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PSE Insights: Manufacturing

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Public Sector Enterprises (PSEs) are emerging as lead players in the ‘Make in India’ initiative that is targeted at transforming the manufacturing sector of the country.
This edition of PSE Insights elaborates on the role of PSEs in manufacturing, their potential and the opportunities for partnerships arising under Make in India.

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PSE Insights: Manufacturing

  1. 1. PSE Vol 1 • No 4 • July 2015 insights CEO SPEAK Cmde K Subramaniam Chairman & Managing Director Cochin Shipyard Ltd SECTOR IN FOCUS Mr. T. Suvarna Raju Chairman and Managing Director Hindustan Aeronautics Ltd (HAL) COVER STORY Manufacturing – The Growth Engine For Future MANUFACTURING
  2. 2. Contents 3 Message from the CII Director General 5 Chairman’s Message 6 CEO Speak – Cochin Shipyard to Become a Major Builder of Aircraft Carriers Cmde K Subramaniam Chairman & Managing Director Cochin Shipyard Ltd 8 Sector in Focus: Manufacturing HAL on Massive Expansion Mode, Aims at Significant Global Presence 10 Manufacturing – The growth engine for future 38 Investments 40 Results 41 CSR Initiatives 42 Overseas Operations 48 Appointments 13 Events 14 Policy & Impact 21 Tie-Ups, Procurement & Contracts 25 Project Updates 28 Operation Highlights 31 Export & Import 32 M&A 33 Marketing & Trade 35 Bottom Line Strategy 50 Stock-Talk PSEUpdates
  3. 3. 2 | PSE insights | JULY 2015 Heralding a new era of Indo – Belarus friendship, H.E. Mr. Pranab Mukherjee, Hon’ble President of India and H.E. Mr. Alexander Lukashenko, Hon’ble President of Belarus, jointly dedicated the Bharat Heavy Electricals Limited (BHEL) supplied 126 MW Grodno-II Combined Heat and Power (CHP) Plant to the Republic of Belarus and its citizens, on 4th of June 2015 at a grand ceremony in Minsk, Belarus. The programme was attended by H.E. Mr Andrei Kobyakov, Hon’ble Prime Minister of Belarus, Ministers and H.E. Mr. Manoj Bharti, India’s Ambassador to the Republic of Belarus, besides various other dignitaries and senior officials of Government of Republic of Belarus and key media persons from both countries. A dedication stone, with the details of the plant and manufacturer inscribed in golden letters, was unveiled at the Grodno CHP-2 during the ceremony to commemorate the dedication of the Grodno CHP-2 to the Republic of Belarus and its citizens. The Grodno-II Combined Heat and Power Plant is the largest power plant set up by BHEL in the CIS region and has emerged to be a testimony of Indo-Belarus collaboration. This plant has achieved better performance in all aspects – whether it be output, fuel consumption, emissions, etc. BHEL has supplied the state-of-the art Frame 9E design gas turbine along with matching generator, heat recovery steam generator and control systems for this plant. BHEL’s performance in the Grodno CHP-2 has been appreciated by the customer RUE“Belenergo”, which consequently placed the largest order for capital spares (in CIS region) worth Rs. 22 crore on BHEL. Hon’ble President of Belarus appreciated BHEL services during the project and welcomed the company’s efforts for future projects in his kind words,“... Indian and Belarusian specialists maintain productive cooperation in the renovation of Grodno CHP plant No. 2. If they work as productively in the future as they do now, you will have no concerns about the projects in Belarus, we will always support such projects. They mean high quality, reliability and excellent results. We welcome such projects in the center of Europe. We will always support them...” Mr B.P.Rao, CMD, BHEL signed a Memorandum of Understanding (MoU) with RUE“Belenergo”, the central state owned public utility of Belarus, for setting up Combined Heat and Power plants in Belarus. A Testimony to Indo-Belarus Friendship – BHEL Supplied Co-Gen Power Plant in Belarus
  4. 4. JULY 2015 | PSE insights | 3 Public Sector Enterprises (PSEs) are emerging as lead players in the seminal‘Make in India’initiative that is targeted at transforming the manufacturing sector of the country. Having contributed to building the base of the Indian manufacturing sector in the past, the long experience and capabilities accumulated by PSEs will be greatly relevant to success of the initiative. This edition of PSE Insights elaborates on the role of PSEs in manufacturing, their potential and the opportunities for partnerships arising under Make in India. The Make in India mission has emphasized a multi-pronged strategy to harness manufacturing capabilities, leveraging ease of doing business, industrial corridors and infrastructure, intellectual property and R&D, skill development and FDI. 25 sectors have been identified as growth engines, including manufacturing, services, and infrastructure to be converged for industrial development. In many of these sectors, PSEs enjoy a strong presence and can emerge as the core of a new growth trajectory. Additionally, many companies from both the private and public sectors are now operating as global players. The‘Make-in- India’campaign has boosted the spirit of these enterprises to excel in their respective areas of operation and sharpen their competitive edge. With new avenues of opportunity opening up and global aspirations gaining pace, PSEs are moving in new directions. India’s leading PSEs such as Hindustan Aeronautics Limited (HAL) and Cochin Shipyard Limited (CSL) are fast emerging as enterprises of global standard. HAL has already emerged into the high-profile top‘Global 100’defence manufacturers’ list, occupying 34th rank in annual sales. The company is contributing substantially to the‘Make-in-India’programme and leading the country’s defence exports. HAL aims to become a significant global player in the aerospace industry. CSL, the country’s first aircraft-carrier builder, now plans to construct more such vessels for the Indian Navy as well as overseas naval establishments. CSL is also undertaking dry docking and ship repair works and has ambitious plans to expand as a world class shipyard. PSEs like HAL and CSL make India proud. In fact, a good number of India’s PSEs are performing at their peak levels and expanding to meet future business needs and challenges. A number of them bring out internationally competitive products and services. Companies such as BHEL, SAIL, HAL and CSL have set new benchmarks in production practices, manufacturing excellence and R&D spheres. For example, BHEL’s scale of operation is emerging as a key competitive advantage, with power plant equipment capacity of 20,000 MW per annum and capacity to manufacture 75 locomotive units among others. The engineering and technology company is spending around 2.5 per cent of its turnover on research and development. CII is working closely with PSEs in a number of areas to expand and strengthen the partnership of public and private sectors. We are excited about the possibilities for enhanced synergies under Make in India, and look forward to a strong, competitive and global manufacturing sector taking shape in the country. Chandrajit Banerjee Director General Confederation of Indian Industry Message from CII Director General
  5. 5. On the occasion of International Yoga Day on June 21, 2015, special Yoga sessions & discourses were organized by CII offices across India. The photograph below is of a special yoga session organized by CII Eastern Region at the Suresh Neotia Centre of Excellence for Leadership at Salt Lake in Kolkata. Trainers from ISHA Foundation explained through both live demonstrations and video clippings how a few minutes of yoga exercises a day can make a world of difference in the way people feel, work, and achieve. About 130 participants showed up and joined the yoga session. The aim of the programme was to help people integrate body and mind, reduce stress, experience happiness and enhance productivity in all spheres of life, said Rear Admiral (Retired) A K Verma, Chairman, CII Eastern Region and Chairman & Managing Director, GRSE, in his introductory speech. “Yoga embodies unity of mind and body; thought and action; restraint and fulfillment; harmony between man and nature; a holistic approach to health and well-being. It is not about mere exercise of body and muscles but to discover the sense of oneness with yourself, the world and nature,” he said. CII joins the first International Yoga Day celebration
  6. 6. Dear Colleagues, Indian economy’s return to higher growth path in 2014-15 is encouraging news for all and will further provide the much needed boost for revival of investment cycle. The contributions of the manufacturing, agriculture and core sectors will hold the key to higher GDP growth in the coming years. IIP data in the recent months suggest an improvement in industrial activity this year in comparison to 2014. PSEs are ready to play their roles to expand the economy that will espouse the cause of inclusive growth. From energy, power equipment, steel and non-ferrous metals, engineering, heavy equipment, electronic products to defence, aircraft and shipbuilding, PSEs are at the helm of almost the entire gamut of manufacturing. In the last five years, large CPSEs performed extremely well in the face of protracted constraints, internal and external. Around two-third of the CPSEs signing MoUs with the government had secured‘excellent’ to‘very good’ratings indicating their healthy performance. CPSEs continued to be a major source of revenue by way of payment of direct and indirect taxes to the government, apart from sharing nearly 10 per cent of the country’s export income. Thus, they play an integral role in the country’s economic development and enhance self-reliance in goods and services, apart from contributing to price stability. From the Chairman’s Desk The turnover and net profit of CPSEs have increased at 14.2 percent and 7.2 percent CAGR respectively during 2009-10 to 2013-14. Post liberalization and with increased globalization in the recent times, PSEs are facing stiff competition. Of late, net profit to turnover ratio is witnessing a declining trend indicating competition from imports and pressure on the bottom line. To enhance the scale of operations, CPSEs have been expanding in other geographies and exploring untapped areas. However, a higher local demand and domestic growth rate will mean a bigger participation of PSEs in all key sectors of economy. According to projections by several global consultants, the manufacturing sector is expected to grow six-fold by 2025 to USD 1 trillion creating a large number of jobs, pushing domestic income and expenditure leading to sustained higher growth. PSEs have to gear up to leverage on the opportunities presented by the Government’s‘Make in India’initiative to their full potential. PSEs have to focus on development of technology to further extend their scope of manufacturing to highly challenging areas to emerge as major exporters of goods and services. The current issue provides a flavor of how our PSEs are meeting such demands and making modern engineering craft a strong trajectory for the Indian economy. B Prasada Rao, Chairman, CII Council on Public Sector Enterprises and CMD, BHEL
  7. 7. 6 | PSE insights | JULY 2015 Cmde K Subramaniam Chairman & Managing Director Cochin Shipyard Ltd CEO SPEAK Cochin Shipyard Limited (CSL) was originally designed to build vessels for merchant marine upto 75,000 DWT Panamax Type. However, the Company is now banking substantially on orders from defence and Coast Guard. What changed the operational strategy? It is true that Cochin Shipyard was designed to build steel intensive ships, viz bulk carriers and tankers upto aframax size. As you would be aware the global recession of 2008 has impacted the shipping industry including shipbuilding. There has been an oversupply of vessels in the market and freight rates have moved sharply downwards. The shipyard has responded with agility to the requirements of the market place to garner remunerative orders. In the past six years, the Shipyard has built and exported 34 high quality, high end, high technology Offshore Support Vessels to international clients. The recession in the shipbuilding market has forced us to look at the defence sector also. It would not be correct to say that CSL is banking only on orders from the defence sector. The fact of the matter is that CSL has built up a repertoire of skills required to build various classes of ships, both commercial and defence. The strategy is to look at remunerative value added products and respond with agility to garner these orders. What is the Company’s experience to design and build aircraft carrier for Indian Navy? Is the Shipyard gearing itself up to become a major builder of aircraft carriers for both Indian Navy and transnational naval forces outside India in future? CSL has been entrusted with the onerous responsibility of building the first indigenous aircraft carrier for the Indian Navy. The design of the aircraft carrier has been developed by the Indian Navy and this is a completely indigenous design. The Shipyard has worked with a lot of commitment to rise to the challenges posed in building the first aircraft carrier. The inherent talent and strength of CSL in designing commercial vessels, the advanced processes of shipbuilding technology of an experienced shipyard and most importantly the people’s skills along with eco system for quality shipbuilding are the reasons why CSL has been able to progress the construction of the aircraft carrier. There have been a huge number of challenges in building the first aircraft carrier, but all of them have been resolved in-house by the inherent innovation, ingenuity and commitment of the designers and workers of CSL. It is quite clear that CSL is positioning itself as a major builder of aircraft carrier. The skill sets nurtured and developed in building the first aircraft carrier have given the Shipyard a huge advantage in building carriers for both Indian Navy as well as for transnational naval forces which we could meet with due approval of Govt of India. The Shipyard has also been doing well in shiprepair though its turnover from such work dropped by almost 30% in 2013-14. How was the performance last year? The Shipyard has assiduously nurtured the ship repair business for the last 40 years and has emerged as a reputed ship repair yard in the country. In my view, the success of CSL is due to the fact that it is an integrated yard for both shipbuilding and ship repair. The cyclicity of shipbuilding could be offset to an extent by the steady and regular ship repair business. The drop in ship repair turnover in 2013- 14 was due to occupancy of the repair dock by the aircraft carrier which has now been undocked. We are confident of improving the ship repair performance this year. In our view, there is inadequate ship repair capacity in the country. As part of its growth strategy the yard is setting up of additional ship repair facilities in the leased land in Cochin PortTrust area. It is expected that this facility will be ready in the next three years time. Cochin Shipyard to Become a Major Builder of Aircraft Carriers
