and (ix) barriersto use of automation.Mr K Nandakumar, Chairman, CII Instrumentation& Automation Division &Managing Director, Chemtrols IndustriesLtd, said in his closing remarks thatthe industry would greatly benefit if bankguarantees are provided against releaseof funds upon completion of projects. Heexpressed hope that the Government willaddress the issues pertaining to paymentterms in financing of projects.There are challenges galore. The benefitsof automation systems for the powerindustry notwithstanding, their applicationsare hindered due to high installationcosts. But, with the power industry reachingan inflection point, automation of T&Dis perhaps the only way forward for theindustry to meet is growth and developmentgoals.MANUFACTURING MATTERS 18 dECEMbER 2010

Interview‘Automation can addressthe issues of congestion,bottlenecks and blackouts’Mr Ramesh Chandak, Chairman, CII Transmission Line Division & ManagingDirector, KEC International Ltd, talks about the multiple dimensions of automationof power T&D in an exclusive interview. Excerpts:Mr Ramesh ChandakChairman, CII Transmission Line Division &Managing Director, KEC International LtdHow critical is of power T&D in thecontext of India's overall powerneeds?Automation technologies have a wide varietyof use in transmission and distributionsystem. They can be in the form of Intelligentor Smart Grid, Sub-station Automationor use of large control systems likeSCADA, Geographical Information System(GIS), Automated Meter Reading (AMR).Automation can address the issues ofcongestion, bottlenecks and blackouts.By using the Smart Grid, there is security,sustainability and efficiency of supply. Automationis one of the key elements in thearea of FACTS, HVDC, SVC used for moreefficient, reliable and high quality powertransmission and distribution.The existing heterogeneous communicationnetworks varying in capacity andbandwidth can transform into homogeneousSmart Grid communication networkwith IP/ Ethernet connectivity between allcomponents. The use of complex personalintensive engineering and operating canbe a thing of the past with the sub-stationautomation.Through all these automation technologies,there could be vast improvementsmade in the T&D system in IndiaIs automation of power T&D prohibitivelycostly for the companies?A look at merely the cost element of automationwould imply that it is does notcome cheap and these technologies arecostly. However, one has to take a moreholistic and integrated approach and lookinto a cost benefit analysis to arrive at asolution. Most of the automation technologieslike the Smart Grid, SCADA, sub-stationautomation have long-term benefitswhich would accrue over a long period oftime.Is the current manpower geared tohandle new processes pertaining toautomation of T&D?The shortage of skilled manpower in thepower sector is one of the serious obstaclesin Union Government's efforts to expeditethe pace of power sector reformsin the country. The requirement of differentskill sets for generation, transmission& distribution further complicates the issues.State utilities have the need for higherlevels of automation in the T&D segment.These utilities will need to adapt the newtechnologies as well as train their manpowerin these technologies and processes.While currently they may not be gearedto handle such new processes, they will intime have to gear themselves to handlesuch situation.Will automation have a bearing onthe supply of green and clean energyin the country?The automation in T&D being talked todayis being done, keeping in mind the need forgreen and clean energy. Any efforts madefor conservation of energy, reduction oflosses, use of non-conventional energyresources will all add to supply of greenand clean energy. The use of HVDC system,multi-circuit lines, GIS sub-stations will improveefficiency and in turn reduce losses.Similarly, use of better technology in coalgeneration through 660MW super-criticalpower plants will improve plant productivitywith lesser emissions.Is financing a bottleneck in the adoptionof automation in T&D?Most of the T&D utilities in the country areMANUFACTURING MATTERS 19 dECEMbER 2010

