With India registering annual GDP growth of over eight per cent consistently, policy makers are laying stress on increased investments in infrastructure to sustain the momentum. Vipin Sondhi, who heads the country’s largest construction equipment manufacturing firm, JCB Ltd, tells Sharmistha Mukherjee that while the industry is set to evolve on the back of strong demand, policy changes have to be implemented to realise the vision of a $1 trillion investment in infrastructure in the next plan period. Edited excerpts:
With the construction boom, what prospects do you see for equipment manufacturers?
JCB has a strong commitment to the market in India over a sustained period of time. With the economy growing rapidly investments in infrastructure will increase. On our part, we have made significant investment in our supply chain, dealer network and factories. It is in line with this that we have introduced a locally developed diesel engine to power our equipment for the market here. Earlier, we purchased engines in the 76 to 154 HP range for our products here. These indigenously developed engines are compliant with BS III emission norms and are being installed in all equipment being produced from April 1. Worldwide, the engine is now powering over 140,000 JCB construction machineries.
Over a trillion dollar investment is proposed in the infrastructure in the next plan period, how do you see the industry evolving in this phase?
Ours is a demand-driven industry. With more investments coming into ports, roads and irrigation systems, we see steady growth. The $ 1 trillion investment in infrastructure sectors is a vision with over 50 per cent of the resources projected to filter in from the private sector. For the vision to work through, there has to be bankable projects. Issues related to land acquisition has to be sorted out, compensation has to be provided to land owners equitably, state and central agencies have to come together and work in tandem. Viability Gap Funding (VGF) has to be provided and policy guidelines strengthened to increase participation of private sector players. A conservative estimate would peg growth in construction equipment industry at a minimum of 15-20 per cent.
For JCB, how does the Indian market compare in terms of sales you register on a global scale?
India is our largest market and contributes significantly to the company’s consolidated revenues. We have 50 per cent share in the construction equipment manufacturing industry here. JCB produced 21,000 units in India last year, most of which were sold in the domestic market. We have recently started exports to Indonesia from India. The numbers are small at the moment.
Would you look at scaling up exports from India, considering it is regarded as a low-cost manufacturing base by many?
We are exploring Southeast Asian markets. Construction equipment are expensive. It would take some time to build consumer confidence overseas. We would scale up exports eventually.
Is the capacity at your plants in India sufficient to meet the demand in domestic and overseas markets or would you consider expanding?
During the downturn in 2008-09, we invested considerably in creating capacity. Over the last three years, we have set up two plants in Pune and expanded production facilities at Ballabgarh in Haryana. The overall installed capacity would be enough to meet our requirements over next two-three years.