  8. 8. JULY 2015 | PSE insights | 7 Although the Company is in operation for over four decades, its growth was negligible until five years ago. What were the reasons? The growth of the Shipyard is an interesting study in itself. Waybackintheearly1980s,shipbuildingwasregulatedwith the price of ships being arrived at based on negotiations and the Government approved a fair price. It is pertinent to mention that in the initial years, the Shipyard as a PSE was subjected to the permit raj system till 1991, by which time the Shipyard was in the red. A debt restructuring plan in 1992-94 put the shipyard back on the rails and the yard has posted profits since then. However, it was the agility and business acumen of the top management which took some extremelybolddecisionsin2003-04thatledthisspectacular growth of the Shipyard. While CSL retained the processes and meticulous approach of a typical PSE, we also looked at shipbuilding with a business focus. CSL is perhaps the only Shipyard in the country to have successfully tied up with a private shipyard and jointly built ships which was a win- win partnership for both. Similarly, the yard’s decision to enter offshore supply vessel market in 2006, which required a lot of re-engineering process within the Shipyard, was another major factor which has contributed towards this tremendous growth in the last five years. Further the move towards the defence shipbuilding has also contributed to this growth. What are the company’s future plans to expand its shipbuilding and repair yard capacities and outputs? The Company has ambitious plans for expansion and as a shipyard which has been successfully delivering very high quality commercial ships and efficiently building defence vessels, it is probably in the best position to expand its market share. Cochin Shipyard, as mentioned earlier, is pursuing an expansion plan to increase ship repair capacity by putting up ship repair facility in Cochin Port Trust area. CSL has also plans to build a larger dry dock within the premises to cater to the large ship segment such as LNG vessels, new generation aircraft carriers, repair of jack up rigs, etc. These plans would fructify in the next three to five years and would add capacity and capability to ensure momentum of growth. Does the Company see itself as a major international player in the industry competing with global giants in future? Yes.The company is looking at emerging as an international player in the industry and towards this end, it is evaluating a proposal to setup a green field shipyard at a new location in Gujarat. The Shipyard is looking at increasing its product mix and investing in research and development. These are the long term plans which will finally enable CSL to be an internationally competitive global player. Cochin Shipyard has been doing a good work in the CSR field. What’s the feedback from the community it serves? CSL is proud of its commitment to serve the society by undertaking CSR projects both in the immediate neighbourhood as well as within the state of Kerala. The Shipyard has done commendable work in the education and health sectors. The Shipyard has a special focus on programmes targeting disadvantaged sections of the society as also geographically backward areas. The feed- back on CSL initiatives in the field of CSR has been extremely positive and the yard has earned a very good reputation as a peoples friendly public sector undertaking in Kerala.
  9. 9. 8 | PSE insights | JULY 2015 SECTOR IN FOCUS – MANUFACTURING Hindustan Aeronautics Limited (HAL) has pioneered the manufacturing of military and civil aircraft in India and stands as Asia’s premier aeronautical complex today. What is the way forward and what are HAL’s current programs?   HAL has been the mainstay of the Indian Defence for over seven decades and its expertise today encompasses design, production, repair, overhaul and upgrade of aircraft, helicopters, aero engines, avionics, aero systems, launch vehicles, satellite structures and Unmanned Aerial Vehicles(UAV).HALhasmadesterlingcontributionsinthe field of aeronautics and aerospace and its indigenization programs date back to the early fifties.  Over the years, HAL has been successful in producing various types of aircraft and helicopters and has grown into a company with 20 production Divisions and 10 R&D centres. HAL’s current programs are aimed at boosting the nation’s defence requirements through indigenization efforts and widening the export base. Responding to India’s future requirements, HAL has conceptualized the indigenous development of a Basic Turbo-prop Trainer (HTT-40) and is working on development of Light Utility Helicopter (LUH). HAL’s latest indigenous product Light Combat Helicopter (LCH) has completed rigorous hot and cold weather flight trials recently and is expected to receive Initial Operational Clearance and enter Series Production by end 2015. I am happy to inform you that thanks to HAL, India happens to be among the six countries in the world that designed a combat helicopter. It is important to note that HAL today provides one stop solution for all the design needs of Aircraft & Helicopters in airframes, airframe systems, avionics mission & combat systems using advanced Design tools. Also, HAL is determined to achieve its vision of becoming a significant global player in the aerospace industry. HAL’s thrust on co-development and co-production of aircraft, engines and equipment with leading global aerospace companies will not only meet India’s defence requirements but will also increase the level of exports of aerospace products. HAL currently exports its products and services to more than 20 countries. Regarding Research & Development strategy, HAL has set up an R&D corpus earmarking 10% of its operational profit after tax for technology development efforts. The Company continues to focus on increasing its portfolio of products including aero engines. The latest being a 25 kN turbofan engine suitable for trainer aircraft and a 1200 kW turbo shaft engine primarily for use on helicopters. As part of R&D policy, a society has also been registered for formation of Corporate Meta-university for industry focused research relating to aeronautical sector in all disciplines and inter-disciplinary areas of technologies.   HAL on Massive Expansion Mode, Aims at Significant Global Presence Mr. T. Suvarna Raju Chairman & Managing Director Hindustan Aeronautics Limited (HAL)
  10. 10. JULY 2015 | PSE insights | 9 What are the initiatives taken by HAL to realize government’s‘Make in India’drive?   HAL has been one of the pioneers in meeting India’s defence needs and ‘Make in India’ concept has been its strength all along. HAL is committed to becoming self- reliant in aircraft production and maintenance in the strategic interest of the nation and has taken several initiatives aligning with government’s‘Make in India’drive. Indigenization is crucial to manufacturing in India and HAL has been successful in indigenizing over 2000 components.  In addition, a total of 111 technology projects have been identified in the areas of design, manufacture,avionicsandmaterialtosupportindigenous development and initiatives are being taken to develop advanced aerospace materials in the country. HAL has so far designed and developed 15 types of Aircraft /Helicopters and has mastered the rotary wing technology. Advanced Light Helicopter (ALH) Dhruv has already proven its worth in India and other countries. HAL’s current indigenous development/production programs include Light Combat Aircraft (LCA), Intermediate Jet Trainer (IJT), Hindustan Turboprop Trainer (HTT)-40, Advanced Light Helicopter (ALH- Weapon System Integration), Light Combat Helicopter (LCH), Light Utility Helicopter (LUH), Fixed and Rotary Wing UAV, Advanced 25kN Aero Engine and Mission Computer (MC) etc. To further propel indigenization efforts and boost private- public partnership, HAL is keen on developing Micro Small and Medium Enterprises (MSMEs) to sustain global competitiveness. With a vendor base of about 2500, HAL is outsourcing its manufacturing activities to the Indian private industries and 25% of the total standard man hours are outsourced.  HAL is well poised to meet the future requirements of the country and emerge as a global player with capabilities in design, development, repair and upgrade of aircraft, helicopters, aero engines and aero systems.   On the HR front, what are the initiatives taken up by HAL to become a globally competitive organisation?   HAL has chalked out plans and strategies to launch itself into the distinguished league of global companies in the aerospace arena.  Human Resources has been identified as one of the thrust areas. HAL’s belief is that “people are key differentiators for sustained success”.  The objectives are to ensure availability of right people to meet the organizational goals; continuous improvement in knowledge, skills and competence (managerial, behavioural and technical); development of core competence in high-tech areas; promote a culture of achievement & excellence  with emphasis on integrity, credibility and quality; maintain a motivated workforce through empowerment of individuals and teams; ensure organizationallearning;andplayaroledirectlytoenhance productivity, profitability and improve the  quality of work life. HAL is focused on getting the best of its workforce through various measures: •  Attheentrylevel,HALhasputinplaceInductionTraining for Management Trainees (MT) / Design Trainees (DT) intended to bridge the gap between the academics and Industry. The 52-week structured training consists of one semester at IITs and other reputed Institutes to strengthen the technical skills and orientation towards Aeronautics.The training also focuses on Basic Management.  • For mid-career level employees, opportunity is provided to acquire latest and advanced technology in the field of Aeronautics and to implement the same on projects. HAL has a tie-up with Cranfield University UK to sponsor Executives for acquiring M. Sc in Aero Dynamics, Aerospace Vehicle Design, Material Science, Thermal Power, Manufacturing etc. During the past five years, more than 100 executives have been sponsored for this programme.  •  In addition, HAL has been sponsoring Officers to reputed Institutions in India for higher studies in the field of Technology and Management, in a structured manner. In the Technical and Design Disciplines, Officers have been sponsored to various IITs and in the field of Management to IMI - New Delhi, XIME - Bangalore, MDI – Gurgaon etc. We recently introduced a scheme for Sponsorship for MS, M Sc (Engg.) and Ph. D Programme at Indian Institute of Science, Bangalore and IIT Kharagpur, Kanpur, Madras, Delhi and Mumbai. • Succession Planning is identified as a thrust area to ensure continuous and timely supply of high performance individuals, who will occupy leadership rolesasidentifiedbyHAL.Themajorinitiativeslaunched by the Company in this direction include outlining a one year comprehensive Leadership Development Programme (Sanghshaptak) in consultation with IIM-Ahmedabad and revamping of Assessment & Development Centres for the Senior Executives with KPMG Advisory Service Pvt. Ltd. Also, customized Competency Development Programmes (CDPs) have been developed in collaboration with IIM Ahmedabad for Business Excellence; IIM Bangalore for Operational Excellence and IIM Calcutta for Leadership Excellence, to bridge the competency gaps identified by way of Assessment Centres.   