Interviewplagued with high T&D losses and commerciallosses. Most of these T&D utilitiesare entities unbundled from existing stateelectricity boards and carry past liabilitiesdue to which they are not very profitable.Given the low financial viability of theseutilities, financing could be an issue forstate-run utilities. It has been observedthat where there is existence of privatedistribution utilities (in places like Mumbai,Delhi and Ahmedabad), there is quickeradaptability to automation and financedoes not appear to be a bottleneck.Is the domestic content of powerequipment in the country rising?What steps are needed to promotethis?The domestic T&D industry has expressedconcern over the increasing penetrationof Chinese suppliers in the Indian marketin the recent years. The annual value ofimports of electrical equipment in Indiahas grown at a CAGR of 23% since 2001.The share of China in the imports of T&Dequipment has grown from 7% in 2001 toover 26% in 2009. The steps needed inthese regard are:Several manufacturers have reported ofdumping of power equipment by foreignsuppliers, especially Chinese manufacturers.The Government of India should institutea mechanism to deal with such unfairtrade practices.Need for manufacturer to proactively engagewith the CEA and utilities to understandthe requirement of different powerequipment in the coming years and undertakecapacity additions on a proactivebasis. Also engage with CEA to understandemerging technologies and those whichwould be required in the Indian contextand undertake acquisition and developmentof such technologies.There is a need to collaborate with technicalinstitutions to provide industry-specificvocational courses to upgrade technicalknowledge.Recently, the finance ministry hasturned down the proposal by power ministryto impose 20% duty on imported powergeneration equipment, saying domesticcapacity was far short of demand and theproposed move would make electricitymore costly.What is your assessment of the rightof way and its impact on the sector?The right of way is one of the major issuesplaguing the transmission sector. Inordinatedelays have led to the backlog for achievementof the XI Plan estimates. The rightof way includes a host of issues like ROWin forest, railways, roads, coordination oncrop compensation, land disputes, etc.In the transmission line sector, keepingin mind the need for conservation of rightof way, the utilities are using bulk powerhigh capacity lines of HVDV, 765 Kv andmore recently looking at 1200 Kv lines.Alternate line constructions likemulti-circuit, double circuit lines arebeing designed. The use of very hightower structures, compact structureslike Delta configuration and use of hightemperature conductors are examplesof use of technology keeping the environmentin mind. Similarly, the use ofGas Insulated sub-station (GIS) wouldrequire only 30% of the land required innormal air-insulated sub-station, thusminimising requirement of land andleading to conservation of ROW.Will the entry of renewable alter theway power T&D is managed?The National Solar Mission of the GOI talksof deploying 20,000MW by 2022, with rampup capacity of grid-connected solar powergeneration to 1,000MW by 2013; an additional3,000MW by 2017. There are a largenumber of wind farms that are connected tothe grid, especially in states of Tamil Nadu,Karnataka, Maharashtra and Gujarat.Renewable energy, especially wind andsolar, have low capacity, are infirm in natureand need to be transmitted from remoteareas to demand centres. This coupledwith smart meters and other demandmanagement practices will be required toallow the integration of renewable. Thereare cost implications for grid connectivityto such remote areas and also issue of capacityutilisation of such lines as the renewablesources do not necessarily run onfull capacity.In view of large infirm capacities of renewableenergy being introduced in thegrid in the coming years, there is need tolook at concepts like DGDBF that is DistributedGeneration-based DistributionFranchisee where the small generationsthrough renewable should be distributedin the surrounding areas, so as to not requirelarge expansion of grid capacity forsuch kind of infirm power.Are the policies adequately gearedto promote automation?The Central Electricity Authority (CEA)has time and again initiated a number ofstudies to understand the technologicaladvancements in the power industry. Presently,there is no regulatory policy or orderwhich makes it mandatory for utilities toadopt automation technologies. Given thefact that large numbers of rural areas areyet to be electrified and also that that thetariffs of residential and agricultural tariffsare subsidised, the Central and State Commissionmay be hesitant to introduce suchautomation measures. However, given thefact that the Central Electricity RegulatoryCommission (CERC) needs to promoteefficiency and economy and promote investmentsas well as enforce standardsfor quality, reliability of service, it must incoordination with the CEA look at optionsto ensure that these automation measuresare implemented and also encouraged bythe T&D utilities.MANUFACTURING MATTERS 20 dECEMbER 2010

