‘Centre’s action to boost economy must translate into tendering’

With 22 plants in India, Siemens is among the biggest players in the infrastructure technology and manufacturing space. While its German parent had made an investment commitment of ^1 billion to the Indian market in 2015, the company has been putting in ~250-300 crore every year, over the past few years. In an interview to Jyoti Mukul, SUNIL MATHUR, managing director and chief executive officer (CEO), spoke about his company’s priorities and the current economic slowdown. Edited excerpts:

Have the government programmes in the power sector been beneficial for your company?

The government emphasis is on the power sector. Effectively, at Siemens, we are looking at demand side management as well as the supply side management and the entire energy portfolio. Here, integrated and optimised power will also be required. Can you make buildings much more efficient with the amount of energy they use? Can you save energy? So, all this a part of the demand side. Looking at the supply side, there is transmission, as you have different forms of energy coming. There are renewables coming at different times of the year and then there is conventional power. The grid is going to get very unstable. We need to be able to have stability on

the grid, so that we can see an offtake as and when required. At some point in time, we will ensure that there are efficiencies in the grid as well. We are also looking at more areas of technology like hydrogen.

Have you seen any impact of the slowdown in your sectors?

Yes, absolutely. Overall capacity utilisations are down. On all these large areas – infrastructure, energy and mobility – there is a very clearly slowdown in the pipeline. In the transmission segment, the ordering by Powergrid is down substantially in the last year or two. And that ordering now is moving to the states. So, you move from large projects to smaller ones over there. On the energy generation side, I am not aware of when the last power plant was built. There are a lot of power plants which have reached or are reaching end of life. Something needs to be done over there because at some point they will need to be replaced with new technologies, increased efficiencies and that doesn't happen overnight. It takes 4-5 years to build a new power plant.

How long do you see the slowdown lasting in India?

I believe we have got to a stage now where it has been acknowledged that there is a slowdown, which is a good thing. I believe the announcements that have been made in the last couple of months by the government are definitely positive steps. They are confidence building and improve sentiment, and when that happens, people start looking at investing. I think, the next step is now, how can we increase demand in the system?

How far are the capacities underutilised and when do you see optimum utilisation being achieved?

My guess is we are talking about 70-75 per cent capacity utilisation in the country. For my company, we have 22 plants and factories. Some are doing better than others. If we get a large order, then utilisation increases. That’s the nature of capital goods. But overall, the volumes that you add this year are lower than the volumes that you added last year, which were lower than the volumes before that. India is a market with huge opportunities. You've got to be here for a long time. You've got to show a commitment to it. Because if you're here expecting to turnaround in 3-6 months, it's not going to happen. This is why Siemens has been here for a 150 years. When does a company go in for fresh capacity?

When they reach 80 plus capacity utilisation with a visibility for the future. Now, if that 80 plus capacity utilisation is not happening or is not yet reached, it will take that much time. So, I think we have to concentrate on building it up from 74 to 80 per cent. Once we get to 80 per cent, then slowly capacity will start coming on stream.

What do you anticipate hereon?

Some of the measures taken (by the government) are absolutely the right signals. If that translates into tendering on the ground over a period of time, I am absolutely hopeful. What we need to realise is this entire infrastructure is not about one, two, or three months. Infrastructure business is a long-gestation period. It takes time for it to ramp up, and it takes that much time only to go down as well. And, it doesn't happen the moment an announcement is made. So, we need to give it time.