There is ample opportunity for all companies to get business

Written by Subhash Narayan | Updated: Feb 29 2012, 06:39am hrs
French industrial engineering major Alstom recently completed 100 years of operation in the country and further fortified its position in the power and transportation businesses. The financial crisis of 2008 and a slowing economy brought some concerns for the company, but it weathered the storm by bringing out new offerings for its customers and getting new orders. Sunand Sharma, chairman, Alstom Projects India and country president, Alstom, India and South Asia, spoke to Subhash Narayan of FE about the Indian market and the companys strategy for consolidating its position here. Edited excerpts:

The power sector is in the news for all the wrong reasons. Despite huge capacity addition, we are short of target, while several projects have been stopped mid-way due to funding problems and statutory clearances. How do you see the development in the sector What kind of strategy do you have to sail through

I think it is appropriate to look at the sector from the point of view of fuel that has a strong bearing on how the industry behaves. Coal continues to remain the biggest source of fuel for power plants in the country. And India remained comfortable on fuel from is huge domestic resources till recently. This resulted in a lot of investment pouring into the sector and consequent increase in orders for equipment, which helped companies like us. But over the last couple of years, land acquisition, mining and environment-related issues have hit several projects.

Domestic problems have forced companies to look at coal mines in countries like Namibia and Australia, exposing them to new production techniques and coal pricing methodology. This has also made companies vulnerable to changes in regulations relating to coal exports by countries such as Indonesia, Australia, South Africa. Imported coal-based projects have suffered due to these changes.

So a pause button has been pressed by the industry. However, at the ground level nothing fundamental has changed. The country demand remains where it is. The energy demand gap and peak demand gap has actually gone up. I hope we would soon overcome the current problems and progress on path of growth again.

Equipment makers such as L&T and Bhel have gone on record to say that they have not received new orders in most parts of this fiscal due to the slowdown in the economy. Did you also face same problems

We are a part of the same community, we are in the same country and function in the same environment.

Are you okay with the government allowing more power equipment manufacturers to come to India by mandating such exercise in bulk tenders for equipment by NTPC

Companies are coming into the country and setting up manufacturing base because they see growth in the market. The energy supply and peak energy gap in the country remain the same as before, giving ample opportunity for all companies to get business. Besides, we should realise that setting up a new manufacturing facility is a very serious commercial decision, which boards of companies take after deep analysis.

If you take an inventory of the worlds steam turbine companies, you will be surprised to see that a very few manufacturers are catering to the needs of the entire globe. With regards to Alstom, the company has made more investments in steam turbine factories in the last four to five years than in the previous 70-80 years. First in China, then in the US and last at Mundra in India.

What plans do the company have for the 12th Plan Will we see a step-up in investment

Whatever investments we had to make has already been announced. As a policy, we start to anticipate our investment requirement early. If the 12th Plan has to begin in April 2012, we begin to anticipate in 2006-07. So the investment and programmes undertaken by the company in 2011-12 is actually based on decisions related to the region which the company took four-five years ago.

How is the work on your joint venture with Bharat Forge at Mundra progressing Have you booked orders outside NTPC also for the project as there has been delay in placing orders by the PSU

The joint venture is not designed to serve one tender, but has been set up to manufacture a particular class of steam turbines. You cannot base a JV on just one tender or one issue. You base it on a market. We have our own timelines on when we would be building a factory and executing it. We will meet exactly the demand of our customers.

Are orders being cancelled by companies in the wake of the slowdown

There is no question of order cancellation as there are no new orders at the moment. We are not in the position of other people who have orders on the books which are getting cancelled.

What about your initiatives in the renewable energy space

The biggest one remains hydro. Hydro is a super story of Alstom in India. Alstom continues to develop the broadest portfolio of renewable energy technologies to meet global needs. We understand that renewable energy sources are an essential element of global power strategies.

The manufacturing facility at Vadodara houses the Global Technology Centre, which is one of the most significant R&D centres for Alstom globally. It was established with an aim to tap the specific issues of the Indian hydro market. The facility has successfully executed multiple projects out of which a few major ones are global projects. In fact, the Vadodara site has become a global hub for hydropower R&D, exporting beyond the Indian market.