  11. 11. 10 | PSE insights | JULY 2015 COVER STORY Manufacturing –The growth engine for future
  12. 12. JULY 2015 | PSE insights | 11 Revival of economy through investment driven growth of industry and infrastructure sectors is the top most priority before the government. Today’s evolving world- order rests on the pillars of globalization and technological advancement, offering a huge opportunity for the growth of industry. The emerging paradigm of manufacturing is based on productivity-adjusted labour, rationalisation in consumption of natural gas and electricity, not merely on the perceptions of high-cost or low-cost economies. In this context, improvement in efficiency and technological advancement are the two most important prime-movers to achieve competitiveness in manufacturing. Manufacturing in India today Today,Indianmanufacturingsectorisatacrossroad.Despite being a major growth sector for the Indian economy, the share of manufacturing is stagnating at around the 15% of GDP for almost three decades now and it is indeed low when compared to around 33 percent in China, 28 per cent in South Korea, 25 per cent in Indonesia and around 20 per cent in Japan, Malaysia and Germany. With share of non- agricultural sectors growing faster than the performance of the agricultural sector, there seems to be an aberration in India’s structural transformation as India jumped directly from an agrarian to a service driven economy leapfrogging the intermediate manufacturing stage. Country has experienced economic boom on the back of servicesledgrowthwhilelowagriculturegrowth,lowquality employment, rural-urban divide, continues to plague the well-being of masses.Today, manufacturing sector employs 30% of the non-agricultural workforce with approximately 15% share in GDP while the agriculture contributes only 18% of GDP with a working population support of around 60%. This re-enforces the fact that domestic manufacturing has to play a pivotal role in achieving consistent, more inclusive, and sustainable growth. Reaping demographic advantage India is one of the best countries in the world poised to take the manufacturing revolution to the next stage. India has a strong advantage of being a nation with the youngest population. With increasing population, the working age people over the next decade is expected to be approximately 900 million which works out to around 65% of India’s population in the age bracket of 18-59 years by 2026. It is an imperative to focus on building a strong and skilled workforce, as such an opportunity rarely comes in the life of a nation and we as a nation should reap this opportunity of“demographic dividend”in its entirety or else we will lose the advantage if the situation does not change in the next ten years. Realising‘Make In India’ Make in India’initiative, aims to catapult Indian Industry into a new phase of growth trajectory by providing one of the best platforms to strengthen domestic manufacturing to earn global recognition for the Indian economy and also place India on the world map as a manufacturing hub. The success of this initiative will depend on how we spur up our level of operations with additional efforts in terms of better technology and enhanced skill meeting global quality standards while indigenizing technology intensive manufacturing and not just acting as a hub for assembly of manufactured components. The Make in India’ campaign has the capability to lead to more localisation by leveraging the incipient strength of “Reverse Engineering” enshrined in various sectors of entire domestic manufacturing value chain. This needs to be cultivated and developed by providing an ecosystem conducive to low-cost and high-quality products. With impetus on developing industrial corridors and smart cities, the government aims to ensure holistic development ofthenation.Thecorridorswouldfurtherassistinintegrating, monitoring and developing a conducive environment for the industrial development and will promote advance practices in manufacturing. In a bid to reap advantage of the initiatives taken by the Government, the manufacturing sectorneedstotransformitselfemphasizingonmaintaining superior quality while keeping price at a competitive level. Appropriate quality standards are needed if the country has to emerge as a destination for global manufacturing. Prime Minister’s call for‘zero defect and zero effect’manufacturing to produce quality products without any adverse impact on the environment very well recognises shape of the things to come in future. The government plans to introduce quality standards for automobile, food processing, electrical machinery, garments and textiles products among others to drive exports of quality products. A policy ecosystem is required to render necessary flexibility to PSEs to address conflicting priorities enabling collaborative working with private sector. In the context of foreign collaboration, sharing business with collaborators on mutual benefit and to the holistic benefit for the country in terms of technology acquisition, skill development should be the hallmark. Fostering innovation for Value added manufacturing The shifting paradigm of global manufacturing led by lower energy cost and improved technology is putting traditional low cost counties under stress as manufacturing bases are returning to US, UK, Germany and Mexico bringing supply chain closer to demand centre. An enabling innovation
  13. 13. 12 | PSE insights | JULY 2015 ecosystem needs to be created to unlock the potential of domestic manufacturers for higher value creation. Today, Value Added by the manufacturing sector in India is less than half that of China (30-35%). Even smaller countries (in terms of GDP and population) like South Korea and Brazil have larger manufacturing imprint than India. Today, Indian manufacturers face a daunting task in terms of transforming to a competing manufacturing centre and have to realize that not spending on innovation would be akin to unilateral disarmament in wartime. In the increasingly globalized manufacturing context, customer-oriented manufacturing is one of the promising approaches to improve product and service quality with competitiveness. This is an imperative, in particular, for the small and medium-sized enterprises (SMEs). Climate change is going to be one of the foremost factors havingahugeimpactintermsoftechnologyinterventionon the manufacturing industry worldwide. With the stringent emissions controls and an earnest need to develop “Green Technology”, technology ‘depth’ is required which seeks to increase value addition and enhance competitiveness. As Indian manufacturers, we need to enhance our R&D spend from a paltry 0.8% of GDP vis-à-vis 1.5% spent by Chinese and 3.5% by South Korea so that we are not left behind in developing emerging technologies necessary for adding higher value in manufacturing. The pace of commercialization of R&D is a weakness of Indian manufacturing calling for confidence and capacity building with right policies and robust competence in place. Other emerging areas like additive manufacturing; factory of future with intelligent decision support models, enveloping ambience of intelligence with sustainable and reconfigurable systems to equip our manufacturing units to catertoemergingkindofmarketdemandarealsonecessary for enduring existence. Skill developments for adapting the best practices with improvements and modifications, Six sigma, lean engineering, reconfigurable manufacturing etc need to be emphasised to enhance capacity and competitiveness. The approaches need to be designed to reduce time to market innovative products. Towards this improving capabilities for information collection and analyzing data, knowledge and patterns with advanced computing are crucial for manufacturing growth. The necessary focus areas for value added manufacturing consists of (a) bridging skill gap by investing in skill development not only for the new entrants but also for the existing workforce in order to enhance productivity. (b) Creating an eco-system for innovation driven research, development and deployment to match the global peers (c) Supporting the SME sector in acquiring technology and improving efficiency as the sector often acts as supply chain partner of OEMs and large industries (d) Streamlining the accessibility to abundant raw material and natural resources of the country. Conclusion In fine, India has to stand up to the global challenges of climate change, resource scarcity and social inequities by leveraging technology and innovation in its manufacturing capabilities for developing products and providing services in an environmentally sustainable and socially responsible manner. The necessary pieces of manufacturing jigsaw need to be put together before global supply chain gets fully re-defined to reap the benefits of “Make in India” platform and overtakes domestic industry. The author of the article is Mr Kaushik Acharya, General Manager, BHEL
  14. 14. JULY 2015 | PSE insights | 13 (L - R) Mr. N K Verma, MD, OVL, Mr. Vimal Wakhlu, CMD , TCIL, Ms. Nita Karmakar, Director, CII, Mr. B Prasada Rao, Chairman, CII PSE Council and CMD, BHEL and Ms. Ratika Jain, Executive Director- Manufacturing, CII. The CII PSE Council, which is a forum of Chairmen and Managing Directors of the Public Sector Enterprises chaired by Mr. B Prasada Rao, Chairman and Managing Director, BHEL, met on 21st July in Delhi for its first meeting for the year 2014-15. The following points were discussed: • Need for the Public Sector Enterprises to get due recognition for their CSR oriented activities and hence CPSEs to be encouraged to apply for the CII Sustainability Award. • Swachh Bharat initiative taken by CPSEs including building toilets across the country. • Discussion on the Public Procurement Bill and its implication for the CPSEs. CII Council on Public Sector Enterprises EVENTS CII PSE SUBCOMMITTEE ON CSR & SD The CII CPSE Subcommittee on CSR and SD, chaired by Mr. Vimal Wakhlu, Chairman and Managing Director, TCIL met on 21st July in Delhi to discuss upon their various that would be taken in the year 2014-2015.The members discussed on their targets of building toilets across the country. Everyone would be completing their targets except for those which are in flooded areas. The members also deliberated on the CII CSR Summit which will focus on sharing of experiences by both Public and Private Sector being planned in the month of September 2015. • A presentation was made by Mr. M L Shanmukh, Chairman, CII Subgroup on Director (HR) on issues of the present Pay Revision and its solution for the next Pay Revision for the CPSEs • A Presentation on Exemptions, Modification and Adaptations to Companies Act 2013 was made by Mr. Rudra Pandey, Partner, Shardul Amarchand Mangaldas & Co. Members were presented the issues yet to be exempted by MOCA for CPSEs and their implication. Mr. Vimal Wakhlu , Chairman, CII Subcommittee on CSR & Sustainable Development and CMD, TCIL. (L-R) : Mr. Rabindra Singh, Director (Personnel), NMDC, Ms. Veena Swarup, Director (HR), EIL , Mr. Rajesh Goel, CMD, Hindustan Prefab and Ms. Anita Dhar Kaul, GGM, RITES.
