Long Overdue
Most of the original equipment manufacturers EQUIPMENT INDIA interacted with were of the opinion that the concept has been long due. Says Ramesh Palagiri, Managing Director and CEO, Wirtgen India,?The ?Make in India? campaign launched by Narendra Modi is long overdue and it is a campaign in the right direction. Now that it is initiated, all the manufacturers will start working towards it, including Wirtgen India.? PV Ramdev, Managing Director, Everest Engineering Equipment, minces no words. He says, ?We welcome the much awaited decision of ?Make in India? concept and its sincere implementation in the next 10 years. This was supposed to be done in 1980s when China started this. Still we can achieve this if the new government is able to turn down several hurdles one by one.?

Amit Gossain, EVP - Sales, Marketing and Business Development, JCB India, had this to say. ?Make in India? campaign is one of the major national programmes which has been designed to facilitate investment and establish India as a global manufacturing hub. Moreover, we feel the campaign will push for necessary policy reforms which will make it easier for prospective investors (domestic and international) to explore India as a business destination, particularly for infrastructure building equipment. It will also foster innovation, create employment opportunities and will protect the intellectual property right.

According Vijay Sharma, Executive Director, Terex Equipment, the concept of ?Make in India? has already been in practice. He says, ?The construction equipment/mining sector has been largely following this concept for a long time now. Most products on the retail side of this sector are made in India, with Indian specifications and in line with requirements of Indian customers. However, this is just one part of our new Government?s campaign on ?Make in India?. The second part is to make products for other world markets and this part is yet to be scaled up. We at Terex are aggressively working on this aspect, and are now making our machines as per export standards. We are already supplying ?made in India? backhoes to SAARC, ASEAN and GCC countries. We are also handing a lot of manufacturing jobs for our group companies as well.?

Kallol Mahalanabis, Chief Executive Officer, Taurian, is on the same page. Speaking about the crushing equipment segment, Mahalanabis had this to say. ?With regard to crushing and screening equipment, Puzzolana, Propel, Proman and Taurian are making cone crushers in India since long along with all other accessories. As the USD exchange value is very high these days, it is not really feasible to import from some manufacturer abroad and sell in a price-sensitive market like in India; hence it has to be ?Make in India?. Speaking about the hurdles, he says, ?I do not see any major hurdles! Crushing and screening is not rocket science and we Indians are the best in adopting any technology.? Challenges in manufacturing according to him are localised issues and can?t be generalised; as power is the single most important factor and not all the states are producing power equally, the picture across the country varies from location to location. Same goes for raw material, which in our case steel.

Mahalanabis further adds, ?Major part of the crushing and screening equipment sales are made in the aggregate sector. Government policies should give more thrust to stalled infrastructure projects which will help the crushing and screening industry. Mining is the other area where boost is required.?

Most of the OEMs believe that ?Make in India? is a highly positive step that will help improve quality, productivity and manufacturing capabilities. Says Wilfried Theissen, Managing Director, Putzmeister Concrete Machines, ?This initiative is a very positive step. India is in great need to improve the quality, productivity and capability of its manufacturing industry. The ?Make in India? campaign is the perfect platform to achieve just that. We at Putzmeister are proud to have already achieved export exceeding 30 per cent of our total turnover.?

According to Rajinder Raina, General Manager-Marketing, Escorts Construction Equipment, this dream concept of ?Make in India? has far reaching consequences in the entire value chain. Raina says, ?In mining and construction equipment segment, there is a lot to be done on ?Make in India? front. Major aggregates like hydraulic pumps and motors, slew rings etc, continue to be imported and these are high-value items. As the focus moves towards contemporary styling, fit and finish the casting facilities in India still are nowhere near the global standards. Even the diesel engines need to move to the next level of quality, efficiency, reliability and homologation. As the domestic demand is bound to increase, investment in these areas is the way forward. This will also give us a bigger, global market to cater to.?

Amarnath Ramachandran, President - Designate, LeeBoy India, has a different take. He says, ?The campaign to ?Make in India? is good. One of the major problems which has plagued India today and in the past is the current account deficit. More than this, India has a technology deficit. This is one of the reasons why manufacturing contributes only 15 per cent of the GDP. The quality and workmanship of products is always centred on COST and hence all equipment are stripped down to below the bare minimum.? He adds, ?ICEMA has a technical panel, which is now looking at lifting the bar and ensuring that all equipment meet safety norms. This will also go a long way in making machines which can be exported. Right now, other than backhoe loaders and pick-and-carry cranes, there aren?t any other machines which have large volumes. As volume and viability go hand-in-hand, we need to export machines to generate sufficient volumes to make products economically feasible.?