SectorIndian MinenomicsMining sector performance is central to the growth and development of thedomestic manufacturing sector1 2Since Independence, there has beena pronounced growth in domesticmineral production both in termsof quantity and value. According toa Ministry of Mines report, India producesas many as 86 minerals, which include 4 fuels,10 metallic, 46 non-metallic, 3 atomicand 23 minor minerals (including buildingand other materials). The contribution ofmining sector to GDP at present is about2-3% and is expected to contribute about5% by 2020. While minerals accounted for20% of exports, employment in the mineralsindustry was estimated at 4.5% of totalthe employed labour force.Production ScenarioThe wide availability of the minerals in theform of abundant rich reserves made it veryconducive for the growth and developmentof the mining sector in India. Based on theoverall trend so far the index of mineralproduction (base 1993-94=100) for theyear 2009-10 is estimated to be 189.90 ascompared to 175.96 for 2008-09 showing apositive growth of 7.92%.The Ministry of Mines data says thatthe total value of mineral production(excluding atomic minerals) during 2009-10is estimated at Rs 1,27,921.42 crore, whichshows an increase of about 4.61% over1: Inaugural Session: Lighting of the Lamp by the Honorable Justine Elliot, MP ParliamentarySecretary for Trade, Australia, along with (L-R) Mr David O Toole, Deputy Minister, Ministry ofNorthern Development, Ministry of Mines and Forestry, Government of Ontario, Canada; Mr ParthaBhattacharya, Chairman, Coal India; Mr Wahiduallah Shahrani, Minister of Mines, Islamic Republic ofAfghanistan; Mr Chandrajit Banerjee, Director General, CII; Ms Justine Elliot, MP Secretary of Trade,Australia, Mr Rajiv Kaul, Chairman, Eastern Region Trade Fair Council, CII; and Mr Madan Mohanka,Chairman, Mining Construction Equipment Division, CII.2: Mr Partha Bhattacharya, Chairman, Coal India, speaking at the inaugural Session of Global MiningSummit 2010.that of the previous year. During 2009-10,provisional value for fuel minerals accountfor Rs 79,602.69 crore or 62.23%, metallicminerals is Rs 27,571.16 crore or 21.55% ofthe total value and non-metallic mineralsincluding minor minerals is Rs 20747.56crore or 16.22% of the total value.India has a long history of commercialcoal mining covering nearly 220 yearsstarting from 1774 of East India Companyin the Raniganj Coalfield along the westernbank of river Damodar. However, for abouta century the growth of Indian coal miningremained sluggish for want of demand butthe introduction of steam locomotives in1853 gave a fillip to it. With the advent ofIndependence, the country embarked uponthe 5-year development plans. Setting up ofthe National Coal Development Corporation(NCDC), a Government of India undertaking,in 1956 with the collieries owned by therailways as its nucleus was the first majorstep towards planned development of Indiancoal industry. Right from its genesis, thecommercial coal mining in modern times inIndia has been dictated by the needs of thedomestic consumption.India is a globally leading mineralproducer endowed with a rich resource baseof several major minerals like coal, ironore, bauxite, etc. It offers an unmatchedopportunity to both domestic and globalcompanies. It has been viewed that tosupport and sustain high economic growth,the country will need investments to themagnitude of $11.5 billion in the miningsector. As India gets ready to ramp upinvestments in the mining sector, the worldmineral scenario is also fast-witnessingsignificant changes.The Government of India is activelyengaged in policy debates, taking policyliberalisation process far beyond allowing100% foreign direct investment in thesector. Industry is of the view that it needsto address specific challenges in policy;MANUFACTURING MATTERS 21 dECEMbER 2010

Sector3 4procedures for permits, clearances, licensesand land acquisition; infrastructure; funding;technology and environment.The Global Mining SummitThe 10th International Mining and MachineryExhibition and Global Mining Summit,organised by Confederation of IndianIndustry (CII) in November in Kolkata, mainlyfocused on investments in exploration,policy frameworks, best practices forachieving high growth in mining, R&R, therole of financial institutions for developingthe mining sector, environmental and safetyissues, etc.Mr Chandrajit Banerjee, Director General,CII, said that during the last few years,several initiatives have been taken formaking the mining sector more effectivefor rightful utilisation of natural resources,creating at the same time a platform forsustainable growth, job creation, addressingof