  15. 15. 14 | PSE insights | JULY 2015 Policy & Impact PSE DEFENCE FIRMS GET ACCOUNTING EXEMPTION The government has exempted its defence companies from segment account reporting so that these entities don’t have to reveal sensitive information in their books. Segment reporting pertains to a company’s financial information with regard to the different products and services it produces and the geographical areas it operates in. “For government companies engaged in producing defence equipment, the provisions of section 186 (loans and investments by companies) and accounting standard 17 (segment reporting) shall not be applicable,” said a senior official. Besides, these companies have also been exempted from complying with section 186 of the Companies Act, 2013, which prohibits a company from making investments through more than two layers of subsidiaries and requires unanimous board approval for giving any loan, guarantee or security. Many government defence companies have more than two layers of subsidiaries. The decisions come at a time when the government wants to increase domestic defence production by both public sector and private companies. Currently, India is the second-largest importer of defence equipment. The government has raised the foreign direct investment (FDI) cap on defence companies from 26 per cent to 49 per cent. FDI beyond 49 per cent is also allowed in state-of-the art defence manufacturing, albeit with riders. “Keeping in view the nature of business and the sensitive nature of the disclosure, it is considered prudent not to disclose the information required by accounting standard 17 regarding segment reporting. Such non-disclosure does not have any financial effect on the accounts of the company,”HAL said in its annual report. Segment account reporting is only a disclosure standard and doesn’t affect the recognition or measurement of any component in financial statements. Though no such exemptions have been given to private companies engaged in defence equipment manufacturing, it is unlikely to disrupt the level playing field, as such exemptions do not have a bearing on the manner in which the performance of such companies are depicted. SHIPPING MINISTRY LOOKING FOR ALTERNATIVES TO PORT CORPORATISATION: GADKARI Shipping Minister Nitin Gadkari on June 5 said attempts were being made to find alternatives to corporatisation, which was opposed by port employees, for upgrading infrastructure and services, as announced in Budget 2015-16.“Finance Minister Arun Jaitley had told us (in the Budget) about the Companies Act, but we are looking at other alternatives beyond the Companies Act to modernise and develop the ports,”Gadkari told reporters at a Mumbai Port Trust event.“Finance Minister Arun Jaitley had said major ports would be encouraged to come under the Companies Act for better functioning. Gadkari said his Ministry was discussing and seeking guidance from the Finance Ministry on the alternatives. He did not elaborate. “Basic concept for ports is development and modernisation. We don’t want to privatise ports, nor do we want to give any equity to private people. We want to modernise, protect the interest of labour, protect the interest of ports and, at the same time, improve the services of the ports to improve business and do good profits.” Speaking to reporters after inaugurating an oil spill response facility for the Mumbai harbour, Gadkari said the 12 major ports would be investing Rs 1,000 crore to set up clean power facilities and reduce reliance on grid power. “The government has sanctioned a 150-MW plan for green power for ports,”he said, adding generating funds would not be difficult. On the occasion of the World Environment Day, Gadkari also highlighted the need to use recycled water and reiterated his plans to have green smart cities at each port, at an estimated Rs 3,000-4,000 crore a city. “Port water will be recycled. Port waste will be turned into biogas. Vehicles will run on biofuel. Solar energy and wind power will be generated at ports. These cities will be pollution-free and aim at being green smart cities,”Gadkari said. The 12 major ports together have an estimated 264,000 acres, and these are being mapped through satellites. Gadkari also said the government had no plans to sell land to builders and private developers. These smart cities would be built according to PSE NEWS UPDATE
  16. 16. JULY 2015 | PSE insights | 15 international standards and would have wide roads, green energy, advanced townships and greenery. The major ports in the country - Kandla, Mumbai, Jawaharlal Nehru Port Trust, Marmugao, New Managlore, Cochin, Chennai, V O Chidambarnar,Visakhapatnam, Paradip and Kolkata (including Haldia) - handle approximately 61 per cent of cargo traffic. INDIA SCRAPS DUTY BENEFITS FOR DEFENCE PSEs TO WOO PRIVATE COMPANIES The government has withdrawn a critical preference given to state-run companies and government entities that manufacture defence goods, a measure that will help attract private capital to the sector and boost job creation by creating a level playing field. The government has issued a notification to withdraw the excise and customs duty exemptions enjoyed by the Ordnance Factory Board and public sector units in defence sector. “This will provide a level playing field ... by taking away the strategic advantage with PSEs for quoting lower rates in open bids,”a Commerce and Industry Ministry statement said on Monday. The move addresses a key demand of private sector and foreign original equipment manufacturers (OEMs) such as Boeing, Airbus, Lockheed Martin and BAE Systems, which are actively exploring the scope of future investments in India, the statement said. It will also send a definitive message to foreign OEMs that India is open to business for defence manufacturing, the notification said. Foreign firms tying up Indian private players have long complained that the excise and customs exemption gives an unfair cost advantage to state-run enterprises. It is partly due to this preference that foreign firms preferred to tie up with a public sector unit for a Defence Ministry contract even when it was more feasible to involve a private partner that could deliver faster and would be more efficient. The withdrawal of exemption will open up possibilities for smaller Indian private players who can be sub suppliers and contractors for larger military contracts. “This is a welcome move to put the Indian private sector and PSEs at par. However, the MoD (Ministry of Defence) also needs to consider the advantage that foreign companies enjoy as it does not have to pay any import levies for equipment it brings in,”said Ankur Gupta of EY India. The Indian aerospace and defence market is among the most attractive globally as the country is the highest importer of defence items in the world, the Ministry stated. The government has systematically opened up the sector for private investment by raising the cap on foreign direct investment to 49% and rationalising certain conditions. Almost 60 per cent items required for industrial licence have now been dereserved. GOVERNMENT MULLS COMMON COAL TRADING PLATFORM FOR COAL INDIA AND PRIVATE COMPANIES The government is working on a common coal trading platform for Coal India and private companies which are likely to be offered lucrative blocks with prior clearances for commercial mining. The electronic platform is likely to be an extension of the spot sale practice of Coal India called‘e-auction’where all the coal mined in the country, excluding from captive blocks, will be traded, a senior government official told ET. State-run Coal India sold around 11% of its output through e-auction at a market-driven price in January- March. The government has decided to auction the company’s future coal supply to unregulated sectors such as steel, cement and captive power plants. The proposed platform could trade Coal India’s auctioned supplies, the PSE’s uncontracted output, imported coal and the output of private companies from coal mines that will be auctioned for commercial use. “A common electronic platform will ensure transparent trading, while letting the government record and monitor every single transaction,” another Coal Ministry official said.
  17. 17. 16 | PSE insights | JULY 2015 The NDA government is working towards auctioning coal blocks for commercial use after enactment of Coal Mines Special Provisions Act that provides for opening the sector to Indian and foreign private firms, ending Coal India’s monopoly. Prior to this, Indian companies with end-use plants were permitted to mine coal for captive purposes. COAL MINISTRYTO RESERVE COAL FOR AUCTION TO UNREGULATED SECTORS The Coal Ministry will reserve coal for auction to unregulated sectors such as steel and cement from Coal India’s additional production every year so that there isn’t any desperate bidding by private firms in the upcoming auction of coal supply contracts. As per a draft model circulated for stakeholders’comments by the Coal Ministry, separate bidding will be held for cement, iron and steel, aluminium and fertiliser plants. As per the proposed mechanism, Coal India will invite bids from companies for supplying a fixed quantity of coal at a floor price. Once bids are received, the state-run miner will increase the floor price till the demand and supply reach the same level. The proposed methodology is among three options proposed by SBI Capital Markets that was appointed as the consultant for advising on auctions of Coal India’s contracts. The methodology is being used to derive a market-driven price for the coal contracts against the current system of awarding the agreements based on decisions of an interministerial screening committee. OIL MINISTRY TO READY ROAD MAP FOR SECTOR’S INFRASTRUCTURE With India’s demand for petroleum products poised to grow at more than 3% annually and the country expected to see average annual GDP growth of 8-8.5% over the next several years, the Oil Ministry has decided to roll out a road map for development of the sector’s infrastructure. This will include decadal plans to meet demand till 2050. This would be for the first time, Petroleum Minister Dharmendra Pradhan said, that his Ministry has proposed a“long-term strategy similar to developed nations”to create infrastructure related to transportation, marketing and production of petroleum products to be able to adequately meet demand till 2050. The‘Vision Document 2050’, would strategise the demand for petroleum products and infrastructure in the country for the next three decades. One of the focus areas would be to cut costs. India, the fourth-largest energy consumer in the world after the US, China and Russia and accounting for 4.4% of global energy consumption, would see highest oil demand between 2013 and 2040, said International Energy Agency’s World Energy Outlook 2014. The country is expected to see its demand for petroleum products grow at a compounded annual growth rate of 3.5%. Moreover, with a positive outlook from the government’s end to ramp up investment in infrastructure, including roads and railways, sales of both passenger and utility vehicles are expected to grow at 6-8% in the current fiscal. NEW POLICY LIKELY TO OPEN PETROL PUMPS With increased private participation in retail sector appearing imminent, the Ministry of petroleum is contemplating to offer petrol pumps on“self investment models”without any outlay assistance from oil marketing companies. Under this new scheme, investments, maintenance and running costs will be done by dealer while the Oil marketing companies (OMCs) – IOCL, HPCL and BPCL – will mentor successful bidders on facility and equipments required, engineering and list of vendors to fetch fuel, said Ministry sources. Besides, the OMCs will decide fuel and other product prices offered at outlets to ensure that customers are not taken for a ride. Till now OMCs are operating more than 50000 retail outlets all over the country under different categories – company-owned and company operated (COCO), company-owned and dealer operated (CODO) and dealer-owned and dealer operated (DODO). PSE NEWS UPDATE