Says Sanjay Wadnerkar, Vice President, LiuGong India, ?We see good suppliers making their footprint in India. ?Make In India? move will attract many leading global players to India through manufacturing roots. In the course of localisation, we started sourcing hydraulic systems from suppliers in India who are reputed international brands. Our new products in pipeline are also being explored with local suppliers from initial stages so that customer will get quick response on their service calls and spares/maintenance needs.? He adds, ?For many years, the casting forging and precision industry is well established in India due to large automotive product demands. This has helped many hydraulic system manufacturers to bring down their cost and upgrade quality to global levels. Soon, it may become a reality that most of the established players will start exporting in a big way to developed countries.? He adds, ?We are looking forward for prosperous growth of India opening opportunities for our range of products. The ?Make in India? initiative has brought the new perspective to us; import duties, export benefits and uniformity in tax structure can support our business. Inflation control actions, excise duty reduction and sustainable capital funding plan will help the infrastructural sector to grow, which will help LiuGong?s Indian operations positively.?

Says Abhijit Gupta, Managing Director, Case Construction Equipment India, ?The government?s ?Make in India? campaign is surely going to garner more interest in the Indian manufacturing sector with concomitant rise in the employability of the masses. CE industry is also going to follow suit. There is an opportunity to start using India as a manufacturing base in line with the government initiative of ?Make in India.? Gupta adds, ?For this, CASE has introduced globally followed ?World Class Manufacturing? processes at the Indian CE plant. We have started exporting to developed as well as developing countries now that reflects the quality of the products. Going forward, the quality products from Pithampur plant will not only open many export markets for us, but will also benefit the Indian customers with a superior quality offering.?

Sameer Shah, Director, Hoffman Equipments (India), rather focus on the importance of SMEs in making this concept a success. According to him, the government should ensure that like big players, small players also get equal opportunity in the process. He says, ?Make in India can be a good initiative. The government should facilitate the small entrepreneurs to start make in India and gradually grow towards bigger players and then they can challenge the world. The Prime Minister should effectively address this.? He adds, ?Now most of the orders for Defence and other government projects go to big players. If the government does not involve small players, the thrust will not come. So, Defence, Railways, Navy, Air Force, mining, etc should encourage young and small entrepreneurs rather than big ones.? Shah further adds, ?If only big players are coming forward for the Make in India initiative, it will not fulfill the purpose of the campaign. The thrust of manufacturing should come through the growth of small players.?

Says Upinder Razdan, Managing Director, Danfoss Power Solutions, India, ?Over the last couple of years, we have seen a trend that many of the Indian manufacturers of construction, agriculture and mining equipment have started exporting to other countries. This was not the case earlier. We hope that this trend will continue to grow in future and it would offer more opportunities for us specially, on high technology electro-hydraulic systems. The ?Make in India? drive would further encourage this trend. The year 2014, in general was not good mostly because of economic slowdown and political speculation in the country. However, now with new stable government in place and their industry-friendly plans like ?Make in India?, we expect a growing trend in near future.?

Challenges
According to AEM?s Project Database (provided by BMI), there are about $7.5 trillion worth of projects underway across all emerging markets globally. Most projects are located in the emerging Asia Region (China and India). However, comparing the activity to the size of the economies paints a different picture as Asia falls behind the Middle East and North Africa (MENA) and Sub-Saharan Africa (SSA). For India, BMI states that the risks and rewards are great. Looking at the infrastructure industry, a main driver behind construction equipment, India is ranked 7th in terms of risk vs reward. There is a high implied growth and a large industry value in the construction sector, though it falls short in terms of overall country rewards and scores poorly when we look at the overall risks. The strong expectation for growth is mainly driven by the government?s efforts to attract multi-billion dollar investments in transport, energy, utilities, and urban infrastructure.

Says Theissen, ?India ranks low on the ?ease of doing business index?. Labour laws in the country are still not conducive to the ?Make in India? campaign. This is one of the universally noted disadvantages of manufacturing and investing in India. According to Raina, the major challenges are adequate investment in R&D, and building up proper test and certification facilities. He says, ?For this campaign, industry needs to invest in R&D, test and certification facilities. This type of investment needs sustained market demand. Government being the biggest spender, has to ensure that projects take off on time and get completed on time too. There has to be some predictability in market demand to encourage the industry to invest in these activities. Government needs to do its bit and the industry has to respond in an equal manner.?

