Automation industry
growing at 12%
“Automation industry in India
is approximately Rs. 12,000 crore which has a potential to grow by 15-20 per
cent given the existing capacity addition in infrastructure and energy sector,”
says K.Nandakumar, President, Automation Industry Association
In the
last couple of years, the performance of the automation industry was less than
satisfactory because other than some major oil and gas projects, there was no
major investment. K. Nandakumar shares his vision and expertise as to how
the automation sector can grow.
Could you brief on the recent performance on manufacturing
sector in India? How is it doing comparative to global standard?
In India the manufacturing sector’s contribution is less than 16
per cent of GDP, lower than the average of the developed countries. In
developed countries, manufacturing contributes on an average of 25 to 35 per
cent of the GDP.
Until 1991, manufacturing was predominantly driving the GDP as manufacturing
was approximately 2 per cent above the GDP growth level. However, after 1991,
when global integration of the Indian economy started, a lot of trading activities started picking
up. This pushed down the incentive for manufacturing, and on the other hand,
better and faster turnaround of products came through import trading. These
have contributed to a great extent in deceleration of manufacturing in India.
Recognising the fact that the country cannot sustain in the global market with
a small manufacturing base, the government and the planning body took the
initiative to put a target for enhancing the manufacturing sector’s
contribution to 25 per cent of the GDP by 2025.
However, to meet this target, the manufacturing sector should be able to
achieve around 10-12 per cent year-on-year growth, which is a big challenge.
Isn’t enhancing manufacturing sector’s contribution to 25 per
cent of the GDP too optimistic?
Because of having no thrust on manufacturing for the last 10-15
years, our skills are not adequately developed for manufacturing. Although more
than 7 lakh students are graduating from the engineering colleges every year,
they are not readily employable as our academic curriculum is not at par with
the industry requirements. That’s why the National Skill Development Council
has set a target for undertaking skills development for 150 million people by
2022.
We hope manufacturing sector will pick up as the emphasis is given on skill
development and infrastructure development in terms of cluster activities,
common user facilities, testing and inspection facilities, and laboratories
accredited to the global bodies. Incentives are also being given to promote
manufacturing sector. All these activities, which are happening in parallel,
will take at least a couple of years to get the momentum.
Infrastructure and energy sectors
are also below the basic required limit. On these accounts, enhancing the
manufacturing sector’s contribution to 25 per cent of GDP is very challenging.
Don’t you feel that the manufacturing sector has failed to
attract quality human resources over the years?
So far, IT has taken precedence over manufacturing. Human
resources from core engineering disciplines such as civil, mechanical,
electrical, chemical and to some extent electronics have been driven into the
IT space as IT was paying much more than the conventional manufacturing sector.
However, nowadays emphasis is
given to get these people back, and retain their latent skill in the
engineering manufacturing sector. The ecosystem in the manufacturing sector is
getting upgraded and comparable to IT services in compensation and working
environment.
Being the President of Automation Industry Association, have you
implemented any kind of initiatives to attract those resources?
The Automation Industry Association has a program called “campus
connect” where we engage with premier engineering colleges and IITs to
encourage students to start their career in core industry sectors. Recently,
AIA in association with IIT Chennai has set up a “centre of excellence” in IIT
Chennai in automation.
AIA has also set up a facility to
train students in Apollo Centre in Vadodara. We are bridging the gap between
present day curriculum and industry demands by conducting interactive programs,
conferences, and seminars on various subjects.
How do you see the growth of automation industry?
The growth of automation industry in India is at an average of 12
per cent a year. The automation industry is a service provider, and its growth
entirely depends on the growth of other sectors. If other sectors are stagnant
or decelerating, automation sector will also have similar effect.
In the last couple of years, the performance of the automation industry was
less than satisfactory because other than some major oil and gas projects,
there was no major investment.
By the end of 2013, large investments are expected in oil and gas, fertiliser,
petrochemical, and cement; hopefully, that should drive the growth of the
process automation industry. Otherwise, the automation industry in India is
approximately ` 12,000 crore which has a potential to grow by 15-20
per cent given the existing capacity addition in infrastructure and energy
sector.
With the implementation of the National Manufacturing Policy,
what kind of growth rate you foresee?
As the national manufacturing sector grows, the automation sector
will grow at a double rate. Also, the automation industry’s growth depends not
only on Indian consumption, it also has to grow on global platform and that’s
where the big challenge is. If we have to grow into the global platform, we
need to have more number of testing and inspection laboratories upgraded and
qualified to an international level. Standardisation of the products is also a
crucial factor and a lot of initiatives are taken by Bureau of Indian Standard
(BIS). Now most of the Indian standards are aligned to IEC standards.
Therefore, the Indian standards have global acceptance, even for automation
sector, which should push up our manufacturing capability, potential as well as
opportunities.
What will be the percentage of domestic as well as global
consumption?
