Automation industry growing at 12%

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

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