  18. 18. JULY 2015 | PSE insights | 17 The Ministry is mulling to add another category in giving out retail outlets to individuals and“legal entity”by relaxing rules in the existing dealer selection policy. This scheme will have a provision for multiple dealerships – which is an indication of opening up of the retail sector for private companies. NATURAL GAS OUTPUT TO RISE 50% BY 2018-19 India’s natural gas output is likely to rise by 50 per cent to 146.87 Million Standard Cubic Meters per Day (mmscmd) by 2018-19 on account of higher production from ONGC fields, Oil Ministry has said. In its annual report, the Ministry has said domestic gas production will rise from 98.15 mmscmd in 2014-15 to 99.87 mmscmd in the current fiscal. In 2016-17, the output will climb to 112.95 mmscmd and finally to 146.87 mmscmd in 2018-19. Bulk of the incremental output will come from state-owned Oil and Natural Gas Corp (ONGC) which will see production rise to 65.75 mmsmd in 2014-15 to 96.38 mmscmd. ONGC production will include 4.66 mmscmd from New Exploration Licensing Policy (NELP) block KG- DWN-98/2 or KG-D5 in 2017-18 and 12.05 mmsmcd in 2018-19. State-owned Oil India Ltd will see gas production rise from 7.78 mmscmd last fiscal to 10.96 mmscmd in four years. The Ministry said output from fields operated by private firms like Reliance Industries is projected to rise from 24.62 mmscmd in 2014-15 to 39.53 mmscmd in 2018-19. Demand, on the other hand, is projected to increase by nearly 30 per cent to 523 mmscmd in 2018-19 from 405 mmscmd in 2014-15. Gas demand is expected to climb 10 per cent in the current fiscal to 446 mmscmd. India is world’s fourth largest energy consumer with oil and gas constituting about 37.24 per cent of primary energy consumption. “The world average primary energy consumption growth rate (CAGR) for 2000-2013 has been 2.41 per cent, as compared to Asia Pacific’s rate of 5.39 per cent and India’s rate of 5.52 per cent,”the report said. GREEN SIGNAL LIKELY FOR 42 STALLED PROJECTS WORTH Rs 1.15 LAKH CRORE The Narendra Modi government is gearing on the pedal to revive the investment climate, facilitating clearances for 42 stalled projects worth Rs 1.15 lakh crore since it presented the Budget for 2015-16. In the previous nine months about 50 pending investment plans worth Rs 1.45 lakh crore were granted green signals through the Project Monitoring Group (PMG) in the cabinet secretariat. Highway projects account for half of the 42 projects whose pending clearances have been resolved by the PMG in the three months since the Budget. Ten power generation and transmission projects with investments over Rs 72,000 crore have also got the green signal. Three oil and gas projects have also got the nod, including Shell’s Rs 5,000 crore re-gasification plant in Kakinada. Railway projects worth Rs 5,500 crore, including the Patna Ganga Rail-Road Bridge and a new 180 km rail line to evacuate coal from Chhattisgarh’s hinterland, are also now set for implementation with all outstanding nods secured. Aditya Birla group firm Hindalco has also secured permissions for a Rs 13,200 crore aluminium smelter plant in Odisha’s Sambalpur district. The PMG, set up by the UPA in January 2013 to help stuck investments, had cleared 155 projects worth Rs 5.5 lakh crore in its first 16 months. Since the NDA came to power in May last year, 91 projects worth Rs 2.6 lakh crore have been put back on track. NO CENTRAL HELP TO DEBT- RIDDEN STATE-RUN POWER DISCOMS: PIYUSH GOYAL The government has ruled out the possibility of a central package for debt-ridden staterun power distribution companies, and has insisted that it’s time that they get their act together. The combined debt of all distribution companies was around Rs 2 lakh crore as on March last year, and despite most discoms raising tariff, they haven’t really managed to cut losses significantly. They are, in fact, depending on loans for even taking care of operational expenses. In the past, the central government had introduced‘restructuring packages’for discoms – the most recent being 2013. What discoms need to do is, set efficiency right, eliminate corruption in the system, reduce losses, cut transmission and distribution losses. I need to handhold them and put on my investment banking hat to help them sort things out,”Minister of Power, Coal and Renewable Energy Piyush Goyal said. The Minister added that the‘onesize- fits-all’principle doesn’t work here. “We have started dialogue with state governments last year. The central government, state governments and outside experts are working together for a 24x7 electricity plan by 2019 for each state,”he said. No state had signed new power purchase agreements since 2013,
  19. 19. 18 | PSE insights | JULY 2015 and many continue to opt for load shedding rather than buy power, forcing the industry and commercial outfits to depend on expensive power from diesel generator sets. India has a total installed capacity of 90,000 MW of diesel generator sets, providing power at upwards of Rs 20 a unit. “We will eliminate consumption of electricity through diesel generator sets. This requires a lot of distribution capacity augmentation and improving transmission network. We are also looking at changing the existing transmission lines in parts to double capacity,”Goyal said. The Ministry plans to bid out contracts worth Rs 1 lakh crore over the next 6-8 months to scale up transmission infrastructure. The recent coal mine auction and bids for gas have given the sector some relief and visibility to increase generation. In the year ended March, India added 22,566 MW of new generation capacity, its highest ever in a year. But these projects were those which had been stranded or stuck and thus delayed. CENTRE PADS UP TO RAISE RS 1-LAKH CR FOR PORTS & INFRASTRUCTURE Union Ministry of Shipping has chalked out a plan to raise Rs 1-lakh crore to develop ports, build ships and improve inland waterways.The amount would be raised in the dollar equivalent at an interest of three per cent. Gadkari said his Ministry is planning to set up Ports Infrastructure Development Finance Corporation to fund ports and shipping infrastructure in dollars. Inland waterways, ports and shipping are on the top of the agenda. The Centre is keen to modernise large ports. The Ministry has already taken decisions to develop six ports, including Rs 12,000 crore deep-water Sagar port in West Bengal, Colachel in Tamil Nadu, Rs 6,000 crore Vadhavan port in Maharashtra, and Rs 1,200 crore Haldia dock 2. These ports would be developed with 20 meter draft. The handling capacity will be more and the ports do not have to annually spend money on dredging. A port with 20 meter draft will also help increase revenues. At present, JNPT has to spend Rs 400 crore annually on dredging. GOVT PROPOSES TRIBUNAL FOR PUBLIC CONTRACTS To streamline the institutional mechanism for resolution of disputes arising from public contracts, including public-private-partnership projects, the government on June 18 released a draft Bill to set up a tribunal for public contracts. The Bill provides for the tribunal to deal with disputes in the public contracts exceeding Rs 5 crore. It would deal with disputes relating to execution of contract, specific performance of the terms of the contract, termination, cancellation, repudiation and claims for damages for breach of contract. The tribunal has to conduct day-to- day hearings and give final order within 180 days from the date of the application. Similarly, an arbitral tribunal would be required to announce its arbitral award within 120 days of referring the dispute to it. The tribunal’s order will be binding on all parties and can be challenged only in the Supreme Court. The Bill is part of the government’s initiative to unclog stalled projects that were holding back investments worth several trillion rupees and discouraging investors. The government has envisaged $1 trillion investment in infrastructure in five years through FY17. Acknowledging that disputes in public contracts are costly and takes a long process to resolve, Finance Minister Arun Jaitley had proposed the Bill in the Budget. According to the draft Bill, the government would constitute the tribunal for public contracts with principal seat in New Delhi and benches in Chennai, Kolkata and Mumbai. PSE NEWS UPDATE
  20. 20. JULY 2015 | PSE insights | 19 GOVERNMENT PLANS TO RAISE NFL’S NANGAL UNIT CAPACITY BY 1.3 MT The Fertiliser Ministry plans to increase the capacity of National Fertilizer Limited’s (NFL) plant at Nangal in Punjab by 13 lakh tonnes (LT). At present, NFL’s Nangal unit has an installed capacity of 4.785 lakh tonnes (LT) “Government wants to produce more fertilisers in the country and reduce import dependence. The Ministry of Chemicals and Fertilisers is working on the Prime Minister’s‘Make in India’ mantra and in this regard several old and sick units are being revived,” Minister of Chemicals and Fertilisers Ananth Kumar said. Besides reviving old units, new units are also being set up, he added. NFL has a total annual installed capacity of 35.68 lakh tonnes and is the second largest producer of urea in the country. GOVERNMENT EASES DEPOSIT- TAKING, MANAGERIAL PAY NORMS FOR FIRMS Ushering in an easier set of regulations, the government has relaxed deposit-taking norms for private companies and exempted the Public Sector entities from managerial remuneration restrictions. The changes, which also include relaxations for related party transactions entered into by the private companies under the Companies Act, 2013, are part of the government’s efforts to further improve the ease of doing business in the country. The Corporate Affairs Ministry said it has notified the changes that broadly include easier compliance requirements for private, government and charitable companies. Private firms can now provide a shorter period for offering securities to existing shareholders, approve employee stock option plans through a simple majority and follow“an easier procedure”with regard to holding general meetings. “Private companies have also been allowed to accept deposits from members without the requirement of offer circular and creation of deposit repayment reserve etc. Flexibility has also been provided in the types of share capital that can be issued by private companies,”the Ministry said in a press release. The mandatory consent of shareholders for certain transactions relating to sale of undertaking, investments and borrowings etc. has been done away with. Among others, private companies not having any investment by corporates have been allowed to extend loans to directors subject to certain conditions. An interested private company director has been allowed to can now participate in board meeting after declaring his interest. For government companies, the Ministry has done away with limits on managerial remuneration as well as restrictions on the maximum number of directorships. Rules for disqualification of directors in certain cases have also been eased. “The provisions relating to loans to directors, loans and investments by companies and related party transactions have been modified to provide flexibility to Government companies in complying with such provisions,”the release said.