infrastructure needs.The mining sector in India is running belowpotential because of poor infrastructuredevelopment, said Mr Shrinivas V Dempo,Chairman, CII National Committee of Mining,adding that requirement for statutoryclearance for mining projects in India isa major obstacle. He also threw light onthe need of creating efficient manpowerespecially geologists and mining engineersin this sector.India has abundant reserves of severalimportant minerals wherein Eastern regioncomprising states like Orissa, Chhattisgarh,Andhra Pradesh and Jharkhand togethercontribute about 40 % of total mineralproduction in India, said Mr Rajive Kaul,Chairman, CII Trade Fair Council.Coal is one of the major energy securityproviders in India whose share from thecurrent 53 % has been estimated to come3: Mr V R S Natrajan, Chairman and MD, BEML speaking at the Valedictory Session of Global MiningSummit 20104: Release of `The Study on Mapping of Human Resources, Skill for the Mining Industry in India'. (L-R):Mr Chandrajit Banerjee, Director General CII; Mr Rajiv Kaul, Chairman, Eastern Region CII Trade FairCouncil; Ms Justine Elliot, MP Parliamentary Secretary for Trade, Australia; Mr Wahidullah Shahrani,Minister of Mines, Islamic Republic of Afghanistan; and Mr Partha Bhattacharya, Chairman Coal Indiadown to 51 % only in 2025. Till 2007-08,demand of coal in India was growing at5.5% per annum. Mr Partha Bhattacharya,Chairman, Coal India Ltd, said that 53% ofcoal production in India is done for primarycommercial energy and 66% of total powergenerated units in India are coal based.However, he mentioned that from 2007 to2010 there has been a capacity addition inpower sector of 22,000 mega watts wherethe growth rate of coal demand has risento 9-10% per annum. To meet this demand,India has to largely depend on coal whichwas 49 million tons in 2008, rising to80 million tons this year and has beenestimated to increase up to 200 milliontons by 2015.Mr Bhattacharya emphasised on effortsto find out various ways to overcome theimpediments to coal production in Indialike environment issues, governmentclearance, etc. He opined that contractualblock mining should use high technology,ecology caring, machineries and equipmentfor sustainable mining.Mr Wahidullah Shahrani, Minister ofMines, Islamic Republic of Afghanistan, saidthat the mineral industry of Afghanistanis worth an estimated value of about $3trillion and has a huge potential of furtherexploration. Rich in minerals like iron ore,copper, graphite, lithium, cobalt, gold,oil & gas and many more, Afghanistan sofar has not been explored to its optimumpotential.According to Mr Shahrani, properinfrastructure development has been thegreatest hurdle in this regard. He said thatthe country has given priority to majorinfrastructure development to add valueto the country's assets and attract betterinvestments. Sustainable mining andcorridor programmes for taking advantageof national and regional resources is alsoon the priority list.Ms Justine Elliot, MP, ParliamentarySecretary for Trade, Government ofAustralia, opined that India plays animportant role in Australia's mining tradeand cited energy security partnership asone significant area of challenge.Canada shares a dynamic relationshipwith India in regard to commercial exchangein almost every key sector, mentioned MrDavid O'Toole, Deputy Minister, Ministry ofNorthern Development, Mines and Forestry,Government of Ontario, Canada. The year2010 has been marked as the Year ofIndia in Ontario, Canada, validating India'simportance in the country's economy. MrO'Toole informed that India is one of thetop 5 trading partners of Ontario. He alsoinformed that in July, 2010, the Governmentof Ontario and the Mining Ministry of Indiahave signed memorandum of understandingMoU on various aspects of mining. Heopined that India has an investor friendlymineral policy and Ontario endeavours tokeep a fine balance with it.The mining sector is at the threshold ofmajor modernization of mines, which willhave a positive impact on the manufacturingsector in particular and the Indian economyas a whole.MANUFACTURING MATTERS 22 dECEMbER 2010

