Following a spate of infrastructure development in Pune in recent years, ANUJA ABRAHAM discovers what makes the city adept at hosting India's largest cluster of German companies.
Pune, the second largest city in Maharashtra and estimated seventh largest in the country, is on the move - and how! While it still aspires to wrest the coveted 'Detroit of India' title from Chennai, it has won the laurel of 'Germany's favourite'!
With roughly 250 German companies having set up businesses here - Chennai is next with about 50 - the city is indisputably the largest hub of German companies in India. "Pune is the biggest business centre for Indo-German trade in India," affirms Ramesh Palagiri, Managing Director & CEO, Wirtgen India. "About one-sixth of the total trade between India and Germany is from Pune. There are 197 wholly German-owned companies, another 200 Indo-German JVs and another 80 Indian firms in Pune that do business with Germany."
An automotive hub
Indian automotive majors like Tata Motors, Bajaj and Force Motors have traditionally set up businesses in Pune. Seeing their success, multinationals have followed suit. Numerous JVs and tie-ups such as Tata-Fiat and Force-MAN and skilled manpower and good infrastructure have further aided growth. "The area slowly developed and further encouraged small vendor units to set up business here," says Anant Sardeshmukh, Director General, Mahratta Chamber of Commerce Industries and Agriculture (MCCIA) - Pune. "As it developed into an auto hub, more auto components and ancillary sprang up. We have around 10,000 SME units. Currently Pune's growth rate is excess of 10 per cent."
The German influx Of all German companies in the city, 99 per cent are from the engineering sector; from these, almost 80 per cent are automotive engineering companies. This also made it a natural choice for German construction equipment manufacturers to set up base here. Out of 249 German companies in Pune (as on May 22, 2013, reported by IGCC), 133 are members of the Indian German Chamber of Commerce (IGCC); of these, 62 companies belong to the construction and allied sector. "IGCC has been working diligently to ensure that German industries wanting to set up a base in India have access to all information they desire, whether an insight into the market, feasibility of a location or access to leading companies," says Manojit Acharya, Executive Director, Demag Cranes and Components (I), a subsidiary of equipment manufacturer Terex. "Similarly, it provides a platform for the local industry to interact with German companies."
A fair share of equipment majors have made the city their home. For instance, Demag's 11-acre manufacturing plant is located at Chakan. "Our plant delivers the same level of technology available to customers in Europe or the Americas," elaborates Acharya. "It was set up to serve customers in South Asia, including India, Bangladesh, Nepal and Sri Lanka. At Chakan, we manufacture EOT cranes of capacities up to 300 tonne and the KBK range of light modular cranes. We also assemble chain and rope hoists imported from our parent company in Germany." Also, Wirtgen India opened its production facility at Bhandgaon, near Pune, in 2011. The company's factory comprises a 2,700 sq m administration centre and training building alongside a 3,600 sq m factory that includes a blasting system, paint facility, spare parts depot and a highly advanced workshop for refurbishment of used equipment. Although there are no different policies for international companies, they can negotiate with the state government to avail incentives or concessions. "Under the Industrial Policy of the Maharashtra government, there are certain incentives available to mega projects," explains Sardeshmukh. "As all these international projects fall under mega projects, there is a separate window for these multinationals. Once the government signs an MoU with them, they are eligible for incentives like priority allotment of land."
Pune's development has been sure and steady. Since the inception of many smaller units, auto components and ancillary units for automobiles, heavy vehicles and construction equipment saw a potential aftermarket besides serving the needs of the companies. Spilling over from already established bases, companies flourished on the outskirts leading to the development of the infrastructure of smaller towns. "Earlier in the 1980s, Chakan was too far and there was no good connectivity," recalls Zubin Kabraji, Regional Director-Pune, IGCC. "However over a period of time, connectivity has improved tremendously. The new link roads from Talegaon and the expressway have brought good connectivity to Chakan. MIDC and a lot of German automobile majors too had a big role to play." Of the 170 German companies that have come up in Pune in the past five years, around 35 to 40 have set up base in Chakan. Thus, smaller, isolated pockets like Talegaon and Chakan are slowly becoming akin to satellite cities. "They have all-inclusive facilities and roads converted from two to three lanes to six lanes," says Sardeshmukh. "Also, the Pimpri-Chinchwad area is abuzz and many pucca (tarred) roads are being built leading to the highways."
Apart from the development of infrastructure, the power situation too has improved over the years. Mega projects are allotted express feeder lines to ensure power supply. "Any company would look for a sound industrial environment, ready or developing component supply base, access to markets and ports and employable workforce," adds Acharya. "While being close to the port in Mumbai or Navi Mumbai, Pune offers a cost structure lower than Mumbai."
Now, the arrival of companies like Demag, Liebherr and Wirtgen has changed the face of Pune. Renowned for their R&D and performance-driven products, the Germans have brought global technology to India while adapting it to local conditions. "German companies invest in India to meet an export demand to their home country or other markets," says Acharya. "Most set up manufacturing units to meet domestic demand as there is a large market available in India. In doing so, they add value to the Indian market."
"In the past 10-15 years only, at least €3.5 billion has been brought into this region by German companies alone,' shares Kabraji. "In terms of expansion, it would be €200 million." Indeed, Pune now stands proud as a case study for smaller, isolated pockets in and around the country on how to grow - and flourish - in this global age.