  21. 21. 20 | PSE insights | JULY 2015 The Ministry has already made a raft of changes to the Companies Act, 2013 - whose most provisions came into effect from April 1, 2014 – amid concerns raised from various stakeholders. Besides, a committee has also been set up to further review the new law and suggest further changes. PSEs, CENTRAL DEPTS TO GET RS1 CR PER MW TO SET UP SOLAR UNITS To boost the country’s energy security, the government has decided to give a push to solar power generation by roping in Public Sector units and Central departments and Ministries. The government has asked them to set up 1 MW solar power plant each on their rooftops or land for which they would be given viability gap funding of Rs 1 crore per MW. The projects have to be implemented by 2017 and the PSEs and Ministries would be free to use the power so generated for either self-use or sell it to third party or discoms. The incentives are being given under the scheme to set up 1,000 MW of grid- connected solar PV power project to give fillip to generation of solar power, which will help in promoting ecological and sustainable growth while meeting India’s energy needs. The viability gap funding (VGF) will be given in two tranches – 50 per cent on successful commissioning of the full capacity of the project and the rest after one year of successful operation of the project. For encouraging domestic manufacturers, the government will give VGF of Rs 1 crore/MW if the cells and modules are procured from domestic source while it will give Rs 50 lakh/MW if only the modules are procured from the domestic source. The PSEs such as NTPC, NHPC, CIL, IREDA, and Railways would be allowed to participate in Central or state government tenders from time to time up to 2016-17 for selling solar power to state utilities, discoms or any other organisation. They will also be allowed to sign power purchase agreements and power sale agreements with state utilities and discoms at tariff determined by the Central or state regulators. The VGF will be provided through Solar Energy Corporation of India (SECI), which will be given a fee of one per cent of the VGF disbursed for handling the funds and managing the scheme. However, if the project fails to generate any power continuously for any year within the 25 years or the major assets are sold or the project is dismantled during this tenure, SECI will have a right to refund of VGF on pro-rata basis. The project falls under the Jawaharlal Nehru National Solar Mission to meet the energy demand and tackle challenges of climate change. The mission has set a target of deploying grid-connected solar power capacity of 20,000 MW by 2022 to be achieved in three phases – first phase up to 2012-13, second phase by 2017 and the third phase by 2022. For encouraging domestic manufacturers, the government will give VGF of Rs 1 crore/MW if the cells and modules are procured from domestic source while it will give Rs 50 lakh/MW if only the modules are procured from the domestic source. PSE NEWS UPDATE
  22. 22. JULY 2015 | PSE insights | 21 Tie-Ups, Procurement & Contracts AIR INDIA SEALS CODESHARE ALLIANCE WITH AIR NEW ZEALAND, AVIANCA Providing a seamless connectivity to its passengers bound for New Zealand and Colombia, national carrier Air India has sewed up a codeshare alliance with Air New Zealand and Avianca. The two partnerships were sealed during the 71st Annual General Meeting of the International Air Transport Association in Miami, in June this year. Both Air New Zealand and Avianca are part of the global airlines group Star Alliance, of which Air India is also a member. Code-sharing allows an airline to book its passengers on its partner carriers and provide seamless transport to multiple destinations where it has no presence. Under the codeshare agreement with Air New Zealand, Air India will place its code on Air New Zealand’s services from Melbourne, Sydney, Hong Kong and Singapore to destinations in New Zealand, Air India said. The state-run carrier would also codeshare on Air New Zealand’s domestic network. In turn, Air New Zealand will place its code exclusively on Air India’s services to Delhi from Sydney, Melbourne, Hong Kong, Bangkok and Singapore. In addition, Air New Zealand will gain access to six points of call in India – Mumbai, Kolkata, Hyderabad, Chennai, Bangalore and Cochin apart from Delhi, the airline said. As part of its codeshare partnership with the Colombian national airline, which is a free flow pact, Avianca would codeshare as a marketing carrier on Air India operated flights on the Delhi-New York and Delhi- London sectors and Air India would code share as a marketing carrier on Avianca operated flights on the New York-Bogota/Medellin/Cartagena and London-Bogota sectors, the airline said. The code share agreement with Avianca is subject to flinalisation of an Air Services Agreement between India and Colombia and other regulatory approvals. The agreement will enable both airlines to get additional feed from each other’s network as it would enable Air India to reach out to the South American market. The agreement means better connecting times, seamless travel, more travel options and more competitive fares for passengers traveling between both carriers’ home markets, for which Air India and Avianca are the premier carriers, Air India said. HAL-TURBOMECA SIGN JV IN PARIS FOR RS 200-CRORE MRO FACILITY FOR HELICOPTER ENGINES Hindustan Aeronautics Ltd (HAL) has signed an agreement with French engine manufacturer, Turbomeca, to support the redoubtable Shakti helicopter engine, which would power a fleet of 1,000 Indian military choppers during the coming decade. HAL’s joint venture (JV) with Turbomeca, long in the making, would support the Bengaluru- headquartered aerospace company’s ambitious vision of becoming a helicopter production giant. India’s military has already committed to buying three different types of HAL helicopters, all powered by the Shakti engine that Turbomeca custom- designed for HAL. Optimised to fly at extreme altitudes of up to 6,000 metres (almost 20,000 feet), the Shakti engine supports Indian army troops deployed on the Himalayan watershed. An HAL release announced that the new JV would provide maintenance, repair and overhaul (MRO) support for the Shakti engine, as well as for the Turbomeca TM333 engine that was initially fitted on the Dhruv ALH while the Shakti was being developed. BEML RECEIVES RS 645 CR ORDER FROM DELHI METRO Defence PSE BEML has received an order worth Rs 645 crore from Delhi Metro Rail Corporation for supplying 74 broad gauge coaches. DMRC signed a contract agreement with BEML for design, manufacture, supply testing and commissioning of the coaches. BEML has forayed into manufacture and supply of metro cars in 2002 and is the reliable Make in India partner in Metro Rolling Stock. BEML has supplied so far more than 600 metro cars or coaches to DMRC and 150 units to Namma Metro of Bengaluru for its Phase I. The defence PSE claims that it has emerged as the preferred metro coach manufacturer in the country to encash upon the emerging opportunities in the Metro segment. HAL, BEL JOIN HANDS TO MEET DEFENCE NEEDS Defence PSEs HAL and BEL have signed an agreement to share their expertise in design, development, engineering and manufacturing
  23. 23. 22 | PSE insights | JULY 2015 to develop and produce advanced airborne communication equipment to meet the requirement of the defence services. Hindustan Aeronautics Limited and Bharat Electronics Limited have agreed to share the business from the Indian defence services. HAL has the expertise in design, development, engineering, manufacture of airborne communications equipment and BEL in communications and secrecy products and solutions. NTPC-JKSPDCL TO DEVELOP COAL BLOCK IN JOINT VENTURE State-run NTPC said, it has entered into an agreement with Jammu and Kashmir State Power Development Corporation Ltd (JKSPDCL) to form a joint venture company for mining at Kudanali-Luburi coal block in Odisha. NTPC and JKSPDCL will share equity in the ratio of 67:33 in the joint venture company for undertaking exploration, development and operation of jointly allocated Kudanali-Luburi coal block by Coal Ministry to them. Earlier, a Power Ministry statement had said that a joint venture agreement between NTPC-JKSPDCL was assigned for development of coal mine for power generation. According to the statement, the agreement was signed during a review meeting over power sector of Jammu and Kashmir, which was presided over by Power Minister Piyush Goyal, on Monday. During the meeting, Goyal had promised all help from the central government for expeditious development of conventional and non-conventional energy sources of the state. US-BASED EMERSON TO PROVIDE AUTOMATION SOLUTIONS FOR NTPC’S ORISSA UNITS US-based engineering company Emerson will be providing automation technology and expertise for two new 80 MW supercritical generating units of NTPC at the Darlipali Super Thermal Power Station in the Sundergarh District, Odisha, India. The first unit at the power plant would be commissioned by December 2017 while the second unit would be done three months after that. Emerson project teams will engineer, install and commission Ovation systems to monitor and control each unit’s supercritical boiler and critical balance-of-plant processes and equipment. “Supercritical technologies boost the efficiency of coal-based electricity generation while reducing carbon and other emissions, but the high temperatures and pressures involved make them more challenging to control. Emerson has earlier worked with NTPC to automate units at the Sipat, Simhadri, and Tanda power stations and is currently carrying out projects at several other sites. COAL INDIA NEEDS MORE CLARITY TO DETERMINE E-AUCTION VOLUME Even though Coal India(CIL) has been allowed to revert to the old system of removing the cap on e-auction volumes with effect from April 2015, in the absence of a specific guideline from the Ministry, the state-owned miner is in a fix over determining the volume to be sold via e-auction route. The e-auction volume is key to CIL, as its profitability to a large extent is dependent on the realisation from e-auction sales. While a small part of overall volumes, e-action sales contribute 35-40 per cent of total Ebitda (earnings before interest, taxes, depreciation and amortisation). Hence, higher e-auction volumes would mean higher profitability in the coming quarters. The standard practice as interpreted by Coal India is 8-10 per cent of the total sales. But out of total sales of 471.58 million tonnes (MT) in 2013- 14, a total of 58 MT of coal or 12.29 per cent was sold by CIL through e-auctions which prompted the Ministry to put a cap on the volume, which has now have been removed. PSE NEWS UPDATE
  24. 24. JULY 2015 | PSE insights | 23 MCL FLOATS SECOND TENDER FOR 10 MT COAL WASHERY Mahanadi Coalfields Ltd, a subsidiary of Coal India, has floated an online tender seeking participation of interested parties to set up a 10 million tonne (mt) per annum coal washery at Talcher. This is the second online tender by the coal company for establishment of coal washery. MCL, which plans to set up five coal washeries in the state, had floated the previous tender for another washery on May 29 this year. The washeries are to be set up under build operate and maintain (BOM) concept, where a bidder has the liberty to choose the technology keeping in mind the project cost and return on investments. As per the tender rules, the operator will have to establish and operate the plant at least for 10 years. COAL MINISTRY INVITES BIDS FOR THIRD ROUND OF AUCTION The government on June 8 kick- started the process for auction of 10 coal blocks in the third tranche, inviting bids from companies engaged in sectors like steel, cement and captive power generation. “The government of India has directed the Nominated Authority to undertake the auction of 10 identified schedule II & III coal mines to eligible companies. Accordingly, bids were invited from eligible companies for shortlisting of qualified bidders,”the Coal Ministry said in a notice inviting tender. “Qualified bidders will be allowed to participate in the auction for the coal mines,”the Ministry said. Government said that it will auction 10 coal mines with reserves of 858.19 million tonnes for steel, cement as well as captive power plants and the process will be completed by August end. The government has so far auctioned 29 coal blocks in two tranches to private companies and garnered over Rs 2 lakh crore, surpassing CAG’s loss estimates of Rs 1.86 lakh crore in allotment of mines earlier without auction. Of the total estimated geological reserves, these mines have extractable coal of about 356.245 million tonnes and are located in Maharashtra, Jharkhand, Chhattisgarh and Odisha. Coal Secretary Anil Swarup had said that the government will execute agreements with successful bidders by August 31. Under schedule II category (producing) mines, two will be auctioned, while in the schedule III (ready to produce) eight mines will be put on offer. The two mines in schedule II category are MarkiMangli-I mine in Maharashtra and Parbatpur-Central mine in Jharkhand. Both are explored blocks having extractable reserves of 62.12 million tonnes. The eight mines in the schedule III category are Dongri Tal-II mine (Madhya Pradesh), KosarDongergaon (Maharashtra), Margi Mangli-IV (Maharashtra), Majra (Maharashtra), Chitarpur (Jharkhand), Bhaskarpara (Chhattisgarh), Sondiha (Chhattisgarh) and Jamkhani (Odisha). INCREASE PRODUCTION, RAMP UP EXPLORATION: DHARMENDRA PRADHAN TO ONGC Petroleum Minister Dharmendra Pradhan, who did a detailed review of India’s flagship explorer ONGC on June 6, saw several“improvement areas”and asked the state-run firm to work towards increasing hydrocarbon output and expanding exploration activity. ONGC has set an ambitious target of drilling about 1.74 Million Tonne (MT) incremental crude oil and 2.98 Billion Cubic Metres (bcm) of additional natural gas in FY16. It produced 22.26 mt crude in FY15, marginally higher from the previous year’s 22.25 mt. Gas output was 22.02 bcm, less than 23.28 bcm in the previous year. “The chunk of production is coming from Western offshore. It is a tough job to take out hydrocarbon from offshore assets, which ONGC has been doing for decades. In future, incremental oil and gas would come from the same region,”Pradhan explained. Currently, 34.5% of ONGC’s crude production comes from improved and enhanced oil recovery schemes. This means extra efforts are being put in to extract hydrocarbon from ageing fields, which naturally see a decline in output. Another 13.1% hydrocarbon is drilled from new fields. ONGC had taken up 15 projects, worth Rs 38,602 crore, for monetisation of 39 new and marginal offshore fields. Of this, nine have been completed, which produced 2.74 mt crude (13.8% of ONGC’s production) and 3.35 bcm natural gas (15% of its gas output) in FY15. ONGC is working on six major field development and three redevelopment projects with an investment of Rs 41,678 crore. Of this, Rs 24,188 crore is towards development projects including Daman, Vasistha & S-1, Bassein, Vasai, Gamij and Nagyalanka. Another Rs 17,490 crore is for three re- development projects – the third phase of Mumbai High North and South and Heera-South. Dinesh K Sarraf, CMD, ONGC, said efforts were being made to achieve the target for the current fiscal. Meanwhile, if some opportunities come up that could immediately add to incremental production, they would be explored.“The government is supportive, which gives the push and encouragement for ONGC to do more,”Sarraf said.