Right now the percentage of exports from the Indian automation
sector is less than 5 per cent of its annual sales and limited to the Middle
East and to some extent the South-East Asia. We aim to achieve an export target
of 20 per cent of the annual production in value terms. This should free the
industry from foreign exchange variation effects as the majority of Indian
automation industries import parts and components from overseas and use them in
their final production.
Apart from the challenges in human resources, what are the
challenges the industry is facing today?
One of the biggest challenges for the Indian automation industry
is infrastructure like test laboratories and certification agencies. Without
international accredited laboratory certifications, we cannot go outside India.
For instance, most of the process automation products use is in hazardous area.
For hazardous area, we need to have certification from international bodies.
The other major challenge for the Indian automation sector, in fact the entire
Indian Industry, is facing the high cost of raising fund and lack of adequate
resources for accessing the global market.
How do you plan to overcome this?
We are working with the government and several industry bodies to
make our infrastructure fully developed like cluster facilities and common user
facilities, and a national standard body interacting with international bodies
continuously.
Which major sectors have the potential for industrial
automation?
Industrial automation can be divided into process automation,
factory automation and electrical automation. Process automation is
well-matured in India and comparable to global standards. As labour is becoming
more expensive, factory automation is also gaining ground. Manufacturers
recognise the need to automate their processes, and now robotics is coming into
use in appreciable way.
In electrical automation, there was a little or no electrical automation in
India. As a result, energy losses on the distribution side, a 35 plus
percentage, is not diagnosed. Now having recognised more than 35 per cent of
energy produced is not accounted for, emphasis is being given for the
electrical automation, transmission, and distribution by way of implementing
SCADA, and smart grid.
So the growth areas are electrical automation, factory automation and robotics.
Process automation, though, is at saturation level, but it needs to get
upgraded with further advancements in conjunction with the global developments.
Can you give a segment wise market size?
The size of the process automation market is around ` 10,000 crore
whereas factory automation will be another ` 2,000 crore. The electrical
automation market is estimated to be ` 5,000 crore in the next 5 years. These
figures do not include other automation sectors like laboratory and healthcare
instruments, security, and surveillance.
As the focus of industry has shifted to achieving manufacturing
excellence, this can be the transition time for automation industry. Being the
president of Automation Industry Association, what are your prime objectives?
Our prime objective is twofold. One is to make user industries
aware of the benefits that they can derive by adopting automation all across
their value chain. The second objective is to take the Indian automation
industry to international level. To achieve that, we are engaging with the
present stakeholders and the future leaders who are coming out from the
engineering colleges and make them aware of the current and future challenges.
We are offering them a global
platform through exhibitions like IATF and workshops like “innovation
exchange”.
Union Budget is also around the corner. What are your
expectations from the union budget 2013-14?
Most of the Indian automation industries come under small and
medium scale. For them, the cost of money in India is very high. The cost is
presently averaging to be more than 16 per cent. We would like that the Finance
Ministry is bringing down the cost for entire manufacturing sector. SMEs are
the growth engine of manufacturing sector. Even the large industries depend on
small and medium industries to a great extend. If they are not able to sustain
by the cost of money, even large industries face problems.
The government should motivate SMEs by giving special incentives to large
companies for sourcing from SMEs for at least 30 per cent of their
requirements. Cash-flow can be eased by paying them on time and giving more
weight to R&D. Also, implementation of GST will eliminate the cascading
effect of the taxes and duties.
What is the interest rate you suggest?
We would suggest that the “base rate” should be applicable for the
manufacturing sector as the Indian manufacturing sector has to compete
globally. Even in Indian market, Indian manufacturing sector is competing with
the global players, especially in automation; and hence they cannot afford to
absorb more than 16 per cent finance cost.
Any other information you want to share?
With the advent of advanced remote or wireless technology, almost
every industry is facing the risk of cyber security. Automation industry is not
an exemption. Maintaining security for automation systems is a major challenge.
Also, Indian automation industry is primarily driven by small and medium
companies. Once they develop a new product, it is difficult to test their
products live as they lack testing facilities. There is no nexus between
developer and user industry in India. As a result, when small entrepreneurs
develop any product, apart from absorbing high cost of developing, they face
uphill task to commercialise their products. This is the biggest challenge
faced by the automation industry. Globally, user industries have tie-up for
development for their requirement with manufacturers which is not the case in
India.
Furthermore, the government departments and public sector undertakings are the
big customers for the automation sector. The developing industry falls under a
ministry, different from user industry. There is no connectivity among these
ministries, regarding encouraging local development. In UK, there is a
high-powered committee for such locally developed products under the prime
minister. We are trying to encourage our government to establish a council
under the highest authority and ensure that locally developed products get due
recognition. Also, specific incentives can be given to the user industry to use
the locally developed products. The sound financial health of the developing
entity will encourage the Indian industry to come up with new products and
upgrade their performances. Without innovations, one cannot bring down the cost
of products, therefore cannot sustain.
Source:-http://www.oemupdate.com/Article.php?ItemId=1728