Ramesh says, ?The major challenges for this campaign would be to optimise cost and at the same time ensure quality, not only the OEM quality, but also the vendor quality, because the OEM quality depends on the vendor and that again depends on the skill levels of the workforce of the vendors. These are the challenges to be addressed, as these are the current challenges we are addressing for our products made in India.? He adds, ?Supply chain management and quality are interlinked and here a lot of effort is required on skill development of vendors at the OEM levels to ensure that quality is maintained, when we offer products at competitive prices.? According to Gossain, the biggest challenge in making India a manufacturing hub is the requirement of infrastructure. In addition to this, issues like high interest rates and the cost of capital need to be addressed. He says, ?Reviving the manufacturing sector tops the ?to do? list of the Government. ?Make in India? has been launched with the aim of creating an environment conducive to turn the country into a manufacturing hub and, in turn, create job opportunities for at least 100 million youths. However, we still have a number of challenges to make India a global manufacturing hub that need to be identified and corrected.? Gossain further adds, ?At a recent national workshop titled ?Sectoral Perspectives and Initiatives? on this programme, the Government has attempted to address such issues and ministries have presented their plan of action to work on the challenges and opportunities for the next one to three years. We are certain that decisions taken at this workshop will smoothen the implementation of the programme.?

Says Sharma, ?In line with policy reforms, unless our political masters help and manage to change the mindset of our bureaucracy, from command and control to that of a facilitator, the ?Make in India? campaign will remain a dream. Labour reforms, skill development, logistics infrastructure up-gradation, financial, banking and taxation reforms, especially rules/regulations related to Forex management and many more macro and micro level reforms, if not completed in time, could dent this ambitious programme.?

According to Wadnerkar, ?Make in India? is one of the most important tools we have to lift us out of the economic crisis. He says, ?Of course, some critical and big investments take a long time before they show the sign of global trade in India. The challenges in cost and availability of energy, secured financial services, distribution and warehouse hubs in promising locations, cost productive skilled resource, data networks and speed, high-speed haulage raw material to finish goods can be major challenges. The government has to focus on initiatives on tax structure, efficient and seamless rail and sea network. No red tapes in single-window clearance so that investor will get confidence on their returns.?

Gupta had this to say. ?The major challenges might emerge due to unavailability of a clear policy framework, funding-related issues and the lack of skilled manpower reserve in India to judiciously deliver on the global technological enhancements locally. Often, it is witnessed that the benefits of Government?s patronage are not executed or passed on to the industry and the consumers eventually. All these issues will need structural changes in terms of transparency in policy, availability of low-cost funds and effective skill development centres to increase the employability of the Indian youth.?

Speaking specifically about the tower cranes and passenger hoists manufacturing segments, Ramdev had this to say. ?If we discuss about tower cranes and passenger hoist manufacturing, we are still following the design standards of other countries. We do not have manufacturing plants suitable for this foreign design standards and sizes. So, we have to import this raw material like angle steel, square tube?.etc. Therefore, we have to start developing from the raw materials or we have standardised the design according to Indian standards and available materials in India. Similarly, the tower crane mechanisms are still getting imported from China and other countries. At present, India is a fabrication workshop with imported steel and mechanisms. To come out of this, we have to start developing our own design according to the Indian standard raw materials, own mechanism, own slew rings and own joystick controls. Even the multiple cam limit switches, crane duty multiple pole motors and forced cooling VFD motors are not available in India. Our Bureau of Indian Standards does not have an updated design standard for tower crane and passenger hoist with latest technology. We do not have a specific safety standard for design, testing and using of such equipment. This indicates to start from the scratch.?

Policy Initiatives
KPMG and CII recently completed a report which identified nine key action items to make India conducive for large-scale manufacturing. These include streamlining investment approval, facilitating land acquisition processes, creating an appropriate labour development ecosystem, efficient and effective enforcement of laws, facilitating greater cross-border transactions, creating clear exit guidelines, rationalizing taxation regimes and technology enablement of the government.

What sort of policy initiatives that OEMs expect from the Government that could catylise the growth to the expected level? What are the challenges in manufacturing in terms of availability of power, raw materials, logistics, and tax-related issues? Says Gupta, ?Thankfully for us in Madhya Pradesh, the power situation is quite satisfactory with reliability of supply. The main challenges which we face in Pithampur are the lack of skilled manpower and limited supplier base. Other than that across India there is a huge deficit in terms of the road infrastructure, which impacts the logistics cost and timeliness. Another aspect is the multiple and inconsistent taxation regime across states which needs to be streamlined.?

Gupta adds, ?To address these fundamental concerns, the new government has started working on making the policy framework much more transparent and smooth, such as electronic tendering and auctions, opening up of certain sectors to privatisation, etc. To further boost the demand, announcement of projects such as river cleaning and linking, smart cities, high-speed trains and more road highways have bolstered the industry confidence. Due to high gestation period, the government is pushing the banks to offer long-term loans with flexible structuring to the infrastructure sector. Recent correction in inflation rate should also result into more affordable lending rates. The availability of funds is being eased through the formation of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (INVITS). However, attracting private and foreign capital to invest in these trusts remains a challenge to be overcome.?