  25. 25. 24 | PSE insights | JULY 2015 RINL IN TALKS WITH ODISHA GOVT, NMDC Rashtriya Ispat Nigam Ltd is in the process of becoming a partner with the Odisha Government and NMDC Ltd in two projects – one for mining iron ore and the other for a greenfield steel plant. RINL has been designated as the‘lead player’in these two Odisha projects. Following up a proposal mooted by the Centre, the public sector steel major was currently negotiating with Odisha Government and NMDC, said RINL CMD P Madhusudan. RINL CMD mentioned that the proposed SPV for mining will have Odisha Mining Corporation Ltd (OMC) as RINL’s partner along with NMDC. In the SPV for the proposed steel plant, the Industrial Development Corporation of Odisha Ltd (IDCOL) will represent the State Government’s interest. RINL hoped to sign the MoU soon. “The MoU will spell out the capacity of the proposed steel making project. As the State agency, OMC will facilitate allocation of mines to the SPV,”Madhusudan said. IDCOL, as a partner, would take care of the land and the related linkages for the steel project, he indicated. BALMER LAWRIE AND CGDA LAUNCHES AIR TRAVEL PORTAL FOR ARMED FORCES An Air Travel Module, developed and implemented by Balmer Lawrie and Co. Ltd. in the Defence Travel System (DTS), was launched as an additional facility for Armed Forces personnel by Mr. Arvind Kaushal, IDAS - Controller General of Defence Accounts (CGDA) and Mr. Viren Sinha, C&MD (Balmer Lawrie & Co. Ltd.) on 28th May 2015 in New Delhi. The Defence Travel System which was developed in 2009 provided the facility of booking railways tickets only. Senior officers representing both the organisations were present during the launch. BHEL GETS LARGEST-EVER ORDER WORTH RS 18,000 CRORE FROM TSGENCO Bharat Heavy Electricals Limited (BHEL) secured the largest order in its history for setting up a 4,000 megawatt (5x800 MW) super- critical thermal power project from Telangana State Power Generation Corporation (TSGENCO). The order is valued at Rs 17,950 crore. The company in a statement said this is also one of the highest value orders ever placed in the capital goods sector in India. In December 2014, TSGENCO placed an order for setting up Telangana’s first super-critical thermal power plant of 800 MW to BHEL, followed by an order for the 4x270 MW Bhadradari thermal power station at Manuguru in Khammam district in March 2015. BHEL’s scope of work in the project would include design, engineering, manufacture, supply, construction, erection, testing and commissioning of 5x800 MW thermal sets on engineering, procurement and construction (EPC) basis. “The key equipment for the contract will be manufactured at BHEL’s Trichy, Haridwar, Hyderabad, Bhopal, Ranipet, Bangalore and Jhansi plants, while the company’s power sector construction division will be responsible for civil works and commissioning of the equipment,” said the company’s statement. To overcome the uncertainty of coal supply, BHEL said it shall be supplying its in-house developed fuel flexible boiler, which is capable of firing the entire range, from 100 per cent Indian to 100 per cent imported mix of coal. This will provide security against variation in design coal and the coal actually available during operation, thereby offering operational flexibility to ensure uninterrupted generation of electricity. Apart, amid a rigorous bidding process, top public sector company Bhel has bagged a Rs369 crores contract for revival of NTPC’s power plant in Barh in Patna, officials said on Monday. The contract has been given for supply and installation of the Power Cycle Piping (PCP) package for the Barh Thermal Power Project - Stage-I (3x660 MW) of NTPC in Bihar. IWAI, CANARA BANK DEVELOPING MODEL TO ATTRACT INVESTMENT IN INLAND WATER VESSELS The Inland Waterways Authority of India (IWAI) is working with Canara Bank to develop models to incentivise entrepreneurs to invest in inland water vessels.“The proposal is at an advanced stage of consideration by the government,” said Amitabh Verma, Chairman, IWAI. Canara Bank, in a study, has pointed out that there are positive cash flow options in case the government subsidises vessel costs by 10-15 per cent for inland waterways, said Ajit Kumar Das, Deputy General Manager, Canara Bank. Meanwhile, marking one year of the NDA government, the Shipping Ministry said it is working on a proposal to develop 300 lighthouses and 1,100 islands as tourist destinations.“The Prime Minister asked us to develop 300 lighthouses and 1,100 islands as tourist destinations. We have made that a part of the Cabinet note,”said Nitin Gadkari, Minister of Shipping, Road Transport and Highways. He also said that Cochin Shipyard Ltd was working on the first model of a hovercraft that can operate on land and water for a cost of Rs. 5 crore, instead of Rs. 50-60 crore. PSE NEWS UPDATE
  26. 26. JULY 2015 | PSE insights | 25 Project Updates SAIL PREPARES FEASIBILITY REPORT FOR TELANGANA PROJECT Steel Authority of India Limited (SAIL) has prepared a feasibility report and carried out site inspection and market analysis for a proposal to set up a 3-million tonne capacity integrated steel plant in Telangana. GSI and MECL, two government organisation under the Ministry of Mines, can assist the state in assessing its mineral resources for revenue generation, according to an official statement. Preferential treatment to Vizag Steel (RINL) products needed for infrastructure and industrial development in the state and, allotment of land to Vizag Steel in Warangal for better reach and distribution in Telangana were discussed. BPCL TO GO AHEAD WITH BINA REFINERY EXPANSION SANS OMAN OIL COMPANY IN MADHYA PRADESH With Oman Oil Company reluctant to put more money, Bharat Petroleum Corp Ltd has decided to fund the Rs 18,000-20,000 crore expansion of the Bina refinery in Madhya Pradesh on its own. Bharat Petroleum Corp (BPCL), India’s second-biggest state refiner, plans to raise Bina refinery capacity to 15 million tons in two phases - to 7.8 million tons a year from current 6 million tons at a cost of Rs 3,500 crore by 2018 and then to 15 million tons at an additional investment of Rs 18,000-20,000 crore in 5-6 years. Oman Oil Company (OCC), which holds 26 per cent stake in the Bharat Oman Refineries (BORL) - the firm that built the refinery, is willing to participate in the first phase expansion but not in the second phase, a top official said. The BORL was formed as an equal joint venture company way back in 1993. However, following inordinate delays in the implementation of the project, OOC froze its investment in the company at Rs 75 crore for a two per cent equity stake. BPCL, which holds 49 per cent stake in the project, provided the unbridged portion of the Rs 4,000-crore equity in form of loan. The state-run firm got its loan back once OOC made payments for its 26 per cent share. The remaining 25 per cent is with financial institutions. BPCL also operates a 12 million tons a year refinery at Mumbai and 9.5 million tons Kochi unit. It also has majority stakes in the 3 million tons Numaligarh refinery in Assam. The official said BPCL is expanding and upgrading its Kochi refinery in Kerala to process high sulphur crudes by 2016. Kochi refinery capacity is being raised to 15.5 million tons from current 9.5 million tons. NTPC PLANNING 3,000 MW CAPACITY ADDITION AT TALCHER State-owned NTPC said on June 11 Talcher in Odisha will become a power hub with the PSE planning around 3,000 MW of capacity addition there. “Talcher Thermal Power station we are planning to add 1,320 MW. In super thermal power station we are planning to add another 1,600 MW. So what will essentially happen is that in that area itself there will be almost 3,000 MW of capacity addition, so it will become a power hub in Odisha,” NTPC Chairman and Managing Director Arup Roy Choudhury said. NTPL TUTICORIN TO COMMISSION FIRST 1000-MW POWER UNIT The first 500-MW unit of coal- based NTPL thermal power plant of NLC Tamil Nadu Power (NTPL) in Tuticorin has qualified for commercial operations. NTPL, a joint venture company of NLC (89 per cent) and Tangedco (11 per cent), is establishing a 1,000-MW (2 units of 500 MW) coal-based thermal power plant at Tuticorin, Neyveli Lignite Corporation. The pre-commissioning activities in Unit II of this plant are nearing
  27. 27. 26 | PSE insights | JULY 2015 completion and this unit will also be ready by July. MRPL COMMISSIONS POLYPROPYLENE UNIT Mangalore Refinery and Petrochemicals Ltd (MRPL), an ONGC company, has commenced commercial production of Polypropylene from its Polypropylene (PP) Plant as part of its phase-III refinery expansion and upgradation project on June 18. The plant has capacity to produce 440,000 tonnes per annum of polypropylene, it said. The feedstock for the Polypropylene plant, polymer grade propylene, is being produced from upstream Petrochemical Fluidised Catalytic Cracking Unit (PFCCU). The technology-provider for the Polypropylene Plant is Novolen of Germany and the plant has been engineered and constructed by Engineers India Ltd, a Navaratna CPSE. HYDEL POWER PUSHES NTPC INTO GLOBAL BIG LEAGUE State-run NTPC has switched on an 800 MW hydel plant to join a select group of global peers who span the entire fuel chain – coal, gas, hydro power and renewables – for generating greener electricity. Last month, the country’s largest fossil fuel-based generation utility quietly switched on the last of the four 200 MW units of its first hydel project in Bilaspur district of Himachal Pradesh, roughly 145 km before the tourist destination of Manali. The development marks fulfillment of a vision, the seeds of which were sown by then Chairman C P Jain during early parts of the 2000-2002 period. The hydel foray is part of NTPC’s diversification plan to widen fuel base. BHEL STARTS NTPC’S 800-MW KOLDAM HYDRO POWER PLANT State-owned BHEL said it has commissioned NTPC’s 800-MW Koldam hydro power project in Mandi district of Himachal Pradesh. The Koldam project is capable of generating approximately 3,054 GWH annually. All the four units have been commissioned within a short span of just 75 days, starting with the commissioning of the first unit on March 30, 2015. Other than Koldam, the other three hydro projects of NTPC being executed by BHEL are Tapovan Vishnugad HEP (4x130 MW), Lata Tapovan HEP (3x57 MW) and Rammam Stage-III HEP (3x40 MW). ONGC INTRODUCES HF TECHNOLOGY IN TRIPURA Oil & Natural Gas Corp (ONGC) in Tripura has undertaken hydro- fracturing in Khubal to assess the