Need for momentum

30 Nov 2013 CW Staff

VINAYAK DESHPANDE strongly believes that India Inc and the EPC sector must be prepared for the next growth wave.

A leading international consulting firm noted: ´There are no easy solutions for the Indian economy as it struggles to regain its lost momentum.´ To see the picture in the true perspective, nothing had prepared the infrastructure and construction industry for this slowdown in the economy that we are witnessing in recent times.

Economic turmoil: The cycle started with the pace of committed projects and investments being slackened, while some important ones, especially those by the private sector being sent back for ´review´. The money supply has been literally choking with long term funds getting scarce for promoters, or becoming prohibitive for infrastructure projects especially in the power sector. New projects symbolically speaking û have vanished or have been in preliminary mode for any real execution to happen.The resultant impact, coupled with inflation, the weakening rupee and high interest rates set into motion a negative spiral in the economy where hope has given way to desperation and gloom. However, the economy and the EPC sector now yearn to break this logjam. The slowdown has made the industry cost-effective, innovative and wary of taking undue risks which were symbolic of the growth years. It has set in motion a process of cooperation instead of blatant competition, co-option with foreign players that has bought forthour entrepreneurial skills to explore international shores. Tata Projects too tied up with international partners for entering new areas.The haste to win more projects and jobs has given way to a new economic logic of looking at domain expertise and then bidding. Stretched ´balance sheets´ have given way to financial prudence and reliance on owned funds instead of borrowed funds. Improving Return on Investment (ROI) or Internal Rate of Return (IRR) in projects is the need of the hour. Technological, execution process improvements need to focus on ´on-time´ deliveries. Tata Projects has taken this as its mantra to beat the slowdown.

Work in progress: There are several innovations that will keep the industry going. To begin with, Indian PPPs, which are some of the world´s largest and well-established businesses, must consider global partnerships. This offers huge opportunities of investment and EPC. The world is becoming a large unified market and trade barriers are diminishing. Some of the other innovative things, the industry needs to work on are: Global partnerships: The Indian PPP business is well established and one of the largest in the world today. This offers huge opportunities of investment and EPC. Productivity improvements: The world is becoming a large unified market and trade barriers are coming down. Currently, we face global competition in the country and many sectors are routinely tendering on the basis of ICB (international competitive bidding). Hence, it is imperative that work productivity of Indian companies matches global benchmarks. This could be in terms of labour, supply chain, logistics, etc. A critical look is needed in terms of moving work from site to a factory thus bringing factory production benefits to EPC; exploring ´lean´ methods; review of suppliers, scope, etc. The more important question that needs to be answered is: ´What does the firm do that cannot be done more efficiently elsewhere?´

Rupee devaluation: Are we using rupee devaluation to our advantage? India Inc is more competitive due to currency devaluation and foreign supplies are more expensive than ever. Thus exports have gone up in the last couple of months. No slowdown is permanent, neither are good times.

As emerging economies need heavy investments in infrastructure, firms must be ready for the next growth wave. This current glitch is temporary and will be offset by a huge surge with big volumes. The readiness required is in terms of skills, people, resources etc.

With many things at the policy level being further improved in India, I think 2014 will be an exciting year. Also, as the EPC sector gets mature after years of plentiful contracts, now is the time for process innovation, higher productivity, global sourcing and implementation.

The government too is responsive to quality and timelines; as it is the sector of choice for getting our GDP growth on track.

The only way to overcome these challenging times is to keep moving and have faith in innovation, and pursue right practices as the next growth wave is just round the corner.

About the author:

Vinayak Deshpande, Managing Director, Tata Projects, is a graduate in chemical engineering (1980) from IIT Kharagpur. He has over 30 years of experience. He started his career with the design and sales of boilers and captive power plants at Thermax, and industrial automation and process controls at Tata Honeywell.

VINAYAK DESHPANDE strongly believes that India Inc and the EPC sector must be prepared for the next growth wave. A leading international consulting firm noted: ´There are no easy solutions for the Indian economy as it struggles to regain its lost momentum.´ To see the picture in the true perspective, nothing had prepared the infrastructure and construction industry for this slowdown in the economy that we are witnessing in recent times. Economic turmoil: The cycle started with the pace of committed projects and investments being slackened, while some important ones, especially those by the private sector being sent back for ´review´. The money supply has been literally choking with long term funds getting scarce for promoters, or becoming prohibitive for infrastructure projects especially in the power sector. New projects symbolically speaking û have vanished or have been in preliminary mode for any real execution to happen.The resultant impact, coupled with inflation, the weakening rupee and high interest rates set into motion a negative spiral in the economy where hope has given way to desperation and gloom. However, the economy and the EPC sector now yearn to break this logjam. The slowdown has made the industry cost-effective, innovative and wary of taking undue risks which were symbolic of the growth years. It has set in motion a process of cooperation instead of blatant competition, co-option with foreign players that has bought forthour entrepreneurial skills to explore international shores. Tata Projects too tied up with international partners for entering new areas.The haste to win more projects and jobs has given way to a new economic logic of looking at domain expertise and then bidding. Stretched ´balance sheets´ have given way to financial prudence and reliance on owned funds instead of borrowed funds. Improving Return on Investment (ROI) or Internal Rate of Return (IRR) in projects is the need of the hour. Technological, execution process improvements need to focus on ´on-time´ deliveries. Tata Projects has taken this as its mantra to beat the slowdown. Work in progress: There are several innovations that will keep the industry going. To begin with, Indian PPPs, which are some of the world´s largest and well-established businesses, must consider global partnerships. This offers huge opportunities of investment and EPC. The world is becoming a large unified market and trade barriers are diminishing. Some of the other innovative things, the industry needs to work on are: Global partnerships: The Indian PPP business is well established and one of the largest in the world today. This offers huge opportunities of investment and EPC. Productivity improvements: The world is becoming a large unified market and trade barriers are coming down. Currently, we face global competition in the country and many sectors are routinely tendering on the basis of ICB (international competitive bidding). Hence, it is imperative that work productivity of Indian companies matches global benchmarks. This could be in terms of labour, supply chain, logistics, etc. A critical look is needed in terms of moving work from site to a factory thus bringing factory production benefits to EPC; exploring ´lean´ methods; review of suppliers, scope, etc. The more important question that needs to be answered is: ´What does the firm do that cannot be done more efficiently elsewhere?´ Rupee devaluation: Are we using rupee devaluation to our advantage? India Inc is more competitive due to currency devaluation and foreign supplies are more expensive than ever. Thus exports have gone up in the last couple of months. No slowdown is permanent, neither are good times. As emerging economies need heavy investments in infrastructure, firms must be ready for the next growth wave. This current glitch is temporary and will be offset by a huge surge with big volumes. The readiness required is in terms of skills, people, resources etc. With many things at the policy level being further improved in India, I think 2014 will be an exciting year. Also, as the EPC sector gets mature after years of plentiful contracts, now is the time for process innovation, higher productivity, global sourcing and implementation. The government too is responsive to quality and timelines; as it is the sector of choice for getting our GDP growth on track. The only way to overcome these challenging times is to keep moving and have faith in innovation, and pursue right practices as the next growth wave is just round the corner. About the author: Vinayak Deshpande, Managing Director, Tata Projects, is a graduate in chemical engineering (1980) from IIT Kharagpur. He has over 30 years of experience. He started his career with the design and sales of boilers and captive power plants at Thermax, and industrial automation and process controls at Tata Honeywell.