Industry DataKey Growth DriversIIPThe Quick Estimates of Index of Industrial Production (IIP) with base 1993-94 for themonth of September 2010, released by the Central Statistics Office of the Ministry ofStatistics and Programme Implementation, show the General Index stands at 325.6,which is 4.4% higher as compared to the level in the month of September 2009.The cumulative growth for the period April-September 2010-11 stands at10.2% over the corresponding period of the previous year.The Index of Industrial Production for the Manufacturing sector forthe month of September 2010 stands at 355.2, with the correspondinggrowth rate of 4.5% as compared to September 2009.The cumulative growth during April- September 2010-11 over thecorresponding period of 2009-10 in the manufacturing sector stands at 11.0%.In terms of industries, as many as fourteen out of the seventeen industrygroups (as per 2-digit NIC-1987) have shown positive growth during the month ofSeptember 2010 as compared to the corresponding month of the previous year.The industry group ÁLeather and Leather & Fur Products has shown thehighest growth of 26.8%, followed by 21.6% in ÁTransport Equipment andParts and 13.7% in ÁRubber, Plastic, Petroleum and Coal ProductsÂ.On the other hand, the industry group ÁOther ManufacturingIndustries has shown a negative growth of 3.1% followed by 2.6% inÁMetal Products and Parts, except Machinery and EquipmentÂ.As per Use-based classification, the sectoral growth rates inSeptember 2010 over September 2009 are 3.5% in Basic Goods, (-)4.2% in Capital Goods and 10.3% in Intermediate Goods.The Consumer Durables and Consumer Non-Durables have recordedgrowth of 10.9% and 2.5%, respectively, with the overall growth inConsumer Goods being 5.2%.Along with the Quick Estimates of IIP for September 2010, the indices for August 2010have undergone the first revision and those for June 2010 have undergone the second(final) revision in the light of the updated data received from the source agenciesIt may be noted that revised indices (first revision) in respect of July 2010 havealready been released in October 2010 and these indices shall undergo final (second)revision in December 2010.Industrial output slows further in SeptemberIndia's industrial output slowed further in September from the previousmonth to touch a 16-month low, sending stocks and the rupee down whilebonds rose. The data is bound to put the policymakers and the centralbank in a fix as they grapple with erratic statistics on the one hand andhigh inflation on the other. Industrial output, as measured by the index ofindustrial production (IIP), grew by a paltry 4.4% in September 2010 versus8.2% in the same month last year, the Commerce & Industry Ministry said.IIP for September 2010 had been forecast to grow by 6-7% on average.August's IIP growth was revised to 6.92% from 5.6% estimated earlier. IIP hadexpanded by an impressive 15.2% in July. Industrial output growth during the firstsix months of the current fiscal year (April-September 2010-11) stands at 10.2%versus 6.3% in the corresponding period of the last financial year.The IIP General Index in September 2010 stood at 325.6 versus 312 in theBCI of SMEs: Major Outlook Indicators450400350300250200150100500Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10same month last year. August's IIP index was revised to 323.0 from a provisionalestimate of 309.1. One has to keep in mind that the September 2010 IIP data isQuick Estimates and is therefore subject to a revision.The Manufacturing sub-segment of the IIP grew by 4.5% in September 2010versus 7.5% in the previous month while Mining output expanded by 5.3% versus6.6% in August 2010. Electricity output for the month improved to 1.7% versus 1%in the previous month.The recompiled IIP data indicates the similar movement of manufacturingindex and general IIP index in the period September 2009 and September 10(quick estimates).two sectors were in the moderate growth category while five reportednegative growth.The Survey further cited that the manufacturing sector is expected to maintainbuoyant growth levels in the quarters July-September 2010 and October-December 2010. Out of 110 sectors covered, 27 sectors are expected to registerexcellent growth rate of more than 20%, 30 sectors are expected to record highgrowth rate of 10-20%, 42 sectors are expected to record moderate growth rateof 0 to 10% while 11 sectors are expected machine tools are also expected toperform fairly well in the next two quarters.Mar-10Apr-10ManufacturingContact usFor suggestions or to advertise with us, contact: Surbhi Mathur, Confederation of IndianIndustry, 23, Institutional Area, Lodhi Road-110 003, New Delhi; Direct Tel: 91-11-24625260,Tel: 91-11-2462 9994-7 Ext 451; Fax: 011 2462 6149; Email: Surbhi.Mathur@cii.inMay-10Jun-10GeneralJuly-10Aug-10Sep-10DISCLAIMER: Information contained in this edition of Manufacturing Matters is accurate to the best ofour knowledge. Confederation of Indian Industry (CII) will not be liable for any omissions, inaccuratedata or subjective views and opinions expressed in the content.MANUFACTURING MATTERS 23 dECEMbER 2010

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