actual reserves of the field and in Baramura to enhance production from tight sands. According to ONGC, the job involved intricate coordination to get domain experts, machine and chemicals from various regions of the country apart from understanding the reservoir characteristics and geology of the region. Hydro-fracturing units, high- capacity storage tanks, Proppant (special sand particles) and chemicals for the work were mobilised from six different assets of ONGC: Ahmedabad, Karaikal, Rajamundry, Bokaro and Assam. ONGC said it made discovery of commercial gas in the Khubal area in February 2009. It completed drilling of seven exploratory-cum-appraisal wells out of which 2 are gases- bearing, the state-run explorer said. THREE OF NHPC’S FOUR STALLED PROJECTS REVIVED NHPC, the state-run hydroelectric power producer, which has often got stuck with environmentally sensitive projects, may be on the cusp of turning a new leaf on the back of progress made on three out of its four stalled projects and higher power generation in FY15. Out of the four under-construction projects, Teesta Low Dam-IV, Parbati-II and Kishanganga, with an aggregate capacity of 1,290 MW, have seen definitive progress towards commissioning. While the geological issues of tunnelling has been solved for Parbati-II and work is likely to start this month, work on Teesta Low Dam- IV also resumed in November and is likely to be commissioned in the next fiscal year. Although Subansiri Lower, with a capacity of 2,000 MW, still faces headwinds from activists, Kishanganga project in J&K is slated for commissioning in FY 17. INDIAN OIL CORPORATION BEGINS WORK ON 4 MW SOLAR POWER PROJECT IN NAGAPATTINAM Indian Oil Corporation Limited (IOCL) has commenced construction work on its proposed 4 MW solar power project at Muttam village in the district. Commencing the construction work with a‘bhoomi pooja’, Nagapattinam District Collector S Palanisamy said IOC was setting up the plant at a cost of Rs 31 crore on 20 acres of land. IOC has entrusted the construction work to Tata Power Solar Systems Limited, he said. The Collector said IOC was setting up the project with the objective of generating green energy so as to reduce carbon footprint. PSE NEWS UPDATE
  28. 28. JULY 2015 | PSE insights | 27 In addition to meeting the power consumption needs of IOC installation here, the power produced from the solar plant will help Muttam and nearby villages of the district, he said. CAPACITY OF INDIANOIL’S PANIPAT REFINERY TO BE RAISED TO 20.2 MMTPA India’s largest refiner IndianOil will expand refining capacity of its state- of-the-art Panipat Refinery to 20.2 mmtpa. This was disclosed at the first maiden visit of the State Minister for Petroleum & Natural Gas ( I/C) Dharmendra Pradhan to the refinery on June 7. Krishan Lal Panwar, (MLA), M P Dhanda (MLA), Sandeep Poundrik, Joint Secretary (Refineries), Ministry of Petroleum & Natural Gas, B Ashok, Chairman, Sanjiv Singh, Director (Refineries), Debasis Sen, Director (Planning & Business Development), IndianOil, T K Basak, ED(I/c) - Panipat Refinery & Petrochemical Complex were also present on the occasion. While appreciating performance of the refinery, particularly its capacity utilisation and energy management, Pradhan emphasised the need for effective integration of refinery operations with Petrochemicals and their positive contribution to develop downstream industries in the region. Panipat Refinery commissioned in 1998 with refining capacity of 6.0 mmtpa had its first expansion of 6.0 mmtpa in 2006.The capacity of 3.0 Mmtpa was added in 2010.The proposed expansion of refining capacity from 15.0 mmtpa to 20.2 mmtpa is being planned at a cost of Rs 15 ARCELORMITTAL-SAIL PLANT PROJECT REPORT BY AUGUST A Detailed Project Report (DPR) on the proposed Rs 5,000-crore steel plant to be set up under a Joint Venture (JV) between ArcelorMittal and state-run SAIL will be completed by August. Last month, the world’s largest steel- maker and domestic steel giant inked a pact to jointly set up a steel plant in India to cater to the fast growing automotive sector. FCI SILO PROJECT FETCHES RESPONSE FROM 21 FIRMS The Food Corporation of India’s (FCI) attempt to create state-of-the-art foodgrain storage facilities,‘silos’, through private sector participation has evoked interest among various companies. Sources said 21 private players, including Adani Agri Logistics, LT overseas and OM Metals, have evinced interest in setting up silos on behalf of FCI at six locations spread across Punjab, Delhi, Bihar, Assam and Karnataka. Silos with a capacity of 50,000 tonne each at four locations and 25,000 tonne grain capacity each at two locations would be created through private sector participation at Sahnewal and Kotkapura (Punjab), Narela (Delhi), Katihar (Bihar), White- field (Karnataka) and Changsari (Assam). Sources also said that in all 92 tenders have been received from various private sector companies. At present the tenders are being evaluated by the FCI. BHARAT ELECTRONICS EMBARKS ON RS 2,000 CRORE MODERNISATION DRIVE Government-owned Bharat Electronics Limited (BEL) is embarking on an expansion-cum-modernisation drive to explore new areas in the defence and non-defence sectors. In the next four to five years, the company plans to invest at least Rs 2,000 crore, to equip itself for new business opportunities. “In the past five years, non-defence business has been 17 per cent of the overall business and we plan to increase this share in the coming years,”said S K Sharma, Chairman and Managing Director. Some of the areas identified in defence are SAM systems, electronic ammunition fuses, satcom terminals, LTE, Gigabit passive optical network, routing and switching products, he said. In non-defence, infrastructure protection, air traffic management radar, intelligent traffic management systems, solar power plants and smart city elements are being focused on, he added. BEL is planning to set up a Rs 500-crore weapon systems facility in Andhra, covering design, development and production. It is expected to be ready in two years, said Sharma. Land acquisition is on in Ananthpur district, he said.
  29. 29. 28 | PSE insights | JULY 2015 Operation Highlights INDIA’S CRUDE OIL OUTPUT RISES 0.8% IN MAY India’s crude oil production rose marginally by 0.8 per cent in May on the back of improved performance by state-owned Oil and Natural Gas Corp (ONGC). Crude oil production at 3.18 million tons in May was 0.8 per cent more than 3.16 million tons in the same month a year ago, an official statement issued here said. The increase was on account of 1.8 per cent rise in ONGC’s oil output at 1.9 million tons. Its western offshore fields produced 8.5 per cent more crude oil at 1.3 million tons and helped tied over a 9 per cent drop in onshore output at 0.48 million tons. However in April-May, the first two months of the current fiscal, the nation’s crude oil production dipped 1 per cent to 6.05 million tons. While ONGC produced 1.7 per cent more crude oil at 3.71 million tons, fields operated by private firms saw a 6.3 per cent dip at 1.92 million tons. Natural gas production declined 3.1 per cent in May to 2.85 billion cubic meters as ONGC saw dip in output. ONGC saw gas output dip by 1.8 per cent to 1.9 bcm while eastern offshore production dropped 8.9 per cent to 403.16 million cubic meters. “Restricted gas withdrawal by GAIL in view of safety issues of GAIL’s pipeline”was the reasons for lower output from eastern offshore fields, the statement said. In April-May, India’s gas production decreased 3.3 per cent to 6 bcm. ONGC’s output was down 1.7 per cent at 3.67 bcm. SAIL AIMS TO PRODUCE 50 MTPA OF STEEL BY 2015, SAYS NARENDRA SINGH TOMAR Public sector company Steel Authority of India Limited (SAIL) has set a target to produce 50 Million Tonnes Per Annum (MTPA) of steel by 2025 at an estimated investment of Rs 1,50,000 crore, Union Minister for Steel and Mines Narendra Singh Tomar said. SAIL’s steel plants are being expanded from a capacity of 13 MTPA to 23 MTPA, at an investment of Rs 61,000 crore. The long term plan is to take SAIL’s capacity upto 50 MTPA by 2025, at an estimated investment of Rs 1,50,000 crore, the Minister said. Last year, the Ministry placed a special emphasis on timely completion of modernisation and expansion of public sector companies under the Ministry of Steel. On April 1, 2015, the Prime Minister dedicated the modernised and expanded steel plant of SAIL in Rourkela to the nation. The Ministry has also set up a Steel Research and Technology Mission of India at an initial allocation of Rs 100 crore which will be augmented by another Rs 100 crore contributed by private sector companies, in order to enhance research and development in the steel sector, he said. In order to enhance steel production, and encourage the‘Make In India’ initiative in the steel sector, a Special Purpose Vehicle (SPV) is dedicated to the steel industry. In the first phase, there are plans to establish steel plants through the SPV route in Chhattisgarh, Odisha, Jharkhand and Karnataka. HAL HANDS OVER CHANDRAYAAN-2 COMPONENT Public sector plane-maker Hindustan Aeronautics Limited (HAL) has delivered‘Orbiter Craft Module Structure’of Chandrayaan-2 to the ISRO Satellite Centre (ISAC). Chandrayaan-2 is a two-module configuration spacecraft comprising of the‘Orbiter Craft’and the‘Lander Craft’. “The Orbiter Craft Module structure is a three-tonne category bus structure made out of a central composite cylinder, shear webs and deck panels,” CMD of Hindustan Aeronautics Limited T. Suvarna Raju said. The Chandrayaan-2 mission is aimed at placing an orbiter around the moon and sending a lander and rover to the surface of the moon. It will be launched by a Geo-Stationary Satellite Launch Vehicle (GSLV-MKII). HAL’s association with ISRO’s space programme dates back to the early 1970s, when HAL provided technical inputs and manufacturing support to ISRO for realisation of light alloy structural assemblies for satellites and launch vehicle.HAL has a division at Bengaluru totally dedicated to cater to ISRO’s growing requirement. PSE NEWS UPDATE

Public Sector Enterprises (PSEs) are emerging as lead players in the ‘Make in India’ initiative that is targeted at transforming the manufacturing sector of the country. This edition of PSE Insights elaborates on the role of PSEs in manufacturing, their potential and the opportunities for partnerships arising under Make in India.


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