Pollution Control Equipment Industry Sitting Pretty On Strong

are firming up their act spelling good news for the industry, say Rajesh Shirsat & Laxmikant Khanvilkar

Ironically, pollution control equipment (PCE) manufacturers make a buck out of the rapidly deteriorating environment and resultant air, water and noise pollution.

Rising industrialisation and urbanisation that abet pollution also aid the growth of the pollution control equipment industry. The increasing concern about the rising pollution has compelled the government to make effluent and emission standards mandatory for major air and water polluting industries.

Polluting industries have been asked to comply with the prescribed standards. While it is not possible to dispense totally with pollution, its control through installation of equipment can minimise the impact.

 

That spells a good market for pollution equipment manufacturers as more industries use the equipment.

The industry, highly governed by government regulation, has to follow laws set by pollution control boards (PCBs) in the country, industry sources point out. But the laws here are not as stringent as international standards.

For example, norms for the presence of toxic gases are 50 milligrams per normal cubic meter, whereas in India the norm ranges from 150 mg/n cubic meter in metros and 250 mg/n cubic meter for rural areas.

Laxity in implementation and monitoring of existing regulation by the PCBs have emboldened the offending industries to be callous towards the pollution control norms in the country.

However, the growing environmental awareness among large sections of society coupled with active pressure from the judiciary is forcing the pollution control authorities to firm up their act.

The industry circles opine that as India becomes more entwined in the global economy, stricter standards are likely to be enforced leading to greater investment in pollution control equipment.

At present, India spends less than 0.25 per cent of its GNP on cleaning up its environment compared with one to three per cent in other developed countries. Hence, the industry holds strong potential for growth.

The exact size of the PCE industry is not ascertainable owing to a large presence of the unorganised sector.

However, the industry estimates the size of the PCE industry inclusive of the organised and unorganised sector at Rs 2000 crore.

It is estimated to grow at about 15-20 per cent per year and sales are expected to touch Rs 3000 crore by 2000 AD.

Major user sectors of pollution control equipment include textile\dyes and pigments, pharmaceutical, breweries and fermentation, paper and pulp, sugar, petrochemical, steel, power, chemicals & fertilisers, cement, tannery & leather industries, smelting plants, hotels, automobile industry and municipal corporations.

The industry is divided into three major segments - water treatment equipment, solid waste management systems and air pollution control equipment. Companies like Thermax, Ion Exchange, Hindustan Dorr Oliver and Voltas have a noticeable presence in the water treatment system.

Western Bio Systems, TTG Industries, L&T, ABB and BHEL are in the air pollution control equipment segment and Western Paques, Excel and Western Bio Systems operate in the solid waste management systems.

In the first half of 1996-97, sales income of three select pollution control equipment companies registered a growth of 33.7 per cent to Rs 92.6 crore (Rs 69.3 crore).

Their operating profit rose by 38.2 per cent to Rs 18.5 crore (Rs 13.4 crore). Gross profit increased to Rs 11.1 crore (Rs 9.8 crore) - up 12.8 per cent. Net profit rose by 5.6 per cent to Rs 7.2 crore (Rs 6.9 crore).

The presence of the unorganised sector has great significance for the industry, the competition from it affects the organised sectors margins. Gross profit margin declined to 12 per cent (14 per cent) and net profit margin to 7.8 per cent (9.9 per cent). Operating profit margin rose fractionally to 19.9 per cent (19.3 per cent).

During the year to March 1997, sales income of Ion Exchange rose seven per cent to Rs 176.8 crore (Rs 165.2 crore) and net profit rose 17.4 per cent to Rs 10.8 crore (Rs 9.2 crore).

Water treatment systems account for over 40 per cent of the total market of the PCE industry as a whole.

Water treatment system helps the polluting industries to convert the polluted water into safe water for disposal purposes. This segment is less likely to be invaded by large new comers in the near future.

The entry is likely to be from small players of the unorganised sector.Under solid waste management system, processing of waste generates a by-product methane, that can be utilised in generating power for captive consumption.

The potential for power generation is estimated at about 350 mw. Yet, the major problem is that hardly 20 per cent of the solid waste is processed, the rest being dumped into the sea.

Another problem is the high labour cost for collecting solid waste. The unorganised sector has strong presence in the solid waste management system segment of the PCE industry.

Excel Industries is in charge of the Mumbai city solid waste management project on a commercial scale. Its 20,000 tpa garbage treatment plant is in operation at Chincholi, Mumbai.

New projects at various locations in the country are at different stages of progress.

The air pollution control equipment plays a vital role in controlling air pollution caused by industry and the growing vehicle traffic on the road.

Vehicular pollution often results from outdated designs technology and the car manufacturers indifference towards emission standards. Other factors are: bad fuel quality, poor traffic management and poor maintenance of vehicles.

The government has issued norms like permissible air pollution levels besides making it compulsory for every vehicle to obtain a pollution control certificate.

With the strict environmental control standards being enforced for various industries, air pollution control equipment has good prospects for growth. Hence, many existing units are adding up capacities to meet the increasing demand. Industry sources feel that this segment is likely to see entry of major players such as Lurgi India, Indomag and TTG (with Simon Craves).

With the power projects getting on stream, major international pollution control players associated with leading power plants are likely to become active in the Indian market.

The increasing presence of MNCs augurs well for the industry as they invest sizeable amounts in pollution control equipment to ensure their green image. Most new projects have an in-built pollution control element.

The industry players also pin their hopes on growth in demand from the user sectors as they get tax exemption by way of pollution control equipment installation relief. Yet, the PCE industry is sore that it has not been given enough incentives.

The industry expects duty free import of bio-gas engines and exemption from the state sales and octroi taxes. The desired concession in finance is to make equipment at reasonable cost so as to encourage small companies to install these equipment.

The industry may have to give greater attention to new technology and better quality as well as effect cost reductions to expand the market for pollution control equipment.