According to Theissen, logistics is one of the major challenges. He says, ?Transporting goods from A to B all across the country remains a challenge. The transport industry is unreliable and terribly segmented. The vehicle park is of poor quality; the contractors and the lorry drivers lack professionalism and have no concern for the safety of the goods they transport. The quality and size of the road network comes in my view only in second position.? He adds, ?Implementation of labour reforms and policy reforms are fundamental for the success of the ?Make In India? campaign.?

Gossain says, ?We have seen a strong intent from the new Government towards infrastructure development since the beginning and to substantiate it, they have introduced some notable reforms - projects like Swachh Bharat, Clean Ganga, and Make in India. But to achieve these targets, the Government needs to ensure that all the bottlenecks are removed and the stalled projects are cleared without any further delay. The need of the hour is to identify projects of national importance and ensure they are implemented expeditiously. We need to have a mechanism in place which will streamline the on-ground execution, thus, ensuring a long-term demand for all construction equipment.

Ramesh has a different take. According to him, the success of the dream concept depends on how we compete with China. He says, ?To make this project a success, India has to compete with China, specially from the export point of view, where China is at an advantage with respect to interest costs.?

Way Forward
With the Government?s renewed impetus on infrastructure, the construction equipment industry is now poised for tremendous growth. The Government has instilled a positive outlook in the country by announcing new infrastructure projects and is allowing huge investments in infrastructure industry. Says Gossain, ?The new Government is promoting domestic and foreign investments in a big way; announcements like the US companies planning to invest $42 billion in India over the next two-three years and China planning to invest $20 billion in India primarily in building the railway infrastructure, will give a huge boost to the infrastructure industry.?

Last few years have not been conducive to infrastructure sector including construction equipment. Infrastructure investment in the first two years of the 12th Five Year Plan has only been 63 per cent of the target. The overall earth-moving and construction equipment market declined by 15 per cent in 2013 and a similar 16 per cent decline are expected in 2014. The demand remains subdued and scattered with no clear sectors leading the pack. Macro level rural India is contributing consistently and now even higher than the urban India in past few years. This has been a positive and robust signal for revival in near future. Says Gupta, ?With certain ambitious projects getting kick-started such as river cleaning and interlinking, metro connectivity in major cities, major highway projects, high-speed rails, et al., the construction equipment looks all set to grow at a CAGR of nearly 15 per cent up to 2020. With the world looking at India as indicated by the recent financial commitments from major economic powers such as Japan, China, Russia and the US, coupled with a clear intent shown by the Indian government, this level of growth looks completely plausible.?

Raj Dabholkar, Director, Tucson Hydrocontrols, sums up. The ?Make in India? campaign is still in its nascent stages but we hope that indigenous companies like ours, who have developed technologies here in India, can have a platform to showcase our talent and quality in the global market. With the success of our home grown Mars Orbiter Mission, maybe the world will start seeing India as the destination to outsource manufacturing. If we can launch a satellite into space for tenth of the cost as that of NASA, there is no reason we cannot dominate in almost every other field.?

ICEMA?s technical panel is now looking at ensuring all equipment meet the safety norms.

Expectation Of OEMS

• Government has to identify and set up manufacturing zones near the cities with proper availability of electricity, water, roads and a welcome approach from the local bodies. To start manufacturing in India, one has to run behind several local bodies, state government offices and several Central government offices. This lengthy procedure must be reduced.
• Availability of trained workforce has increased and is meeting the current requirement. But a manufacturer has to take care of employee?s PF, PT, WC policy, welfare fund....etc with a lot of split accounts and paper work. The industry expects a single-window, single-account and single-paper to deal all payments related to an employee through the latest software developed by government.
• A manufacturer has to pass through excise, local sales tax, central sales tax, LBT, octroi, Income tax and TDS....etc. The whole taxes will come about 30 per cent on the equipment cost. The complications on each tax are so high and each manufacturer has to spend a lot of manpower and papers to manage these government taxes. If the government works seriously to reach single-window, single-paper for all the above taxes through newly developed software, then nobody can stop the pace of India.
• The settlement of economical offences does not have any time frame in India. It can be lifelong and the accused will attain his lifespan without any recovery/punishment. Now the Government has to change the law and specify the exact time frame for the settlement/punishment of economical offence like six months to one year maximum. Quick response and decisions are another requirement to succeed ?Make in India?.

- As told by PV Ramdev, Managing Director, Everest Engineering Equipment