To boost economy, Centre must pave way for tendering: Siemens MD and CEO

Some of the measures taken (by the government) are absolutely the right signals, said Mathur

With 22 plants in India, Siemens is one of the biggest players in the infrastructure technology and manufacturing space. While its German parent made an investment commitment of euro 1 billion in the Indian market in 2015, the company is putting in Rs 250-300 crore every year over the past few years. In an interview with Jyoti Mukul, Sunil Mathur, its managing director and chief executive officer (CEO), speaks 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.

What exactly are your looking in hydrogen?
 

It's an interesting new technology where effectively hydrogen will be used to make fuel. Hydrogen's available everywhere, and we have got, particularly, a lot of fertilizer chemical plants where hydrogen is actually a by-product. And you use hydrogen, electrolyze it for the purpose of a fuel cell, and you can effectively start using hydrogen as a technology now for fueling process, etc. It's like the next level of green technology.
 

We are still in the exploratory stage. Eventually, it will become the next major jump in technology in the country and in the world. 

What are your offerings in storage and grid stability space?
 

Flexible AC Transmission systems (FACTS) which adjusts to ensure that there's stability. This and similar kind of technologies help to stabilize the grid and improve efficiency. Then, there are substations which take a huge amount of space and one of the key technologies over there is what is called gas-insulated substations which take much less space, and, therefore, are more efficient than what is currently available. The insulation medium is gas in the transformers. You also have gas insulated substations at the distribution side. Effectively, you can put substations in a smaller footprint than a normal substation.

There are technologies which are available that enable flexibility in ramp up and ramp down. So, due to ramp up in a shorter period of time, therefore using this fuel being much more efficiently. These are kind of technologies in the energy space that will make a huge difference in the entire energy area.

Where do you see business growth for your company?
 

We are looking at energy, mobility and smart infrastructure besides digital industry as huge growth areas.

Is there enough investment being made in the Railways?
 

There is electrification which has huge potential. Signaling is another area. Electric locomotives, EMUs, train sets, etc. all these are huge areas of technology which are a big potential for the Indian Railways. Investment has been earmarked for these areas. Now, we would like tenders to be issued. In electrification, quite a lot of tenders have been issued. A lot of digitalisation is also happening in the Railways. So, I expect that now we will move to the next level, and get to signalling. You will need much more speed in the rolling stock and for greater loading capacity. You can then decongest the railway network and make it much more efficient.

Have you seen an impact of 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.

And, going forward, what do you anticipate?

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.