Cutting competition by imposing duty may hurt economy:Banmali Agrawala Interview with President & CEO, GE Energy, India Region (Business Standard)
GE Energy, part of the US-based General Electric (GE), a $150-billion diversified manufacturing and infrastructure conglomerate, has committed thousands of crores of rupees in the Indian energy space, including supply of power equipment. Banmali Agrawala, president and chief executive officer of GE Energy, India Region, says the company has a long-term view on India, is not perturbed at the short-term economic problems here and intends developing an export hub. He talks to Sudheer Pal Singh on these issues and on policy changes he’d like to see from the government. Edited excerpts:
How do you rate GE’s growth experience in India?
Over the last three years, GE has had a global thrust on growing faster in the emerging markets which need a long-term perspective. What has been achieved in India has been dramatic. The quality of manpower has been ramped up, by bringing in people with domain knowledge. There is a huge thrust on local manufacturing to make products locally for India and for the rest of the world.
For instance, we are spending $200 million in a manufacturing facility in Pune, for which we have signed an agreement with the Maharashtra government. This is for a range of products, including wind energy turbines, control systems and healthcare. The idea is to get scale at one location, rather than having many small units and also to develop India as a manufacturing hub. The drift would be to manufacture components here that are relevant to the Indian market, where the cost of capital is high and the cost of labour is relatively low, and use it as a base for exports at the same time.
So, you are focusing on localisation and developing India as a manufacturing and export hub, at a time when the economy is said to be suffering from a ‘policy paralysis’?
This perception does not affect our overall belief in the Indian market. The basic fundamentals of this market are strong. There might be a bit delay in some projects because of the hiccups India is going through. But the long-term potential of this market will stay. Power, transport and health are some areas where demand will continue to be robust. For a company $150 billion in size, it is okay to go through a rough patch from a market perspective in the short term.
What are these challenges? Would you say imposing import duty on power equipment is one?
There are certain policy decisions needed. Unless the country is able to take some hard reform and policy-led decisions, it will be tough to see the same kind of growth as in the past. Imposing duty barriers on import of equipment is the right way of developing the economy. If there is dumping occurring from a particular region, one has to protect oneself against it. But if the government is trying to curtail genuine competition through imposing duty, it will hurt the domestic economy. If domestic manufacturing is to be supported, it has to be made more attractive. And, it cannot be made attractive by not allowing exports. Also, in the case of many of these capital goods equipment, Indian volumes alone might not be sufficient to support large-scale manufacturing facilities. So, India might still end up importing a fair amount of components and manufacturers doing a minimal tinkering here to say their products are local. So, we would be cautious on whether the government should be imposing import duty.
The nuclear deal had generated a positive momentum for companies like GE supplying equipment here. What is the status?
The nuclear liability law is yet to be amended. That amendment will need some action by the government but something substantive will move forward only after the matter goes through Parliament. Meanwhile, we are in touch with Nuclear Power Corporation, with which we have an agreement for supplying equipment, and the government to be prepared for the liability law to fall in place. India has a fairly modest nuclear power generation programme. The committed path is long. One should not expect results in a year or two.
In its current form, is the liability law a dampener for GE’s plans?
The law, in the current form, is still undergoing dialogue between governments. It needs some change. Globally, there are certain norms on which the nuclear industry works. Not only the supplier but the operator also plays a major role. India needs to take decisions which comply with these global norms. As a company, we are also accountable to our shareholders. We have to take into account what are the liabilities we are committing ourselves to. The nuclear power regime is already one of the most heavily regulated industries in the world. So, there is a whole lot of scrutiny that goes on in the making of an equipment before the plant is even close to be constructed. The regulation in India is equally good as any other country.
GE is already one of the largest wind energy turbine manufacturers in the world. How are your plans in the solar sector progressing? Lately, there have been reports of GE taking a re-look at its solar strategy.
From a manufacturing stand, the whole market in solar is going through a major upheaval. All the big manufacturers of solar equipment are going through a very difficult phase from a financial stand. I think there will have to be a shake-out in terms of the kind of technology and the players that will prevail. GE has put on hold, for some time, its plans for thin film solar panels. But our play in solar is not limited to panels. There is a lot of over-capacity in the solar panel market. And, these are all big capital-intensive projects. There is also the question of what the tariffs (rates) going to be. I think we will have to see some upward revision in tariff to bring about a revival of the manufacturing space.
Is GE on track to meet its revenue target of $8 billion by end-2012?
I am not sure whether GE ever announced this target. But, clearly, growth is on our agenda. We have grown pretty sharply over the last few years. We are not here for the short term. We are not going to be cowed because we see a little bit of a bad patch. We are putting investments and bringing in people. We have already announced our Rs 1,000 crore investment plan in the upcoming manufacturing facility near Pune. We do not have a number in mind regarding the amount of money we want to invest. It will depend more on the opportunities that will come.