With geo-political concerns, engg firms nudge suppliers to 'Make in India'

These firms are either tying up with Indian entities of their foreign suppliers, or urging foreign suppliers to set shop in India

In a bid to find a long-term fix to unrelenting geo-political concerns, Indian engineering and capital goods firms are looking to ditch foreign suppliers, and plan to collaborate with Indian entities instead.

Executives from these companies termed it an attempt to secure supply chains and cut down transit time.

“If it works, I need not go to Europe,” said Anil Parab, whole-time director, heavy engineering and L&T Valves, with Larsen & Toubro.

He was referring to an investment that L&T is making on research and development and other certification to develop a special grade of steel in India, along with ArcelorMittal Nippon Steel (AMNS India).

Multiple trade routes, particularly those that connect India to the European market, have been facing time overruns owing to the Red Sea crisis. Trade activity and global supply chains have been under pressure for more than three years now. This is owing to several geo-political concerns. It is an issue that engineering firms are now trying to fix.

L&T, the country’s largest engineering firm, is one of the companies that is either building partnerships with Indian arms of foreign suppliers or asking suppliers to set up shop on Indian soil.

Manoj Nair, national head – industrial epc business, Sterling and Wilson, noted, “We procure a lot of products from various sources such as specialised fire-fighting systems, which were imported from Europe. However, currently major components of the same system are being procured from indigenous sources, thereby eliminating global supply chain risks. This is reducing costs and maintaining quality standards.”

Nair said his company is also in discussion with our other European and North American supply partners, encouraging them to establish a manufacturing base in India.

KEC International has also adopted a similar approach. Vimal Kejriwal, managing director (MD) and chief executive officer (CEO), said it helps to minimise the physical movement of products through international trade routes. He added, “It thereby reduces exposure to geo-political concerns, and also enhances our operational efficiency and responsiveness to market needs.”

Kejriwal said many of the company’s European suppliers and partners, such as ABB, Hitachi, Schneider, and Siemens, already have a significant presence in India.

“We are collaborating with them to develop products tailored to the Indian market. These are currently served in markets like China, Europe, and the US,” he added.

The nudge has seen some early success. Kejriwal added one of the company’s major South Korean partners has not only established a plant in India but has also scaled up operations to meet KEC’s 100 per cent requirements. They include local requirements for parts and components.

The alternative approach, some other industry executives point out, could hit a client hurdle. “On certain forging and castings of a certain size, Europe remains a preferred supplier. This has now been an ongoing discussion in India for the last 15-20 years. However, we are willing to experiment but our end customers in many cases still do not have the confidence that Indian suppliers can deliver,” Vivek Bhatia, MD and CEO for Thyssenkrupp Industries India, said.

Some like L&T are also attempting to increase domestic production, not just as clients but as suppliers too.

Parab noted that many Indian small forging manufacturers were importing ingots as their raw material. Companies like L&T source from these Indian manufacturers.

“We connected with Siemens Energy and said we can make the ingots at our forging shop,” he said.

He added that, “Everybody is trying to have a secure supply chain. So, we are also trying some of these experiments.”