Introduction of a country-wide goods and services tax (GST) can dramatically alter tax administration by giving a one-stop solution for excise and value-added tax into a single unified tax, says Dimitrov Krishnan, Vice-President, Sales & Marketing, Volvo CE, India. Excerpts from the interview...
What are the growth drivers for the construction equipment (CE) sector?
With the new government in power, we are already seeing few changes in the industry and more is expected in the coming months. There are some early indicators of demand improvement in the CE market, especially coal and road construction.
Some factors that are currently driving the demand for construction equipment in India include heavy investments in various infrastructure projects by public and private enterprises, in areas like road construction and maintenance, ports, power plants, telecommunication sector, urban infrastructure developments etc. Also, with the new government promising revolutionary changes in the road transport and highway sector, demand for construction equipment is expected to grow manifold along with an increase in the country´s GDP through these sectors. In addition, demand by companies in real estate is also supporting the growth of the construction equipment market.
What is the growth prospects for mining equipment, especially from coal and minerals?
According to the Annual Report FY13, Ministry of Mines, Government of India, after growing at more than 8 per cent for many years, the Indian economy registered a GDP growth of 5 per cent in FY13, the lowest in almost a decade. The ongoing slowdown has had an impact on demand for metals across all major consuming sectors.
The mining sector has gone through major challenges in the last few years. For instance, the CE industry supplies its machinery for extraction of coal and iron ore for mining activities. However, restriction of iron ore mining in Goa, Karnataka and Odisha has had an adverse impact in the last two quarters. Coal sector was relatively less impacted though there is still a massive shortage in coal production in the country despite adequate coal deposits in the country.
Demand for minerals as well as for mining services is strong in the country. In fact, mining in India is becoming organised which is evident in the way companies have started outsourcing projects to mining service companies; contract mining could also be a solution to the current coal deficit in the country. And with the new government´s plan to open up the coal sector for commercial mining, this sector has the potential for large growth in the coming years.
How do you assess the scenario in the road sector?
The road construction sector will provide large growth in the coming years. The new government has announced its priorities in this area and we need to wait for the actions. They have to address the key issues of land acquisition and infrastructure funding to unleash the growth potential in this sector.
What are the major challenges?
Challenges are quite a few like the land acquisition bill, which needs to be simplified. At present, it is definitely not encouraging for infrastructure projects as all the land required for infrastructure or road building needs to be procured well in advance; introduce a country-wide goods and services tax (GST) that can dramatically alter tax administration by giving a one-stop solution for excise and value-added tax into a single unified tax; or acquiring of raw material in some states as they have banned all quarries.
From a construction industry perspective, there is also a liquidity issue which is impacting the CE business. Hydel power is also an important area though they are not drivers of large volumes of equipment but specialty equipment. This is expected to change with the demand for hydel power projects in the neighbouring countries as well.
How far Volvo has geared up to meet the expected demand?
Volvo has sufficient industrial capacity for handling demand growth. We have product development teams working on Indian product needs constantly. We have invested heavily into providing solid aftermarket support through our wide dealer network across India. Our investments include a state-of-the-art customer demonstration and training centre where we showcase our products to our customers and also develop our dealer and customer personnel competence in equipment operation and maintenance. In addition, we have a component remanufacturing centre which remanufactures old components to a new quality level, thereby saving cost for our customers and also saving the environment with reuse.
What are the initiatives taken by Volvo to sustain the growth?
Volvo has grown rapidly over the last decade without sacrificing the quality of its products and by understanding the demands of its customers.
It has brought in technological innovations to the CE market in India. For example, Volvo CE is the first manufacturer to introduce a telematics system called CareTrack that allows remote monitoring and machine diagnostics. With CareTrack, a customer gets the knowledge and information he needs to make the right decisions about his machine and thereby increase profitability. Volvo recognises the power of aftermarket services and hence launched the Customer Contact Center ´V Care´, which helps customers achieve higher productivity by minimising their machine downtime. The centre records and processes all customer issues centrally and in real-time, giving Volvo CE the ability to monitor dealership customer serviceability and enable them to resolve customer issues quickly and efficiently.
Volvo believes in skill development. It has been actively investing in training and competence development to ensure there are trained labour and operators to operate advanced machinery. It has an operator training centre with all the latest machinery and also with simulators in Hosakote to train our customer´s operators and train our dealer mechanics.
Volvo has also partnered with GMR Varalakshmi Foundation (GMRVF), the Corporate Social Responsibility arm of GMR Group, to offer an Operators Training Course, which will provide free training to under-privileged youth in India to operate construction machinery. Volvo is also active with its used equipment business and rental equipment business.
How do you assess the future potential by 2020?
India will be a major market and there will be many more players investing in India. Volvo´s intention is to strengthen its business in India as it will be one of the markets that will define the construction industry globally.
Also, decisions by the new government like granting new infrastructure projects and allowing huge investments in the infrastructure industry is expected to boost the urbanisation of India, apart from increase in coal production and mushrooming real estate industry.
Volvo CE is committed to the India market; and design, manufacturing and sales form an integral part of its presence in India. We would like to be known as a complete solution provider by making our products more and more suitable to the Indian market. The future of Volvo CE in India is definitely bright. We have grown substantially in India and our plans include growing further and when the need arises making more investments in India.